Crealogix — Driven by growth in recurring revenue

CREALOGIX (SW: CLXN)

Last close As at 21/12/2024

124.50

0.00 (0.00%)

Market capitalisation

174m

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Research: TMT

Crealogix — Driven by growth in recurring revenue

CREALOGIX is a leading, global digital banking engagement platform provider, based in Switzerland, offering front-end software solutions that enable ‘the digital bank of tomorrow’. The market is dynamic and fast-changing, with the group’s solutions used by traditional retail, private and commercial banks, as well as wealth managers that need to upgrade legacy systems to meet the challenge of digital banks. Traditional banks see the benefits of modular, customisable, single-platform solutions, offering lower maintenance and development costs, better content management and stronger security in a swiftly digitalising marketplace.

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TMT

CREALOGIX

Driven by growth in recurring revenue

Software & comp services

Deutsches Eigenkapitalforum 2021

17 November 2021

Price

CHF121.5

Market cap

CHF170m

Share price graph

Share details

Code

CLXN

Shares in issue

1.40m

Net debt (CHFm) at 30 June 2021

1.9

Business description

CREALOGIX is a Swiss Fintech 100 company and is among the global market leaders in digital banking, providing front-end digital banking technology solutions to banks, wealth managers and other financial services companies.

Bull

A market leader in a high-growth (c 8% 2020–22) digital banking sector.

Increasing proportion of recurring revenues – 50% in FY21; 60% targeted in FY23.

Recurring revenues grew at 22% y-o-y in FY21, with SaaS revenues growing 76% y-o-y.

Bear

CREALOGIX operates in a challenging global market, with large, well-funded competitors.

Although a SaaS-led model is strategically attractive, growth remains uncertain until the SaaS transition completes in FY23.

The threat of an economic slowdown would dampen growth prospects.

Analyst

Richard Williamson

+44 (0)20 3077 5700

CREALOGIX is a leading, global digital banking engagement platform provider, based in Switzerland, offering front-end software solutions that enable ‘the digital bank of tomorrow’. The market is dynamic and fast-changing, with the group’s solutions used by traditional retail, private and commercial banks, as well as wealth managers that need to upgrade legacy systems to meet the challenge of digital banks. Traditional banks see the benefits of modular, customisable, single-platform solutions, offering lower maintenance and development costs, better content management and stronger security in a swiftly digitalising marketplace.

A market leader in a fast-growing market

CREALOGIX provides front-end banking software solutions for digital banking via its modular Digital Banking Hub, with 34% of FY21 sales from Switzerland, 49% across Europe and 17% RoW as CREALOGIX expands its international footprint. As with other businesses, the COVID-19 pandemic slowed business development but, despite this, with a focus on high-growth markets (principally Middle East and APAC) the group still delivered 6.4% constant currency organic revenue growth in FY21. The total addressable market for digital banking software is estimated to be worth $60bn globally (of which c 10% is for third-party digital front-end solutions), forecast to grow at 8% between 2020 and 2022 (source: Temenos, February 2020).

More than 50% recurring revenues in FY21

Management is focused on growing SaaS/recurring revenues. In FY21, recurring revenues grew 22% y-o-y to 50% of total sales, of which SaaS/hosting revenues grew 76% y-o-y, to 27% of total revenues. FY21 was the third year of a five-year SaaS transition, with FY21 EBITDA of CHF3.3m, a margin of 3.0%. CREALOGIX expects to make continued operational progress in FY22 and complete its SaaS transition, with no fixed guidance. The benefits of the SaaS transition are expected to be seen in FY23, when management expects double-digit EBITDA margins, with 60% recurring revenues, of which 30% will be SaaS.

Valuation: Further upside post SaaS transition

Looking at SaaS comparables for CREALOGIX suggests a valuation of c 4–5x EV/sales and c 18x EV/EBITDA could be achievable as CREALOGIX emerges from its SaaS transition. If we apply the peer group EV/EBITDA multiple to consensus estimates for CREALOGIX, it suggests an EV of CHF220m in FY23, a premium of c 30% to the EV and share price today. Looking ahead, a multiple of 4x revenues would imply an EV of CHF488m in the medium term.

Consensus estimates

Year
end

Revenue
(CHFm)

Adj. EBITDA
(CHFm)

PBT
(CHF)

EPS
(CHF)

EV/Adj. EBITDA (x)

P/E
(x)

6/20

103.7

2.4

(0.9)

(0.15)

70.4

NM

6/21

109.3

3.3

(3.8)

0.61

51.7

199.2

6/22e

115.0

5.0

(3.5)

0.97

33.8

125.3

6/23e

122.0

12.1

4.0

6.27

14.0

19.4

Source: Company, Refinitiv (17 November 2021)

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This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 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.

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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 2021 Edison Investment Research Limited (Edison).

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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

1185 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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