Disclaimer: This isn’t funding recommendation. PLEASE DO YOUR OWN RESEARCH !!!
As all the time with my extra detailed writeups, I’ll concentrate on the gernal part within the publish and fix the complete pdf for anybody within the particulars.
- Elevator pitch:
EVS Broadcast is a 400 mn EUR market cap Belgian know-how agency that’s the international chief in Reside sports activities broadcasting/manufacturing know-how that after earned margins larger than Nvidia does at this time.
After a comparatively lengthy section of stagnation from 2008-2019, EVS appears to have discovered its path to first rate progress once more below new administration. The principle driver is a brand new know-how cycle that may shift the product choices from {hardware} targeted options to extra Software program/Saas merchandise and a transfer into adjoining markets (Studio manufacturing).
For a corporation with EBIT margins > 20%, capital return >20%, internet money and a focused progress price of 10% p.a. (which they’ve achieved since 2019), the present valuation of ~9x EV EBIT or 10-11x P/E is dust low cost and gives appreciable upside for the affected person investor.
As EVS has been engaged on AI options since no less than 2017 and has already functioning merchandise to point out, one will get any potential “AI upside optionality” for completely free.
- Introduction
The primary time I got here throughout EVS in 2014 on the weblog. Again then it seemed like a reasonably valued, extraordinarily worthwhile firm that had nevertheless some difficulty with regard to progress and potential additional Expertise adjustments. Their preliminary progress got here from a know-how change from tapes to digital laborious drives for which they turned the clear market chief within the area of interest of Sports activities broadcasting.
One other warning signal again then was that they simply completed constructing their shiny new HQ.
Wanting again, it was a smart determination to remain away, as the corporate shrank for a number of years till very not too long ago.
Then only recently, I got here throughout them as soon as extra in my “All Belgian Shares” sequence and got interested.
What has modified at first sight is that since 2019 they’ve new administration and that particularly within the final 3 years the corporate managed to develop properly and stabilize margins on a nonetheless very enticing degree. Valuation smart, the inventory is even cheaper than 2014.
So once I got here throughout the corporate as soon as once more within the Al Belgian Shares sequence, I made a decision to do a brand new deep dive.
Full PDF:
- The Firm & the enterprise
EVS is a Belgian firm that’s comparatively younger, it was based in 1994 and went public in 1998. It was based by 2 individuals which since then have left the corporate. They acquired an organization in 1998 that introduced on board Michael Couson, who at this time is the biggest shareholder with round 6%.
Right here is an outline of some KPIs:
6. Valuation/Return expectations
In a latest interview, the CEO reiterated his long run goal: Doubling of gross sales till 2030 (goal 350-400 in 2030). He explicitly talked about that he desires to attain this by means of natural progress and acquisition.
My brief kind pitch can be the next: If you should purchase one thing for a P/E of 10 or 11 that grows by 10% p.a. for a while and may be very worthwhile and has internet money, you’ll very seemingly come out alright with restricted draw back threat.
The longer model seems to be as follows:
The goal from the CEO represents a prime line progress price of ~10% p.a. . Assuming no fairness dilution, fixed profitability and the present dividend yield of three,6%, that progress price ought to end result in a return of round ~13-14% p.a. with none a number of growth..
That sounds fairly OK to me for such a top quality enterprise with no leverage and so on. .
If they really handle to ship on that, a a number of growth is very seemingly sooner or later in time which might add one other 3-4% p.a.
Even when profitability goes down a bit bit, this nonetheless ought to be greater than enough. General I do suppose that I might double my cash right here over the following 5 years (together with dividends).
12. Professional’s and Con’s
As all the time, earlier than coming to the conclusion, a fast listing of professional’s and con’s:
- low valuation, low cost in comparison with margins and return on capitaö
- New CEO 2019, new CFO in 2021, progress since 2019 first rate after lengthy stagnation
- Might 2020 Acquisition of AXON
- Long run charts in Annual reviews and IR presentation
- Respectable aggressive benefits, nonetheless good margins
- 2024 massive occasion yr
- clear reporting, no bullshit changes
- low tax price due to R&D Exemptions
- some share purchase backs in 2020 at very low costs, no additional buybacks
- Expertise change / new Funding cycle from On premise to distributed and HD to UHD
- Early mover in AI, Precise helpful AI purposes already realized that save clients cash (cheaper cameras)
- some tailwind from growing recognition and significance of reside sports activities
- no apparent brief time period catalysts
- Progress requires Working capital (stock, receivables)
- solely restricted share purchase backs
- 7 C-Degree staff (however complete comp OK)
- TV Studios as clients are total in decline in decline
13. Conclusion and sport plan:
General, EVS Broadcast at this time appears to be a really fascinating inventory. Evidently the lengthy stagnation interval is over and that new administration is ready to ship first rate progress.
Based mostly on the very modest valuation of a P/E of 10-11 for 2024 (not contemplating the 4 EUR et money per share), the draw back appears to be fairly restricted.
However, if Administration might ship on its targets (10% progress p.a. till 2030), the upside might be substantial, even with out a number of growth.
In the event that they ship, for a world Expertise firm dominating its area of interest, considerably larger valuation multiples might be attainable.
Due to this fact I made a decision to allocate ~3,3% of the portfolio right into a “starter place”, reinvesting my Proceeds from my partial DEME sale.
The sport plan is straightforward: Sit tight and watch how the enterprise develops over the following 18-24 months and if the Administration can ship.
Appendix A) Bonus Soundtrack:
