4iG — Executing at pace on its five-year plan

4iG is a leading provider of IT services and systems integration in Hungary and aims to become the largest IT systems integrator domestically by the end of FY22, both by revenue and engineering headcount. With the group’s acquisitions in FY20 and H121, 4iG has laid out a roadmap to become a leading Hungarian telecoms services business, as well as developing a major presence in space and defence. Having consolidated its position in its home market, the group intends to expand regionally to become a major player in Central and Eastern Europe (CEE) and the Balkans.

4iG acts as the main contractor on large-scale IT projects for both public sector and private clients across multiple sectors, but with special expertise in education, the pharmaceutical industry, healthcare, logistics, the automotive industry and transport. The group’s services include hardware and software reselling, development, infrastructure maintenance and IT security.

In FY18, 4iG’s new management team launched a five-year plan to transform 4iG from a sleepy IT services business, to become the number one IT systems integrator in Hungary by the end of FY22, as well as a significant regional player across the CEE and the Balkans. Having repositioned the company for growth through a reorganisation and investment in group systems, management has actively targeted a more solution-oriented approach, based around new technologies to increase margins and revenue visibility. In FY21, management unveiled a three-pillar group structure, based on: 1) IT systems; 2) telecoms and infrastructure; and 3) space and defence, updating the group’s prior focus only on IT services. This revised strategy accelerates 4iG’s move away from a lower-margin software and hardware reselling business model towards the higher margins and longer-term contracts available in telecoms services.

In its Q121 results, 4iG’s revenues rose 77% y-o-y to HUF15.3bn, with EBITDA rising 74% y-o-y to HUF1.0bn, a 6.6% margin and a touch below the 6.7% margin in Q120. Net debt rose to HUF4.2bn, from net cash of HUF0.2bn in Q120, leaving plenty of firepower for M&A. Following the acquisitions of Rotors & Cams and Spacenet in Q121, the Poli Computer and HDT deals both completed in June 2021. In Q121, the group saw absolute growth in revenues for all service lines, with development, operations, consulting and other services now representing 44% of revenues, with recurring revenues 18% of total sales. With a backlog of HUF36bn, in addition to Q121 revenues, 4iG is expecting FY21 revenue growth of 25%+, with 10%+ growth expected in FY22 and beyond. However, factoring in the contributions from Poli Computer and HDT (together, with an estimated FY21 revenue contribution of HUF3bn, EBITDA of HUF1.5bn), we believe FY21 revenue growth should be in excess of 40% with blended EBITDA margins of c 11%.

Based on 4iG’s disclosure, the three acquisitions 4iG completed in FY20 (TRC, INNObyte (70% stake) and DTSM) should contribute over HUF5bn of revenues in FY21 and HUF0.6bn of EBITDA. In addition, 4iG’s CarpathiaSat joint venture (JV) with its strategic partner, Antenna Hungária, announced in August 2020, laid the groundwork for 4iG’s ambitions in space. In FY21, 4iG has already announced five acquisitions, of which four have completed (Rotors & Cams (24% stake), Poli PC, SpaceNET (70% stake) and HDT (75% stake)), adding a further HUF7bn to FY21 revenues. HDT represents the next step in 4iG’s strategic relationship with Antenna Hungária (which retains a 25% holding), with the acquisition establishing 4iG’s presence in the telecoms and infrastructure sector.

Assuming DIGI Group receives competition clearance, the acquisition would add a further HUF70bn of revenues to the group (with a part-year contribution in FY21). Although 4iG has yet to provide any details of the structure or consideration for DIGI Group, given a relatively ungeared balance sheet with significant additional debt capacity, we would not be surprised if 4iG went back to the bond markets to part-fund its acquisition with a further bond issue. Based on 2–3x pro forma FY22 EBITDA, 4iG might be able to support an additional HUF50–70bn of debt.

Having reported 39% revenue growth in FY20, through a blend of organic and M&A-driven growth, 4iG has set a revenue target for FY21 of HUF79.8bn, 39% up on FY20, with EBITDA of at least HUF6.5bn. The seven deals 4iG completed in FY20 and H121 are expected to add HUF12bn to FY21 revenues, with DIGI Group yet to complete. We have increased our FY21 revenue estimate by 33% to HUF82.7bn (4iG’s stated revenue target adjusted to include a HUF3bn contribution from HDT and Poli PC) and raised our FY21 EBITDA estimate by 59% to HUF8.9bn, a 10.8% EBITDA margin (including a HUF1.5bn contribution from HDT and Poli PC). Based on FY20 figures, DIGI Group would add a further HUF70bn of revenues and HUF19bn of EBITDA (c 27% margin), implying pro forma group FY21 revenues of c HUF153bn and EBITDA of HUF28bn (c 18% margin).

