QUEST HOLDINGS | Instilling confidence

Continuing to execute well – Quest’s 9M results affirmed that the group is on solid footing, with growth remaining robust across all segments. Group continuing revenues shaped 40% higher yoy at €637m, with Q3 showcasing moderating – albeit still very strong – trends (revenues +26% from >40% in H1). Operating profit growth was also healthy, with 9M EBITDA +35% yoy and Q3 +15%. Net profit from continuing operations settled at €29.7m in the 9M period, markedly higher yoy, and was further bolstered by the capital gain related to the sale of Cardlink, leading to a reported net profit near €110m (from both continued and discontinued ops).

 Minor changes to forecasts; EBIT CAGR in 2021-24e in the mid-to-high single digits – We have made minor changes to our forecasts, which are now recalibrated to deconsolidate Cardlink and account for the supply chain frictions anticipated in Q4. We now expect FY’21 EBITDA at €59m (ex-Cardlink), indicating Q4’21e negative growth of -5% yoy which looks reasonable, given a strong comparable yoy. Looking ahead, we expect c9% EBITDA growth in 2022 assuming that challenges affecting supply (expected to impact H1’22) will gradually moderate through H2’22, with demand across all the group’s subsidiaries staying robust. Overall, we expect c13% EBITDA CAGR over 2020-23e, underpinned by the digitization push, strong demand for IT products and elevated e-Commerce penetration.

 Cardlink sale completed; c€45m return to shareholders, further war chest built – Quest successfully completed the sale of its subsidiary Cardlink in Q3’21 for c€89m, significantly boosting its liquidity and switching to an €81m net cash position as of Sep 2021. As such, mgt has decided to return half of the proceeds to shareholders in the form of a special dividend (€1.25/share payable in Feb’2022). Balance sheet optionality has thus become more prevalent, in the light of the group’s ample liquidity. Given the solid track record, we reiterate our view that Quest is well placed to deliver additional shareholder value through either heftier cash returns or M&A.

 Valuation – Quest shares are c87% above pre-pandemic levels, substantially outperforming Greek non-financials and peers over the last 2 years. From a valuation perspective, we believe the current valuation of <9x 2022e EV/EBITDA constitutes a compelling risk-reward proposition, as we argue there is substantial latent value to be crystallized over time by rising shareholder returns and/or M&A. Our valuation is based on a sum-of-the-parts (SOTP) of the 4 core segments comprising the group to which we apply a 10% holding discount, coming up with an indicative baseline fair value near €18.1/share. We note that this baseline value is on an ex-div basis and now assumes a much higher dividend than before (i.e. it includes the €1.25 special DPS). Excluding the latter, our calculated baseline intrinsic value is seen at €19.4 mirroring our estimate changes and effectively placing the stock at 9.9x 2022e EV/EBITDA, justifiable by the high growth profile.