Benefit Systems: Reaping the Benefits of CEE fitness (BUY - initiation of coverage)
We initiate coverage of Benefit Systems (BFT) with a BUY rating and a price target (PT) of PLN 1,200/share, implying 21% upside potential. We see Benefit Systems as a direct play on the strong macro trends in Poland and other CEE countries. We like Benefit Systems because of its: i) growth potential in Poland, where the company has a proven track record and a dominant market position, with an 80% market share among the sports cards operators; ii) growth potential in foreign markets (Czech Republic, Bulgaria, Slovakia and others), where it can replicate its Polish business model; and iii) strong free cash flow generation (average of 45% 2015-19E FCF/EBITDA), which allows it to finance its expansion, while paying dividends to shareholders (or buying back shares). While the business model is extremely simple, and we believe it has low barriers to entry, we see Benefit as a pioneer and a prodigy in a space that already has a large enough scale of operations to truly benefit from the abovementioned factors. With growth above its peers, on our estimates, the discount in valuation is not justified, in our view.
Benefit System SA is a Poland-based company engaged in providing work benefits in the area of sport, recreations, culture and entertainment for employers. Its products portfolio includes MultiSport Plus card, program that allows access to the sport and recreation clubs and multi-purpose facilities; MultiBet, providing access to more than 90 cinemas through Poland; and cafeteria programs, which allow employees to select items from such segments as sport, recreation, culture, entertainment, tourism and health and beauty. The Company is a parent entity of a capital group, which includes subsidiaries, such as MyBenefit Sp z o o, FitSport Polska Sp z o o, Vanity Style Sp z o o and Multisport Benefit sro, based in the Czech Republic.
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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