At an FY21 P/E of 10.5x and EV/EBITDA of 6.1x, 4iG’s valuation neither reflects the transformation the business has already achieved nor its future growth prospects as 4iG consolidates market leadership in Hungary. Based on our two primary valuation approaches (peer group multiples and DCF), the stock remains at a substantial discount to regional peers, as well as a material discount to our NPV estimate of HUF1,237 per share, with lower medium term-growth and EBITDA margins, offset by a reduced WACC of 8.2%. Given its size, the potential acquisition of DIGI Group (expected to complete in Q321) will affect both 4iG’s capital structure and valuation, with a likely step-up in EBITDA and EBITDA margins. The acquisition should also offer a platform for regional expansion across the CEE and the Balkans and raise 4iG’s capital markets profile.

Over FY20/21, 4iG is rapidly expanding from its core IT services and integration business into telecoms services, space and defence. This three-pillar strategy has been fuelled by M&A, with seven acquisitions, a maiden bond issue and a JV completed in the last 12 months, and the largest transformative deal (DIGI Group) expected to close in Q321, subject to competition clearance, funding and due diligence. This follows from a bold five-year strategy established in 2018 by Gellért Jászai (chairman and CEO), 4iG’s majority shareholder, who currently holds c 63% of the equity, leaving a 37% free float. Acqui-hires (acquisitions targeted at increasing headcount) have been a way to navigate a tight domestic jobs market, but the scale and diversity of acquisitions will be challenging to integrate. The group remains very dependent on Gellért Jászai as its principal.

4iG was founded in 1995 as FreeSoft and has been operating as a leading provider of IT services and systems integration in Hungary for almost 30 years. The group listed on the Budapest Stock Exchange in 2004, before the current management team bought in in 2018.

4iG acts as the main contractor on large-scale IT projects for both public sector and private clients, with special expertise in education, the pharmaceutical industry, healthcare, logistics, the automotive industry and air transport. The group’s services include hardware and software reselling, infrastructure maintenance and IT security.

4iG aims to become the largest IT systems integrator domestically in Hungary by the end of FY22, both in terms of revenue and engineering headcount. Having consolidated its position in its home market, the group intends to expand regionally to become a major player in CEE and the Balkans. With the group’s acquisitions in FY20 and FY21, as well as the pending acquisition of DIGI Group, 4iG has also set out a roadmap to become a leading Hungarian telecoms services business, as well as developing a leading presence in the space and defence sector.

Headcount at 4iG rose by over 50% in FY20, from 600 at the start of the year to 944 direct employees and freelancers on 31 March 2021.

The service mix (Exhibit 1) has not changed significantly from that reported in the H120 results. However, it is worth noting that the proportion of overall sales from the lower-margin hardware and software reselling segments has fallen significantly in FY20 from FY19, from 73% of revenues to 59% in FY20 (and further to 56% in Q121), to the benefit of higher-margin development, consulting and implementation services.

Looking at the balance of revenues by client type, public sector clients represented 73% of revenues in FY20, up from 69% in Q320 and 62% in FY19, with the proportion of revenues from large corporates falling from 22% in FY19 to 11% in FY20 – with SMEs representing the 16% balance. In terms of the sector split (Exhibit 2), it is apparent that the proportion of revenues from public administration increased materially, from 15% in FY19 to 29% in FY20, with the proportion of revenues from the education, IT and communications sectors falling in compensation.

The proportion of recurring revenues also took a step backwards in Q420, representing 14% of FY20 sales versus 16% in Q320, but still an increase from 10% in FY19. In the latest Q121results, recurring revenues increased to 18%.

Having reported 39% revenue growth in FY20, with net revenues of HUF57.3bn, through a blend of organic and M&A-driven growth, 4iG set a revenue target for FY21 of HUF79.8bn (pre HDT and Poli PC acquisitions), 39% up on FY20. In terms of EBITDA, 4iG reported HUF5.05bn in FY20, an 8.8% margin versus management guidance of c 8% at the start of the year and medium-term guidance of 8–10%. We have assumed an FY21e EBITDA of HUF8.9bn, comprising an underlying margin of 9%, together with an additional c HUF1.5bn from the HDT and Poli PC acquisitions, implying a blended FY21e EBITDA margin of 10.8%.

