3U Holding — Cloud computing and e-commerce growth

3U Holding (UUU)

Last close As at 23/11/2024

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Research: TMT

3U Holding — Cloud computing and e-commerce growth

3U Holding’s diverse portfolio benefits from exposure to long-term growth trends across cloud computing, e-commerce and renewable energy. Solid execution, a cash-generative property sale and the increasingly realistic prospect of a value catalysing weclapp IPO has seen its shares rise by 74% ytd. We highlight the main trends in its three segments.

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TMT

3U Holding

Software and comp services

Price

€1.59

Market cap

€56m

Share price graph

Share details

Code

UUU

Shares in issue

35m

Net debt (€m) as at end June 2019

9.5

Business description

3U Holding is a holding company with assets in three segments: ITC (information and telecommunication technology), Renewable Energies and SHAC (sanitary, heating and air conditioning). All three segments are exposed to long-term growth trends. The company has stated its intention to list weclapp and its 75% equity stake was recently independently valued at c €50m.

Bull

Exposure to megatrends in cloud computing, ecommerce and renewable energy.

Property sale frees up capital to reinvest in weclapp or fund further acquisitions.

A weclapp IPO could prove to be a catalyst for a re-rating.

Bear

ITC revenues currently shrinking due to falling telephony sales.

SHAC segment is currently loss-making.

Profit generation in Renewable Energies is highly weather (wind) dependent.

Analyst

Dan Gardiner

+44 (0)20 3077 5700

Cloud computing and e-commerce growth

3U Holding’s diverse portfolio benefits from exposure to long-term growth trends across cloud computing, e-commerce and renewable energy. Solid execution, a cash-generative property sale and the increasingly realistic prospect of a value catalysing weclapp IPO has seen its shares rise by 74% ytd. We highlight the main trends in its three segments.

The shift to the cloud

ITC accounted for 27% of 3U Holding’s H119 sales (€6.9m) but nearly 70% of earnings. While segment sales declined 9% y-o-y, weclapp grew 50% to €2.1m. weclapp has developed a cloud-based ERP software platform for small and medium sized enterprises specialising in online commerce. The broader shift to cloud-based software has helped drive its 100% revenue CAGR between 2013 and 2018 and management expects a further 50% y-o-y growth in H219. 3U Holding believes weclapp’s rapid growth is set to continue. It has stated its intention to list the business and its 75% stake was independently valued in June at c €50m.

Growth in e-commerce

At 57% of sales, SHAC is 3U Holding’s largest segment. It delivered 24% y-o-y revenue growth in H119 primarily driven by Selfio, an online shop specialising in selling SHAC equipment predominantly to consumers. Selfio grew 30% y-o-y and now accounts for two-thirds of segment sales. The steady shift to online sales in the DIY sector is expected to sustain a growth rate above 10% in Selfio’s core market. Investment in the supply chain saw segment margins turn negative in H1, but management views these issues as temporary and Selfio’s EBITDA doubled y-o-y.

Rising renewables

Renewable Energies is 3U Holding’s smallest segment (16% of H119 sales). The company currently has 45MW capacity in a mixture of solar and (increasingly) onshore wind. While the opportunities to deploy new onshore wind capacity in Germany are currently modest, the existing business is highly cash generative.

Valuation: weclapp IPO could be a catalyst

The Marburg property sale in August lifted FY19 EBITDA guidance by €5m (to €11m) and frees up €9.7m to either fund acquisitions or be re-invested in weclapp. Such a diverse portfolio is not easy to value but a weclapp IPO could prove to be a catalyst for a re-rating. At €1.6, the shares offer an FY20e dividend yield of 3.4%.

Consensus estimates

Year
end

Revenue
(€m)

Adj EBITDA (€m)

PBT
(€m)

EPS
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/17

46.9

6.7

1.9

3.0

2.0

53.0

1.3

12/18

48.0

6.7

1.8

6.0

3.0

26.5

1.9

12/19e

53.1

11.0*

5.6

13.0

4.5

12.2

2.8

12/20e

60.2

11.5

4.1

8.0

5.5

19.9

3.5

Source: Company data, Refinitiv. Note: *Midpoint of company guidance.

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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

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

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

General disclaimer and copyright

This report has been prepared and issued by Edison. 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

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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