QUEST HOLDINGS | Tech fuelling growth
Strong 2023 execution – Quest reported a solid set of 2023 results, with both sales and EBITDA up 16% yoy, driven by better-than-expected top line in commercial activities and IT services, which filtered through to the EBITDA lines. As a result, Quest saw its EBITDA margin unchanged at 7% in 2023. The bottom-line figures were slightly impacted by elevated net financials and an unfavourable base effect (extraordinary gains in 2022), leading net profit to increase by 8.2% yoy at €44.8m in 2023.Mgt points to positive growth in 2024 – Looking into the current year, Quest mgt expects positive growth in all lines, primarily led by IT services and the courier business, and specifically points to: 1) double digit growth in IT services (backlog >€550m), 2) accelerating growth in courier services (vs +6-7% in 2023), 3) mild growth in commercial activities revenues, on fairly flat EBT, and 4) positive growth in RES division thanks to the new investments. However, growth should be more backloaded (H2’24) as the company is cycling tough comps (govt subsidies last year) and smartphone growth is decelerating.
We raise our group EBITDA forecasts by 5-6%, eyeing c8% 3-year EBITDA CAGR – We have lifted our revenue forecasts by 7-8%, embracing a more aggressive stance in IT services (raising sales by 15-21% in 2024-26e). We also adjust our commercial activities revenues higher based on the better 2023 performance and, similarly, our courier services sales forecasts lower, in the face of the lower price/mix seen in 2023. Against this background, we see revenues at €1,300m in 2024 (+8.6%) rising at 8% CAGR through to 2026e. On the profitability front, we maintain a fairly unchanged EBITDA margin between near 7%, thus envisaging EBITDA of €90m in 2024 (+8% yoy), rising to €104m by 2026e, implying an 8% 3-year CAGR.
Healthy balance sheet – Quest boasts a robust balance sheet (€17m net debt), having comfortably financed the G.E. Dimitriou acquisition (Retail A/C’s business) and the Xiaomi expansion abroad. In 2023 Quest experienced increased working capital needs, as new activities ramped up. Looking ahead, we factor in a normalization of the trends, but with pre-tax ROIC remaining above 20% (in sync with history). Quest has implemented investments of more than €100m since 2020, while it has seen its EBITDA grow more than 20% CAGR in the same period. For 2024, mgt pointed to a €40m capex envelope, noting that it has identified some €10m investment opportunities at Unisystems and c€15m at ACS (last mile strengthening), while pencilling in c€12-15m for exploring new acquisitions.
Valuation – We value Quest via a SOTP of its 4 segments to which we apply a 10% holding discount. Our indicative valuation range is set between €6.6 and €8.0 per share. Quest currently trades c7x 2024e EV/EBITDA, namely c10% discount vs its blended peer group. Our indicative baseline intrinsic value estimate effectively values Quest at c9x 12-mth forward EV/EBITDA, a level we reckon is reasonable given the growth profile and the diversified mix. We believe that the current valuation constitutes a compelling risk-reward proposition, underpinned by the solid growth outlook and the prospect for rising shareholder returns (>4% div. yield) and/or M&A-related value crystallization.
Quest Holdings SA. Quest Holdings SA, formerly Info-Quest SA, is a Greece-based information technology (IT) and telecommunication solutions provider. Its main activities include the digital technology industry, with activities across the entire spectrum of the ICT market, from the manufacture and distribution of products to the design, application and support of Integrated IT Solutions for large organizations in the private and public sectors. Quest Holdings coordinates its activities in this market via the strongest companies in the field: Info Quest Technologies, Uni Systems and iSquare. In the Green Energy sector, the Group implements large investment projects on electricity production from renewable sources with licensed power exceeding 400 MW regarding more than 30 wind and photovoltaic parks. In this market, Quest Holdings is active through Quest Energy and its subsidiaries. At the same time, the Group is also active in the Courier Services sector, through ACS.
Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.
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