Sirma Group Holding: healthy leverage position, amidst slowdown in IT (BUY - transfer of coverage)
Due to a change in analyst responsibilities, we transfer coverage of Sirma Group Holding (Sirma), with a BUY rating and a 12M price target (PT) of BGN 1.52/share, or 114% upside. Sirma sold its highly regarded Ontotext in the middle of this year and the sale should generate significant cash proceeds of BGN 39m, or c.90% of its market cap, on our estimates. We believe the proceeds are likely to be used for special dividends over 2022-23E and, together with its new policy of a 50% payout ratio, investors should enjoy healthy dividends (mid-high single digit yields) in the coming 3Y. With net cash/EBITDAs of around 2.0x, the deleveraged position and its huge cash pile should allow the company to continue with its M&A pipeline (like Sciant, ReSolution, TBI), bolstering its organic growth, which we estimate in mid-high single digits throughout 2023-24E (our forecasts are adjusted for the disposal). The company is trading at severe discounts to its larger peers on earnings valuations, with 2023-24E P/E and EV/EBITDA discounts of 45% and 43%, respectively.
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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