Asseco Poland cut to HOLD, TP PLN 68.0 - Price already above level offered by the strategic buyer
The share price of Asseco Poland has already exceeded the PLN 65 threshold that Cyfrowy Polsat paid in December to obtain joint control over the company. We believe that synergies with Cyfrowy Polsat group may take time and will mainly be reflected in a better performance on the Polish market, while we expect limited impact on international businesses. We have incorporated a higher margin and increased target multiple in our SOTP valuation, which adds PLN 4 per share in the valuation of the Polish business (up from PLN 20 to PLN 24 per share of Asseco Poland). We believe that minority investors should not pay more than the strategic buyer who obtained control last month and after a strong performance last quarter we cut our recommendation from BUY to HOLD. The stock now trades at adj. P/E of 16x in 2020e, compared with an average of 13x in 2014-2018. Moreover, the dividend yield of 4.9%, while still attractive compared to the local index (WIG yields almost 4%), is at the bottom of the range of 5-7% seen in the past five years.Asseco Poland is a provider of proprietary information technology ("IT") solutions which is based in Poland. Co. is engaged in provision of consulting on IT infrastructure, security solutions, human resources solutions, outsourcing services as well as fully comprehensive IT support. Co.'s profile includes software and computer hardware consultancy, production of software as well as supply of software and hardware. This category includes analysing, developing, and programming ready-to-use IT systems. In addition to IT services, Co. also sells goods including mainly computer hardware.
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