4iG — CEO doubles down on 4iG

4iG (BSE: 4IG)

Last close As at 21/11/2024

HUF815.00

6.00 (0.74%)

Market capitalisation

243,747m

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Research: TMT

4iG — CEO doubles down on 4iG

4iG has announced that Gellért Jászai (4iG chairman and CEO) has acquired the combined 22.3% equity stakes (excluding treasury shares) held by Konzum PE and Opus Global, entities controlled by Lőrinc Mészáros. This takes Mr Jászai’s equity stake in 4iG to 63.9% of the total voting rights. We considered these holdings to represent a related party in our initiation report, so in many respects this change in ownership does not reflect any change in control, but rather highlights Mr Jászai’s long-term strategic commitment to 4iG as a vehicle for growth. As a result of the transaction, Mr Mészáros no longer holds an equity stake in 4iG and were there to have been any residual political exposure from his shareholding, that risk has now been removed. The free float remains 36.1% (excluding treasury shares).

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TMT

4iG

CEO doubles down on 4iG

Shareholding update

IT services

2 July 2020

Price

HUF620

Market cap

HUF56.9bn

HUF316/€

Net cash (HUFbn) at end Q120

0.2

Shares in issue

91.7m

Free float

36.1%

Code

4iG

Primary exchange

Budapest

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.5)

54.6

(42.6)

Rel (local)

(9.3)

41.4

(34.1)

52-week high/low

HUF1,100

HUF296

Business description

4iG is one of the leading IT services and systems integrators in Hungary, working with public sector clients, large corporates and SMEs. Management is focused on becoming the market leader in Hungary by FY22 as well as targeting expansion in Central and Eastern Europe.

Next events

H120 results

28 August 2020

Analysts

Richard Williamson

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5730

4iG is a research client of Edison Investment Research Limited

4iG has announced that Gellért Jászai (4iG chairman and CEO) has acquired the combined 22.3% equity stakes (excluding treasury shares) held by Konzum PE and Opus Global, entities controlled by Lőrinc Mészáros. This takes Mr Jászai’s equity stake in 4iG to 63.9% of the total voting rights. We considered these holdings to represent a related party in our initiation report, so in many respects this change in ownership does not reflect any change in control, but rather highlights Mr Jászai’s long-term strategic commitment to 4iG as a vehicle for growth. As a result of the transaction, Mr Mészáros no longer holds an equity stake in 4iG and were there to have been any residual political exposure from his shareholding, that risk has now been removed. The free float remains 36.1% (excluding treasury shares).

Year end

Revenue
(HUFbn)

PBT*
(HUFbn)

Adjusted EPS*
(HUF)

DPS
(HUF)

P/E
(x)

Yield
(%)

12/18

14.0

0.2

1.1

0.0

N/A

N/A

12/19

41.1

3.3

31.1

22.0

19.9

3.5

12/20e

49.1

3.4

31.1

22.0

19.9

3.5

12/21e

58.9

4.8

43.9

31.0

14.1

5.0

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Transformation targeting market leadership

We set out overleaf a summary of the shareholder register, as disclosed in the Q120 report, as well as our update following the announced transactions.

Our recent initiation report provides further background information on the company as well as our detailed forecasts.

Impact on the shareholder register

We set out below a summary of the shareholder register, as disclosed in the Q120 report, as well as our update following the announced transactions.

Exhibit 1: Adjustments to the shareholder register

Pre-transaction (as disclosed in Q120 report)

31-Mar-20

31-Mar-19

KZF Vagyonkezelő Kft. (Jászai Gellért)

35.02%

22.57%

Manhattan Invest Kft.( Jászai Gellért)

3.29%

N/A

MAnhattan Magántőkealap (Jászai Gellért)

1.90%

N/A

Konzum Magántőkealap (Mészáros Lőrinc)

11.63%

26.74%

Opus Global (Mészáros Lőrinc)

9.95%

13.79%

4iG treasury shares

3.23%

2.39%

Free float

34.98%

34.51%

Total

100.00%

100.00%

Post-transaction

02-Jul-20

02-Jul-20

Inc. treasury shares

Ex treasury shares

Jászai Gellért

61.79%

63.85%

Treasury shares

3.23%

-

Free float

34.98%

36.15%

Total

100.00%

100.00%

Source: 4iG, Edison Investment Research

Exhibit 2: Financial summary

HUFm

2016

2017

2018

2019

2020e

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

15,686

16,915

14,007

41,129

49,083

58,881

68,467

Cost of Sales

(10,913)

(12,046)

(8,938)

(30,126)

(34,322)

(41,183)

(47,625)

Gross Profit

4,773

4,868

5,070

11,003

14,761

17,699

20,842

EBITDA

 

 

604

273

842

4,075

4,152

5,631

7,726

Normalised operating profit

 

 

98

(333)

240

3,362

3,380

4,792

6,811

Amortisation of acquired intangibles

0

0

0

0

0

0

0

Exceptionals

0

0

0

0

0

0

0

Share-based payments

0

0

0

0

0

0

0

Reported operating profit

98

(333)

240

3,362

3,380

4,792

6,811

Net Interest

(128)

(32)

(21)

(18)

