Comarch – An Undervalued Earnings Play
Comarch creates and implements software solutions for customers in Poland and worldwide (with global sales currently accounting for nearly 60% of total sales). The Company's flagship telco solutions are used by Telefónica, Vodafone, Orange, T-Mobile, and Thales, among others. The Comarch software range also includes ERP and solutions for the financial and retail industries. Comarch runs a well-balanced revenue strategy with more than 90% of sales coming from proprietary software, and more than half delivered as software-as-a-service (SaaS). Comarch looks on course to deliver record earnings in FY2019, with EBITDA expected to come in at PLN 226m, beating the current market consensus by a projected 8% and showing a year-over-year rebound of 29.1% compared to median growth of 8.0% expected in the IT sector. Meanwhile at 6.4x 2019E EV/EBITDA CMR stock is currently trading at a large, 32% discount to the peer group. After updating our valuation model to include first-quarter results and current peer multiples, we set our new 9-month price target for CMR stock at PLN 231.00 per share, indicating upside potential over 29% and a reiterated buy recommendation.
Comarch is a producer of IT systems for key sectors of the economy: telecommunications, finances, public administration, large companies and the sector of small and medium-sized companies. A range of Co.'s product offering includes ERP-class and financial and accounting systems, CRM systems and loyalty software, sales support and electronic document exchange systems, knowledge management, Business Intelligence, security and protection of data and many other solutions. Apart from providing IT solutions to its customers, Co. is focused on professional customer service and on providing consulting, advisory and integration services as a uniform package.
Set up in 1986, mBank (originally BRE – Export Development Bank) is Poland’s 4th largest universal banking group in terms of total assets and 5th by net loans and deposits at the end of June 2019. mBank has one of the oldest brokerages in Poland – we have been providing brokerage services since 1991 - and the biggest, serving about 300 ths clients.
We provide all brokerage services available in the Polish capital market (i.e. Warsaw Stock Exchange, non-public markets and forex) in a way that meets the expectations of all groups of investors, both individual and institutional. Participating in the dynamic growth of the Polish capital market since its inception, we have acquired competences and experience needed to provide the highest quality of service and we have won the trust and satisfaction of our Clients.
Over the past decade, mBank's Equity Research Team has been consistently ranked among the top research teams in Parkiet's annual institutional investor surveys (Parkiet is Poland's leading daily business newspaper). mBank analysts provide coverage on an extensive list of companies, mainly in Poland but also elsewhere in the CEE region: Austria, Czechia, Portugal, Ukraine and Hungary.
Clients get access to a comprehensive selection of research products including daily market insights, monthly roundups, macroeconomic views, industry- and company- specific analyses, investing strategies, earnings comments, etc.
We give our institutional clients numerous opportunities to connect with industry professionals, top executives, and leading analysts:
- Get direct access to senior management teams at listed companies (over 30 meetings in 2018),
- Engage in our many industry events, featuring listed Polish and global firms (in 2018, we hosted sector-themed conferences around industrials, chemical companies, telecoms, retail, and financials, and co-hosted a Best of Poland investors' with Commerzbank and the Warsaw Stock Exchange),
- Stay informed through an array of enlightening discussion panels, workshops, and briefing sessions with regulatory officials.
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