Comarch - Undeserved Sell-Off, Global Contracts
Comarch stock has fallen nearly 8% in the past month for no apparent reason. In the first half of 2020, the Company achieved 56% of our full-year earnings estimate with EBITDA of PLN 118m, and if seasonal patterns hold it should deliver even better results in the second half of the year. The coronavirus pandemic is having even less of an effect on Comarch than we had originally assumed, and after updating our models to account for this we are now expecting FY2020 EBITDA of PLN 234m. Our new target price for CMR at PLN 247.60 indicates upside potential of more than 21% which prompts an upgrade from hold to buy. Comarch stock is currently trading at 6.6x 2020E EV/EBITDA and 17.5x P/E, showing discounts to the corresponding peer multiples of 42% and 21%, respectively – huge gaps which we see as narrowing before long, supported by the global contracts that the Company has recently added to its backlog, including a PLN 300m high-profile contract with Vodafone New Zealand, which strengthen its presence in the global market.
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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