m-u-t — Efficient photonic solutions

Nynomic (DB: M7U)

Last close As at 04/11/2024

39.00

−0.70 (−1.76%)

Market capitalisation

222m

More on this equity

Research: Industrials

m-u-t — Efficient photonic solutions

m-u-t has followed a record-beating FY16 with another record-beating year, as it delivers non-contact measurement systems to OEMs across a very broad range of applications in the clean tech, life science and green tech sectors. We expect demand to continue to grow, since m-u-t’s products are key building blocks of the remote-controlled, continuous online measurement systems at the heart of Industry 4.0 networks. FY18 has started well, with sales rising by 12% y-o-y during Q118 to €18.3m and EBIT by 14% to €3.3m, representing an 18% EBIT margin.

Analyst avatar placeholder

Written by

Industrials

m-u-t (Nynomic)

Efficient photonic solutions

Measurement instruments

Scale research report - Update

1 June 2018

Price

€23.4

Market cap

€119m

Share price graph

Share details

Code

M7U

Listing

Deutsche Börse Scale

Shares in issue

5.1m

Last reported net cash as at December 2017

€15.8m

Business description

m-u-t is an integrated provider of photonics solutions based on a common technology platform. It uses non-contact optical technology to create customised systems for OEMs, which are deployed in the clean tech, green tech and life science sectors. The group will be known as Nynomic from July 2018 onwards.

Bull

Ability to provide customised solutions for OEMs

Addresses high-growth emerging markets.

Multiple sectors give resilience.

Bear

Dependent on customer activity to drive sales.

Spectral Engines acquisition a drag on margin growth.

Dilutive impact of shares issued as part consideration for LayTec.

Analyst

Anne Margaret Crow

+44 203 077 5700

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

m-u-t has followed a record-beating FY16 with another record-beating year, as it delivers non-contact measurement systems to OEMs across a very broad range of applications in the clean tech, life science and green tech sectors. We expect demand to continue to grow, since m-u-t’s products are key building blocks of the remote-controlled, continuous online measurement systems at the heart of Industry 4.0 networks. FY18 has started well, with sales rising by 12% y-o-y during Q118 to €18.3m and EBIT by 14% to €3.3m, representing an 18% EBIT margin.

Buy-and-build strategy delivering growth

Group revenues increased by 11.4% y-o-y during FY17, to a record €60.7m. This resulted in strong growth in both EBIT (33% rise to a record €9.1m) and EPS (28% improvement to €0.97/share). EBIT margin rose by 2.4pp to 15.0%. Net cash grew by €10.6m to €15.8m. This cash level has given plenty of scope for acquisitions: the outstanding 25% stake in Avantes in November 2017, a 100% stake in LayTec, the final tranche of which was acquired in March 2018, and a 75% stake in Spectral Engines in May 2018. The terms of these transactions have not been disclosed.

Acquisitions strengthen portfolio

In May, management reiterated its FY18 guidance of c €66.0–68.0m sales and c €10m EBIT, which includes the recent acquisitions. LayTec, which generated c €6.5m sales in FY17, develops measurement equipment used for in-situ process control in the manufacture of light-emitting diodes (LEDs) and semiconductor lasers, giving the group a strong presence in a new, well-defined and growing industry vertical. Spectral Engines makes miniaturised spectrometers that can be made in the volumes and at the price point required for consumer applications, opening up the B2C market.

Valuation: Trading at a discount to peers

A comparison of m-u-t’s prospective EV/sales, EV/EBITDA and P/E multiples with those in our sample of European-listed companies involved in instrumentation shows m-u-t trading at a discount to the sample mean on all metrics (EV/sales 1.5x vs 3.4x for sample, EV/EBITDA 8.2x vs 15.5x, P/E 21.9x vs 25.4x). Consensus estimates show m-u-t growing more quickly than the mean for our sample, while the improvement in EBIT margin is taking it close to the sample mean. This indicates potential for share price appreciation if the improvement in margin achieved in FY17 can be sustained.

Consensus estimates

Year
end

Revenue
(€m)

EBIT
(€m)

EPS*

(€)

DPS
(€)

P/E

(x)

Yield
(%)

12/16

54.5

6.8

0.76

0.0

30.8

N/A

12/17

60.7

9.1

0.97

0.0

24.1

N/A

12/18e

67.0

10.0

1.07

0.0

21.9

N/A

12/19e

73.0

11.1

1.22

0.0

19.2

N/A

Source: Bloomberg. Note: *After deducting minority interest.