Management guidance remains for 10%+ overall annual revenue growth from FY22 onwards, with EBITDA margins of 8–10%, dependent on the margins of acquired businesses. With the group expanding its presence through vertical integration in the telecoms & infrastructure and the space & defence sector, future margins are subject to a degree of uncertainty, particularly given the looming DIGI Group deal.

On 29 March 2021, 4iG announced the conditional acquisition of DIGI Group, a leading Hungarian telecoms services provider (FY20 revenues HUF70bn, adjusted EBITDA of HUF19bn, 27% EBITDA margin). This is clearly a transformative acquisition that would help 4iG become one of the leading domestic Hungarian telecoms services companies when it completes. The deal is subject to due diligence and regulatory approvals, but is expected to complete in Q321. Consideration was not disclosed, but we envisage that funding will be supported by future debt and equity issuance.

Management intends for 4iG to become a diversified technology holding company in Hungary and a major IT services and telecoms business in the CEE and the Balkans. To fulfil this vision, the company has identified three pillars of future growth:

4iG is developing new technologies and products, but where the skillset does not exist internally it expects to hire or acquire expertise through acquisitions. Broadening the company’s sector footprint is also expected to be M&A driven, with clients, contracts and a sector track record to be acquired through complementary acquisitions.

4iG’s CarpathiaSat JV (August 2020) with its strategic partner, Antenna Hungária, laid the groundwork for 4iG’s ambitions in space, further consolidated by its FY21 minority investment in Rotors & Cams. 4iG’s Q121 majority investment in Hungaro DigiTel (HDT) represented the next step in 4iG’s strategic relationship with Antenna Hungária (which retains a 25% minority holding in HDT), diversifying 4iG’s presence in the telecoms and infrastructure sector, offering better revenue visibility through longer-term contracts and higher EBITDA margins than IT services. HDT would be complemented by the acquisition of DIGI Group, strengthening the group’s position as a leading Hungarian telecoms services provider.

Together with its investment in group-wide IT systems, management expects these pillars to continue to drive growth well above local market levels for the foreseeable future.

Despite a fall in market share in FY20 with fewer public sector implementation projects, T-Systems Hungary remains the domestic market leader in Hungary’s IT sector, with 4iG now the clear number two in the market. Management’s ambition remains to overtake T-Systems Hungary to become the market leader by the end of FY22, both in terms of headcount and revenue.

4iG is already of a scale in Hungary that means it is invited to tender for all major contracts. With the group’s investment in IT systems and processes, together with its skilled and motivated full-time workforce, management believes it also has a real competitive advantage over T-Systems Hungary that will mean it can continue to take market share.

In what remains a fragmented IT services market, no other group has the expertise or manpower to compete with 4iG and T-Systems Hungary across a broad range of sectors.

4iG continues to consolidate a fragmented market, targeting smaller players with an attractive client base or sector focus and a proven track record to support 4iG’s growth and build out its headcount and capabilities.

4iG’s headcount increased significantly over the course of the year, driven principally by the four acquisitions announced in H220. Headcount increased from just over 600 employees at the start of the year to almost 700 staff by 30 September 2020, including more than 500 engineers, reaching a headcount of 944 (including contractors) by 31 March 2021 with more than 700 engineers.

As well as the most recent acquisition of HDT announced in February 2021, 4iG completed the acquisition of DTSM in Q420, adding to the two transactions completed in Q320 (TRC and INNObyte), as well as the CarpathiaSat strategic JV. The three acquisitions completed in FY20 (TR Consult (TRC), INNObyte and DTSM) are expected to contribute more than HUF5bn of IT services revenues in FY21 and over HUF0.6bn in EBITDA.

In FY21, 4iG has already announced five acquisitions, of which four have completed: Poli Computer PC (Poli PC) and SpaceNET in IT services, as well as Rotors & Cams in space and defence and HDT in telecoms services, together adding a further HUF7bn to FY21 revenues and HUF1.8bn to EBITDA.

Assuming that the acquisition of DIGI Távközlési Szolgáltató and its subsidiaries, Invitel and I TV (DIGI Group), receives competition clearance and completes, this would add a further HUF70bn of revenues to the group (with a part-year contribution in FY21), almost doubling the FY21 year-end revenue run rate. Consideration and acquisition multiples have not been disclosed.

