EUR 900.00 For Business Accounts Only

Benefit Foreign affairs boost Benefit - BFT (BUY, FV PLN 1110) - IPOPEMA

Foreign affairs boost Benefit
We initiate coverage of Benefit Systems with a Buy rating and a Fair Value of
PLN 1110 per share, which implies 20% upside. In our view, the company’s
cards business should be able to record dynamic growth on foreign markets
and deliver solid results domestically. We assume that Benefit should sport
2017-2021E revenues CAGR of 18.8% driven mainly by expansion abroad.
We also expect the company's EBITDA to grow by 21% y/y in 2019E to reach
PLN 213m and by +17% y/y to PLN 249m in 2020E.
Card segment: mature market with (still) growing margins
After three years of reporting growth in the cards business in excess of 100k
annually, we expect Benefit Systems to continue to report solid increases in customer
numbers although at a slightly slower pace of expansion. We expect the firm to add
92.6k, 76.5k and 61.2k cards in 2019E, 2020E and 2021E respectively. However, as
the market is becoming more and more penetrated we assume that brand new clients
will have a lower propensity to work-out compared to heavy users, which should have
a positive impact on the company’s gross margin.
Fitness segment: is the worst behind us?
The year 2018 was a period of expansion and consolidation in the fitness segment.
Benefit Systems almost doubled the number of fitness clubs, both organically and via
M&As, which significantly burdened the 2018 results, including 4Q18 (see preview on
page 21). Going forward we expect the segment’s results to improve as fitness clubs
mature and start to generate more traffic. Also, the integration of acquired fitness
clubs should start to bring rewards as Benefit Systems applies its know-how to
improve operation effectiveness.