(22)

2

31

Joint ventures & associates (post tax)

0

0

0

0

0

0

0

Exceptionals

0

0

0

0

0

0

0

Profit Before Tax (norm)

 

 

(29)

(364)

219

3,344

3,358

4,794

6,843

Profit Before Tax (reported)

 

 

(29)

(364)

219

3,344

3,358

4,794

6,843

Reported tax

(81)

(87)

(117)

(488)

(437)

(671)

(1,026)

Profit After Tax (norm)

(111)

(452)

102

2,857

2,921

4,123

5,816

Profit After Tax (reported)

(111)

(452)

102

2,857

2,921

4,123

5,816

Minority interests

0

0

0

66

0

0

0

Discontinued operations

0

0

0

0

0

0

0

Net income (normalised)

(111)

(452)

102

2,922

2,921

4,123

5,816

Net income (reported)

(111)

(452)

102

2,922

2,921

4,123

5,816

Basic average number of shares outstanding (m)

92.8

92.8

91.6

91.6

91.7

91.8

91.8

EPS – basic normalised (HUF)

 

 

(1.19)

(4.93)

1.11

31.87

31.84

44.93

63.39

EPS – diluted normalised (HUF)

 

 

(1.19)

(4.93)

1.08

31.09

31.08

43.86

61.87

EPS – basic reported (HUF)

 

 

(1.19)

(4.93)

1.11

31.87

31.84

44.93

63.39

Dividend (HUF)

0.00

0.00

0.00

22.00

22.00

31.00

44.00

Revenue growth (%)

(4.9)

7.8

(17.2)

193.6

19.3

20.0

16.3

Gross Margin (%)

30.4

28.8

36.2

26.8

30.1

30.1

30.4

EBITDA Margin (%)

3.8

1.6

6.0

9.9

8.5

9.6

11.3

Normalised Operating Margin

0.6

-2.0

1.7

8.2

6.9

8.1

9.9

BALANCE SHEET

Fixed Assets

 

 

2,506

2,049

1,571

1,948

2,079

2,274

2,527

Intangible Assets

1,954

1,655

1,221

1,525

1,440

1,375

1,335

Tangible Assets

374

187

140

322

539

798

1,092

Investments & other

178

207

210

101

101

101

101

Current Assets

 

 

7,166

6,352

6,824

22,161

23,078

27,389

32,362

Stocks

461

274

242

523

686

824

953

Debtors

5,801

4,472

4,306

12,892

13,498

16,192

18,829

Cash & cash equivalents

187

323

176

6,238

6,386

7,865

10,073

Other

717

1,283

2,101

2,508

2,508

2,508

2,508

Current Liabilities

 

 

(6,544)

(5,756)

(5,652)

(17,861)

(18,006)

(20,408)

(22,662)

Creditors

(4,696)

(4,660)

(3,894)

(16,361)

(16,765)

(19,166)

(21,421)

Tax and social security

0

0

0

0

0

0

0

Short term borrowings

(1,848)

(1,096)

(1,758)

(1,500)

(1,242)

(1,242)

(1,242)

Other

0

0

0

0

0

0

0

Long Term Liabilities

 

 

(5)

(8)

(18)

(57)

(57)

(57)

(57)

Long term borrowings

0

0

0

0

0

0

0

Other long term liabilities

(5)

(8)

(18)

(57)

(57)

(57)

(57)

Net Assets

 

 

3,123

2,637

2,725

6,192

7,095

9,199

12,171

Minority interests

0

0

0

64

64

64

64

Shareholders' equity

 

 

3,123

2,637

2,725

6,255

7,158

9,262

12,234

CASH FLOW

Op Cash Flow before WC and tax

604

273

842

4,075

4,152

5,631

7,726

Working capital

(1,020)

904

(1,360)

3,231

(366)

(430)

(510)

Exceptional & other

28

(0)

(26)

(5)

0

0

0

Tax

(100)

(104)

(117)

(415)

(437)

(671)

(1,026)

Net operating cash flow

 

 

(488)

1,072

(661)

6,886

3,350

4,530

6,190

Capex

(387)

(120)

(120)

(1,471)

(903)

(1,034)

(1,168)

Acquisitions/disposals

(89)

(11)

0

3

0

0

0

Net interest

0

(18)

(11)

(13)

(22)

2

31

Equity financing

(94)

(8)

0

185

0

0

0

Dividends

(183)

0

0

0

(2,019)

(2,019)

(2,844)

Other

(131)

(2)

(3)

36

0

0

0

Net Cash Flow

(1,373)

915

(795)

5,626

406

1,479

2,209

Opening net debt/(cash)

 

 

333

1,707

792

1,587

(4,039)

(4,445)

(5,924)

FX

0

0

0

0

0

0

0

Other non-cash movements

0

0

0

0

0

0

0

Closing net debt/(cash)

 

 

1,707

792

1,587

(4,039)

(4,445)

(5,924)

(8,133)

Source: 4iG accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by 4iG and prepared and issued by Edison, in consideration of a fee payable by 4iG. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

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General disclaimer and copyright

This report has been commissioned by 4iG and prepared and issued by Edison, in consideration of a fee payable by 4iG. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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