Management expects single-digit organic growth in the Hungarian IT services market (IDC has estimated 3.5% market growth in 202024), complemented by acquisitions. By our calculations, to become the market leader in Hungary 4iG will need to reach c HUF90bn of revenues by FY22, implying a further c HUF5–10bn in acquired revenues needed to supplement organic growth and market share gains in FY21/22.

4iG’s M&A strategy remains aligned with its growth strategy, where management expects continued robust organic growth to be complemented by acquisitions in the coming years. Management also remains open to considering strategic partnerships and JVs (eg 4iG’s CarpathiaSat strategic JV with Antenna Hungária), including long-term cooperation with European or other international groups with complementary resources.

With the Hungarian market still highly fragmented and with not all IT services companies performing as strongly as 4iG, management continues to review M&A opportunities, although it will remain bandwidth constrained pending completion of the DIGI Group acquisition. Regionally, we expect 4iG to follow a low-risk opportunistic expansion strategy, building on client contracts to land and expand in nearby or adjacent markets.

4iG reported net debt of HUF4.2bn as at 31 March 2021 (HUF2.7bn net cash as at 31 December 2020), reflecting its HUF15.45bn (c €43m) 10-year bond, less cash spent on its Q121 acquisitions. Given its relatively ungeared balance sheet, 4iG retains funding capacity for further expansion.

Scope Ratings gave 4iG a BB-/Stable issuer rating ahead of its acquisition of HDT and the issue of the group’s initial 10-year bond as part of the Central Bank of Hungary’s (MNB) Growth Bond Programme (NKP). 4iG issued the HUF15.45bn (c €43m) bond on 29 March 2021, with a 10-year maturity and offering a 2.9% coupon. The proceeds were to be used for domestic and regional expansion, with the bond registered on the Budapest Stock Exchange’s Xbond multilateral trading system. Scope Ratings noted the group’s robust interest cover and stipulated that Scope-adjusted debt (SaD)/EBITDA should remain below 3x, with free operating cash flow/SaD remaining below 20% for FY21 and FY22.

Subsequently, on 4 March 2021, Scope Ratings placed 4iG's BB- issuer rating under review for a possible upgrade, assessing that the acquisition of HDT would likely improve its business and financial risk profile, as 4iG would benefit from HDT’s long-term contract structure, meaningful diversification into a new industry (telecoms services) and higher EBITDA margins. Additionally, with a major part of the acquisition financed by way of equity, the deal structure would result in materially lower leverage than Scope Ratings had previously anticipated.

On 29 March 2021, 4iG signed a preliminary, non-binding agreement with Romanian companies RCS and RDS to acquire the Hungarian telecoms services business, DIGI Távközlési Szolgáltató and its subsidiaries (DIGI Group). The acquisition is subject to due diligence and competition authority approvals, but is expected to complete in Q321. DIGI Group reported FY20 revenue of HUF70bn (c €195m), with adjusted EBITDA of HUF19bn (c €53m).

DIGI Group is a leading telecoms service provider in Hungary, employing over 3,000 people, serving more than 1.1 million subscribers and operating over 2.5m revenue-generating units (RGUs). Together with the acquisition of HDT, the potential acquisition of DIGI Group builds on the telecoms market expansion plans announced jointly between 4iG and Antenna Hungária, with the establishment of CarpathiaSat in August 2020.

This is a transformative acquisition that would help 4iG become one of the leading domestic Hungarian telecoms services companies in a single step. Based on FY20 figures, DIGI Group would add a further HUF70bn of revenues and HUF19bn of EBITDA (27% margin), implying pro forma group FY21 revenues of HUF153bn and EBITDA of HUF28bn (c 18% margin).

Although consideration and acquisition multiples have not been disclosed, given the size of the company, we would expect that 4iG is likely to need to have recourse to the equity and bond markets to finance the acquisition.

Gellért Jászai became chairman of 4iG in July 2018 and CEO in March 2019, with a five-year plan to transform the business. Having strengthened the existing management team with outside expertise to help drive the required strategic transformation, he (as chairman and CEO) has led a transformation programme that delivered record financial performances in FY19 and FY20, but is not expected to deliver its full benefits until FY22.

Gellért Jászai, chairman and CEO: Prior to joining 4iG, Mr Jászai was the chairman of Konzum Nyrt between April 2015 and 2019. He graduated from the Corvinus University of Budapest with a Master’s in public administration.

