AROBS Transilvania Software: rolling up IT development in Romania (BUY – initiation of coverage)
We initiate coverage of AROBS Transilvania Software (AROBS), a software development company headquartered in Cluj-Napoca, with a BUY rating and a 12M price target (PT) of RON 1.43/share. Over 75% of its revenue comes from services, including the development of embedded software. Products generate c.20%, mainly fleet management and enterprise software. The remainder is software integration and hardware resale. Embedded software for the automotive industry is a core competence, a typically high-margin business with sticky client relationships; and, through M&A, it has expanded this into the aerospace and life science sectors. The group should generate a c.20% EBITDA margin (including the cost of the ESOP), from a ROACE of c.18%. Since its IPO on the AeRO (start-up) market in late-2021, AROBS has executed nine deals to strengthen its talent pool. During September 2023, the stock will move to the Bucharest Stock Exchange’s main market, where it should be one of the largest entrepreneur-founded listings. Moreover, the CEO and main shareholder has declared his intention publicly to launch an SPO in the coming months to fund further M&A.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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