Company Alert - CANCOM IT Systeme

Company Update: Strongly increased price target

Jettingen-Scheppach, (PresseBox) - WHAT'S CHANGED
- Sales and earnings forecast significantly increased
- Based on our new assumptions fair value raised to 4.90 EUR (Multiples) and 5.80 EUR (DCF) accordingly
- Price target revised up to 5.00 EUR from 3.40 EUR, Buy recommendation confirmed

Fundamental news: Cancom released a few good news in the last weeks. Q3/09 figures were better than expected and Q4/09 should have been another good quarter. Additionally, the management released a guidance for 2010 which also exceeded our forecast. In November 09 the company started a share buyback in order to use these shares as cash for growth at a later date. In December a takeover of a smaller competitor was announced and last but not least the shareholders will get a dividend of 0.15 EUR per share for FY2009 and a pay out ratio of about 50% in future is targeted by the company. We had expected the first dividend only for FY 2010 with an amount of 0.10 EUR.

Higher estimates: Based on the new information we increased our revenue forecasts to EUR 416m (2009e, was EUR 412m), EUR 467m (10e, EUR 430m) and to EUR 480m (11e, EUR 456m). Our new EPS forecast (2009e to 2011e) is 0.29 EUR (was 0.22 EUR), 0.42 EUR (0.33 EUR) and 0.51 EUR (0.47 EUR). The shareholders should get dividends (09e to 11e) of 0.15 EUR (old estimate: 0.00 EUR), 0.20 EUR (0.10 EUR) and 0.25 EUR (0.12 EUR) respectively.

Fair value increased significantly: Taking into account our new estimates the fair value calculated with our DCF model increased from 4.60 EUR to 5.80 EUR per share. The same applies to the fair value calculated by the peer group valuation, which is now 4.80 EUR (3.80 EUR) per share.

Higher price target, Buy recommendation confirmed: As a result of the increased valuation we lift our price target significantly from 3.40 EUR to 5.00 EUR and confirm our Buy recommendation despite the good performance of the stock in the last months. If at all, we expect only a temporarily drop. A more detailed report will follow.

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