Aladin Linczényi, COO: Mr Linczényi is a board member and the COO of 4iG. Prior to joining 4iG, he was a board member of Konzum Nyrt and the CEO of Konzum Asset Management. Earlier in his career, he spent over 11 years at Raiffeisen Bank in Hungary focusing on diverse corporate finance and financing activities. He has a Master’s in economics from the Corvinus University of Budapest.

Csaba Thurzó, CFO: Mr Thurzó is deputy CEO and CFO, and responsible for the accounting, finance, tax, controlling and HR activities of 4iG and its group (DOTO, Veritas, Humánsoft Service). Prior to joining 4iG, he was CFO for Magyar Post for 13 years. He is a graduate from the Budapest Business School and Eötvös Loránd University.

Péter Farkas, CTO: Mr Farkas is the deputy CEO of 4iG and is responsible for client service delivery. In 2001 he joined Humansoft, one of 4iG’s subsidiaries, progressing to CTO of Humansoft between 2012–17 before being appointed CTO for 4iG. He has a master’s in engineering from the Miskolc University of Engineering.

Gábor Radó, CSO: Mr Radó is responsible for all sales and commercial activities of the company. He joined Humansoft, a subsidiary of 4iG, in 2004 and worked his way up to chief sales officer. Prior to this, Mr. Radó worked for multinational companies including SAS Institute and Microsoft. He holds a degree in technology from Ort Braude Collage of Technology in Israel, Karmiel.

Péter Fekete, head of strategy and corporate governance: Mr Fekete is deputy CEO for strategy and corporate governance and leads the company’s M&A, capital markets and international activities. Prior to 4iG, he served as the deputy CEO of Konzum Nyrt, having previously spent 12 years working in investment banking for UBS, Jefferies and Houlihan Lokey in London. He graduated with a master’s in economics from the Corvinus University of Budapest.

There are a number of factors that investors should bear in mind when considering investing in 4iG:

We have looked at 4iG on the basis of peer valuations, cross-referenced against a more fundamental discounted cash flow (DCF) approach. We have included all completed acquisitions from FY20 and H121, but with limited disclosure on, for example, consideration and structure of consideration, we have had to make certain assumptions in our modelling. Our valuation currently excludes DIGI Group as the acquisition has not yet completed, with an undisclosed consideration and deal structure. However, we note that it would have a material impact on the valuation once the deal completes.

Firstly, looking at the net present value (NPV) of future cash flows, we have derived a core value of HUF1,237 per share (from HUF1,005), 99% above the current share price of HUF623, with lower medium term-growth and EBITDA margins than at our initiation, offset by a reduced WACC of 8.2% (vs 10.2%). This valuation is based on an explicit forecast period from 2020–29, before adding a perpetuity calculation. Our key valuation assumptions are set out in Exhibit 11, with the sensitivity to different WACC assumptions in Exhibit 10.

In terms of 4iG’s quoted peer group, in the absence of directly comparable domestic peers, we have looked at regional and European companies offering IT services of a similar nature (eg Atos, Tieto, Adesso), international companies with a presence in the Hungarian market (eg S&T) as well as CEE based peers Comarch and the Asseco Group (considering two separately quoted entities, Asseco Poland and Asseco South Eastern Europe; Exhibit 12).

We will review the peer group once the acquisition of DIGI Group completes.

The peer table offers a fairly consistent set of multiples, with an average current financial year EV/sales multiple of 1.1x, against 0.7x for 4iG. The peer group average current year EV/EBITDA is 9.7x with a mean P/E multiple of 19.2x. 4iG trades at a material discount to these metrics, with the discount ranging from 38% to 45%.

Factors behind 4iG’s low relative valuation may include the group’s: 1) low market capitalisation and related illiquidity; 2) singular exposure to the Hungarian market, with a lack of direct peers; 3) reliance on M&A to supplement market growth; and 4) perceived governance risk and low free float. As 4iG builds investor credibility and establishes itself regionally, we would expect the peer group discount to narrow.

Focusing on EV/EBITDA and P/E (Exhibits 13 and 14), both sets of multiples show a steeply falling trend as the management team has consistently delivered on the group’s growth targets and looks set to continue to execute successfully, as part of 4iG’s five-year plan, driving sales growth both organically and through M&A as well as realising cost efficiencies.

Despite the far-reaching impact of the COVID-19 pandemic, 4iG reported no perceptible slowdown in the Hungarian IT and ICT sectors in FY20. The pandemic even acted as a catalyst in certain segments, accelerating the digital transformation in both private and public sectors, with increased demand for home-working and cybersecurity solutions. With a flexible operating model, 4iG was able to respond effectively to the operational challenges of the pandemic, allowing it to sustain growth across its main areas of strategic focus in FY20.

