Analysis & model updates: Unidata, Golar LNG, Vysarn, AutoPartner..
Analysis & model updates: Unidata, Golar LNG, Vysarn, AutoPartner..
Furthermore, our free Week in the Markets edition & Portfolio Management
Hi there!
Short week but tremendously intense for us, this might be one of the most comprehensive updates to date!
Week in the Markets: Recently launched, our briefing about the last week in the markets, macro data and worldwide events
Results analysis & model updates: Unidata, Golar LNG, Vysarn Ltd, InterCars & AutoPartner
Portfolio Management: Some movements this week and we add an interesting Luxury Rental Houses company to the radar section ( illiquid microcap, almost negative EV, making profits) that we recently began the due diligence process on. We also include comments on other assets (not only equities) we believe interesting for the current market environment.
The Week in the Markets
It was an atypical week marked by the Thanksgiving holiday, with the American stock market closed on Thursday and open for only half of Friday. The trends observed in the past week (specifically since the American CPI data) continue, with small businesses gaining ground over large ones. Stock markets in developed countries are outperforming emerging markets despite the weakness of the dollar, and energy is the worst-performing sector of the week, albeit still in positive territory.
Energy was the worst-performing sector of the week due to tensions and the OPEC+ meeting delay until November 30th. Some African countries, like Nigeria, are pushing the free rider strategy to the limit, and it remains to be seen if Saudi Arabia will continue to yield or run out of patience. Additionally, economic data is very poor, and in Europe, there is a considerable amount of oil waiting to be unloaded.
Regarding European natural gas, the arrival of cold weather and forecasts for an extremely cold December have boosted TTF in recent days. However, inventories are at 98% (vs. an 85% average over the past 5 years), and the fundamentals remain rather bleak.
High-yield bonds experienced an upward trend on Monday, boosted by strong equity performance and the successful auction of 20-year Treasuries. Yields rose on Germany's decision to suspend debt limits for a fourth year, coupled with the ECB's commitment to tight monetary policy. In the UK, the 10-y bond yield went up after an unexpected rise PMI for November.
Also noteworthy are the impressive 3Q23 results of NVIDIA, although it ended lower after issuing cautious guidance due to export restrictions to China. Additionally, the week featured a soap opera between OpenAI and Microsoft (with Microsoft holding a 49% stake in OpenAI). In the end, the OpenAI board will be removed, and Sam (CEO) will return to OpenAI after being employed by Microsoft for just 48 hours. A happy ending for all parties involved.
Bitcoin: On Friday, it reached its annual highs, and we continue to believe that it looks poised to continue its upward trajectory. Short-term catalysts are quite strong (SEC approving the ETF, halving in April, and American elections - everyone knows that politicians think people vote better with some free money). Beta plays two ways.
Macro data
Eurozone PMI: The data remains poor - sixth consecutive month of declines - although the pace of contraction is slowing, a recession is imminent. Manufacturing PMI: 43.8, Services PMI: 48.2, Composite PMI: 47.1 (remember that <50 indicates contraction).
UK PMI: Surprisingly positive (4 and 5-month highs) Manufacturing PMI: 47.9, Services PMI: 50.5, Composite PMI: 50.1.
US PMI: The data is slightly worse than expected but visibly better than in the Eurozone. Manufacturing PMI: 49.4, Services PMI: 50.8, Composite PMI: 50.7.
Durable goods orders: Notable 5.4% drop in October, largely attributed to a sharp decline in civilian aircraft orders.
Other events
The elections held in the Netherlands on Wednesday were won by the far-right Geert Wilders, although forming a government may prove challenging. We are closely monitoring the resulting government as a portion of Kistos' assets are in the Netherlands, and its development will depend significantly on how Natural Gas-friendly the new government proves to be. It's also worth noting that the Ultraliberal Javier Milei won the elections in Argentina and faces the formidable task of turning around a country with an annual inflation rate of over 140%. In the meantime, Argentine companies have seen significant gains on Wall Street this week.
Finally, we are attaching a small table for you to see the tremendous dependence that sector indicators have (similar to the S&P 500) on a few companies, and why we are showing you other ways to measure sectoral market sentiment in small businesses.
PD: All Spreadsheets we use are available for subscribers. We are also working with an external organisation to habilitate a data section on our website which allows subscribers to access all type of data related to financial markets.
We are redeveloping the website, so you will see many updates there + everything that is coming (all this Sunday's content is published on the website throughout the week).
Unidata presented the 2024-2026 plan with important strategic announcements regarding the roadmap of the business model. Last week, the company released the 9M results which were in line with what the market expected and the 2023 year-end targets.
9M results and 2023 targets
9M results have been very strong with +16.4% organic growth (without TWT acquisition) and +120% on a proforma basis (TWT consolidated from 1st January). The number of customers has also grown by 20% leveraging the increase in fiber network. The ARPU has continued to fall in the Consumer Unidata segment and a positive trend continues in the Business segment. The network is now above 6,200 km with 300km added in Q3.
For 2023, the management expects proforma revenues of about €97 million and EBITDA of €25 million
2024-2026 Plan
The key point of the call for us was the intention to rely a bigger part of the revenues on recurrent services leveraging the already available infrastructure. Their target is to drive it up from 64% of total sales in 2023 to 79% in 2026. This more favorable revenue mix will add further visibility making the company not fight each year for additional sales, and will allow it to optimize its working capital.
Unifiber (the most advanced Joint Venture) is developing very well and is starting to impact revenues with c. €13 million in revenues for the nine months for a €7 million investment by Unidata. The JV will be completed in 2025 connecting 200k residential units and 8k businesses. Our rough estimate is that across the 2023-2027 period, the cumulated revenues for the network construction could be above €65 million. And once it finishes, Unifiber will be able to resale the network to other wholesale.
With more than €15 million won on tenders this year, the idea is to keep growing the IoT business and reinforce its position in the Business, Wholesale, and Public Sector markets. They see a lot of potential with the Rome public sector which is a big potential customer not targeted yet by Unidata. Regarding the 5G and Wifi tender in Rome that should have been finally signed in November, the negotiation seems to continue smoothly and an SPV has been already set up.
The 2026 targets are the following: 130€-140€ million in revenues and €37-41€ in EBITDA which is a +28% EBITDA margin versus the 25% expected for 2023. It may seem little growth in 2025 €128-€134 but here it was previously included in the voice trading business (around €17 million in sales). So, from 2022 to 2026, the management expects an 11% and 17% CAGR growth in sales and EBITDA.
Capex for the 2023-2026 period came higher than we expected with a cumulative capex of €56 million for the three years being €14 million financial investment. The management also commented they are comfortable with the analyst consensus on FY24 (€120MM revenues and €29.5MM EBITDA).
Valuation
From 2024, the Unidata/TWT breakdown will disappear, so we have adjusted our model to reflect it. We have also revised some assumptions.