Allterco: Shifting gear, and hitting the accelerator (BUY - initiation of coverage)
We initiate coverage of Allterco, a Bulgarian Internet of Things (IoT) company, with a BUY rating and a 12M price target (PT) of BGN 10.83/share (25% upside potential). The company was founded nearly 20 years ago, as a telecommunications firm. In 2010, it started developing its IoT segment, which is fast growing and high margin (most of the segments of the European smart home devices market should grow by 16-47% yoy over 2020-24E, according to IDC). In 2019, Allterco decided to exit the stagnant and low-margin telco sector, by selling its European telco subsidiaries, and it is considering disposing of its Asian assets currently. We like the company for its: i) growth profile (a 2019-22E revenues CAGR of 33% and an EBITDA CAGR of 19%, on our forecasts); ii) strong balance sheet position (2020-22E net cash/EBITDAs of 2.1-1.4x); and iii) attractive valuation (2021-22E EV/EBITDAs of only 11.8-8.4x, i.e., 32-36% below its peers).
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