4iG confirmed a notably strong Q420 (beyond normal seasonality), with an unusual volume of contracts signed. Q420 revenues were up 74% from Q320 (48% y-o-y), driving FY20 revenues of HUF57.3bn, a 39% increase on FY19 and 6% ahead of our upgraded estimates following 4iG’s Q320 report. EBITDA rose 24% to HUF5.0bn, a 24% y-o-y increase (FY19: HUF4.1bn) and PAT rose 21% to HUF3.4bn with the implied tax rate rising from 14.7% to 17.6%.

The group reported HUF31.7bn of contracted backlog (incremental to recorded sales) as at 14 April 2021, a 38% increase compared to the HUF23bn backlog reported with the FY19 results. This had risen further to HUF36bn by 31 May 2021, the time of the Q121 update.

Having reported 39% revenue growth in FY20, through a blend of organic and M&A driven growth, 4iG set a revenue target for FY21 of HUF79.8bn, 39% up on FY20 (pre HDT and Poli PC). In terms of EBITDA, 4iG reported HUF5.0bn in FY20, an 8.8% margin versus management guidance of c 8% at the start of the year and medium-term guidance of 8–10%.

The seven deals 4iG completed in FY20 and H121 are expected to add approximately HUF12bn to FY21 revenues and HUF2.5bn of EBITDA. Assuming DIGI Group receives competition clearance, it would add a further HUF70bn of revenues (with a part-year contribution in FY21), almost doubling the year-end revenue run-rate and underpinning growth in FY22.

Based on the seven completed deals, together with 4iG’s resilient trading throughout the pandemic, we have increased our FY21 revenue estimate by 33% to HUF82.7bn (4iG’s stated revenue target adjusted to include a HUF3bn contribution from HDT and Poli PC) and raised our FY21e EBITDA estimate by 59% to HUF8.9bn, reflecting a c 9% underlying margin, which together with a HUF1.5bn contribution from HDT and Poli PC results in a blended EBITDA margin of 10.8%.

From FY22, 4iG’s management team is guiding towards revenue growth of 10%+ and EBITDA margins of 8–10%. We have assumed 12.5% revenue growth in FY22 (prior to any contribution from DIGI Group) and 10% in FY23. EBITDA margins in FY22 and FY23 decline gently towards the top end of management’s medium-term range, leading to our EBITDA estimates for FY22 of HUF9.9bn and HUF10.6bn in FY23.

We will revisit our estimates once the DIGI Group acquisition completes.

4iG remains cash-generative, with net operating cash flow of HUF3.6bn in FY20 (FY19: HUF7.2bn), and HUF9.1bn forecast for FY21. In FY20, the company spent capex of HUF1.2bn (FY19: HUF1.5bn) to cover the investment and integration of its IT systems. From FY21 and for the remainder of the forecast period, we see capex stabilising at c 2% of revenues.

The board of directors declared a dividend of HUF2.2bn for FY20, equating to HUF24 per share, offering a dividend yield of 3.8%. This represents a pay-out ratio of 65% of post-tax profits, and for FY21 and beyond, we have assumed dividends are maintained at a similar level of pay-out, although we would note that cash may instead be reserved for acquisitions (eg DIGI Group).

As at 31 December 2020, 4iG had an ungeared balance sheet with c HUF2.7bn of net cash, no long-term borrowings, FY20 EBITDA of HUF5.0bn and net assets of HUF7.7bn. Post year end, on 25 March 2021, 4iG issued a HUF15.45bn (c €43m) 10-year bond offering a 2.9% coupon, with the proceeds from the issue to be used for domestic and regional expansion. At 31 March 2021, 4iG reported net debt of HUF4.2bn suggesting that the balance sheet remains still relatively ungeared.

On 4 March 2021, Scope Ratings placed 4iG's BB- issuer rating under review for a possible upgrade, noting that the acquisition of HDT would likely improve 4iG’s business and financial risk profile with 4iG set to benefit from HDT’s long-term contract structure, sector diversification (telecoms services) and higher EBITDA margins.

Although 4iG has yet to provide any details of the structure of the consideration for DIGI Group, given a relatively ungeared balance sheet with significant additional debt capacity, we would not be surprised if 4iG went back to the bond markets to part-fund its acquisition with a further bond issue.