SeSa S.p.A - An interesting situation
Analysis of an Italian IT company that has been growing at double digits for over 15 years and is currently facing some challenges.
In the previous analysis of Tamburi Investment Partners published in the first half of October, we highlighted their stake in Sesa as the first contributor to the NAV of the holding (almost 10% of the NAV). Since then, Sesa’s stock price has tumbled, recording a -30%. This price decrease was driven by consecutive quarters of underperformance to analysts’ expectations and the Digital Value scandal.
These are the main factors driving the current underperformance:
Sesa possesses a minority stake of 3,75% of Digital Value (DGV), acquired for EUR4 million in 2018. (Sesa controls 6% of DGV's parent company, which controls 62.5% of DGV). As of 23Dec24 (the price of DGV is very volatile lately), the value of that participation is around 8m EUR. Just a couple of days after we published our analysis of Tamburi, Rossi, who was chairman and CEO of DGV, was dismissed due to an investigation along with other 17 people over alleged corruption in public procurement contracts.
The slowdown in the Digital Green segment, which had experienced outstanding growth mainly driven by government incentives. In FY24, Digital Green decreased the top line 33%. This decrease started in 2Q24 and accentuated over 2H24. 1Q24 recorded YoY growth vs 1Q23. Since 2H24, the revenues of Digital Green have stabilized. The YoY comparison for Digital Green’s 1H25 remained tough.
VAS sector slowdown. This is the main sector of SES producing 70% of the revenues and 48% of the EBITDA. The sector slowdown happened industry-wide and Sesa is not the only impacted company.
However, despite the recent drop in the share price, we are talking about a company that has been growing for more than 15 years at a CAGR of over 10% and whose success story is well-known in the IT industry, despite currently having a market cap of less than €1Bn. It is controlled by insider ownership and has a long runway for growth thanks to investments in the higher-margin and fragmented SSI and Business Service segments.
In today’s analysis. We explain the company, analyze its different lines of business separately, as well as the expectations and risks for each one, and, why not say it, identify some flags that are worth mentioning. We are talking about a company with the share price down 50% YTD, near-double-digit long-term growth prospects, trading at a PER of slightly less than 9 for the NTM, which in itself represents an investment worth looking at on its own. And the reality is that we came up with a very detailed analysis that stands out quite a bit in conclusions from those of the analysts covering the stock.