Sirma Group Holding: Small player, but growing quickly (BUY - initiation of coverage)
We initiate coverage of Sirma Group Holding (Sirma), the largest information and communication technology (ICT) name in the Balkan region, with a BUY rating and a 12M price target (PT) of BGN 0.90/share (61% upside potential). The company’s operations encompass software development, and providing IT services for many sectors, including banks and industrial companies. Sirma’s largest market is Europe (56% of its 2019 top line), followed by North America (24%). We like the company for: i) its growth profile (we expect a 2019-22E EBITDA CAGR of 10% vs. the Bloomberg consensus of 7% for its regional peers); ii) its low valuation (2020E EV/EBITDA at only 3.5x, indicating a 60% discount to its peers); and iii) the option for a large buyback (up to c.34% of the total number of shares may be repurchased by the end of 2022E, with a cap price of BGN 2.0/share). As the main sources of risk, we see: uncertainty over the development of COVID-19 and, hence, the ICT market outlook in 2021E; as well as the stock’s low liquidity (3M ADTV of just USD 22k).
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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