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Excellent Q3 figures above estimates; Guidance raised again; Estimates and PT up; Remains a BUY
Cancom yesterday reported excellent preliminary Q3 figures significantly beating our estimates and announced a raise in its guidance for the FY 2010
The y-o-y rise of 47% can be split up into external growth of c. 21% (Bürotex in Dec. 2009) and organic growth of c. 26%. The organic growth is above the long-term average (5-10% p.a.) driven by pent-up demand (c. 10-15pp) stemming from 3 years of underinvestments in IT and market share gains. According to CANCOM, pent-up demand in the IT market is strong enough to continue to propel growth above the long-term average throughout 2011E.
EBITDA reached € 5m in Q3, a rise of 124% y-o-y: Economies of scale in admin, marketing and rent should have overcompensated for higher hardware sales, which in our view resulted in a slight y-o-y decline in CANCOM's gross margin.
CANCOM said it will raise its FY 2010 guidance when reporting final Q3 figures on November 11. While the company gave no details, we expect the new guidance to call for sales of more than € 520m and an EBITDA of more than € 15m (old: sales > € 500m and EBITDA > € 13m). We have adjusted our estimates for 2010E and beyond to incorporate higher top- and bottom-line growth.
News flow should remain positive as CANCOM looks set to execute up to two acquisitions before the end of 2010 which should result in economies of scale in procurement, admin and logistics and could again call for a raise in the FY guidance.
Valuation remains favourable: CANCOM trades at an EV/EBITDA of only 4.2 for 2011E, representing a c. 25% discount to Bechtle. BUY with a new PT of € 13 based on DCF. The FCFY 2011E would result in a higher fair value of € 14.
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