FY17 performance

Exhibit 1: Analysis of FY17 revenue by division

Exhibit 2: Analysis of FY17 revenue by geography

Source: Edison Investment Research, m-u-t

Source: Edison Investment Research, m-u-t

Exhibit 1: Analysis of FY17 revenue by division

Source: Edison Investment Research, m-u-t

Exhibit 2: Analysis of FY17 revenue by geography

Source: Edison Investment Research, m-u-t

Between 2014 and early 2016, management implemented a programme of activities intended to transform m-u-t from a loss-making, debt-laden group of companies into an integrated platform capable of delivering profitable, cash-generative growth. It cut costs throughout the organisation, sold off or closed unprofitable operations and focused activities on providing a full service offer for OEMs in Europe, North America and Asia. Having created a cash-generative, profitable platform, it is now adding to the product portfolio through acquisition, taking the group into new industry verticals and addressing the B2C sector for the first time.

The FY17 results clearly demonstrate the success of this strategy. Group revenues increased by 11.4% year-on-year to a record €60.7m. This was ahead of management’s guidance of €59.0m, which had been raised in both July and November, and underlying market growth, which management estimates grew by c 5%. Clean tech sales jumped by 26% because of a spectroscopy application in the semiconductor segment, which was also behind a 40% hike in sales to North America. This positive effect offset an anticipated 30% drop in life science sales that resulted from one key customer destocking and another reducing volumes. Green tech sales grew by 20%. The ability to achieve revenue growth at group level, despite short-term setbacks in the Life Sciences division, highlights the importance of engaging with multiple OEMs across a wide range of market segments. Importantly, the revenue growth resulted in much stronger growth in both EBIT (33% rise to a record €9.1m, in line with €9.0m guidance) and EPS (28% improvement to €0.97/share). EBIT margin rose by 2.4pp, to 15.0%, reflecting higher sales at an improved average gross margin (56.4% vs. 55.1%). Management is hoping to improve margins further by selling more product under brand names owned by subsidiaries, eg Avantes’ AvaSpec-Mini and LayTec’s EpiTT epitaxy measurement tool, and focusing on scalable products.

The group was highly cash-generative during the period because the group already has the infrastructure it needs to support good growth. On top of record operating profits, only €0.6m was required for office and operating equipment (less than the €1.1m charge for depreciation and amortisation). Net cash increased by €10.6m to €15.8m. This level of cash has given plenty of scope for management to continue with the ‘buy-and-build’ strategy it has pursued since 2007.

Favourable outlook

Management has reiterated the FY18 guidance it provided in March of c €66.0–68.0m sales and c €10m EBIT, which includes recent acquisitions LayTec and Spectral Engines. This view is backed by a strong order book: €41.2m at end-FY17, compared with €31.0m a year previously. In the medium term, management expects to see continued steady revenue and earnings growth and stable double-digit EBIT margins, reaching €100m with a target EBIT margin of around 15%. The year has started well, with sales rising by 12% y-o-y during Q118 to €18.3m and EBIT by 14% to €3.3m, representing an 18% EBIT margin.

Recent acquisitions

LayTec develops measurement equipment used for in-situ process control in the manufacture of LEDs and vertical cavity surface emitting lasers (VCSELs), other compound semiconductor devices and solar cells. Based in Berlin, the nature of its market means that 85% of its installations are outside Europe. The acquisition is a good addition as it gives a strong presence in a new, well-defined and growing industry vertical. (VCSELs are the enabling technology behind face recognition in the iPhone X, for example. Please refer to our IQE note from September 2017 for other applications.) It gives LayTec faster and more direct access to m-u-t technology. In 2017, LayTec generated approximately €6.5m sales. Details of the transaction, which included a cash component satisfied through the group’s existing cash resources and new shares, have not been disclosed. However, we note that purchase price obligations totalling €14.5m relating to the acquisition of shares in 2017 were reported under other provisions (which includes the outstanding stake in Avantes as well as LayTec) and 285k new shares were issued in February as part-payment for LayTec.

Spectral Engines is based in Helsinki, Finland. It makes MEMS-based (microelectromechanical systems) spectral sensors, opening a route for manufacturing high volumes of extremely small, cost-effective spectrometers that measure material content such as moisture, fat, protein, hydrocarbons, textiles, polymers and pharmaceutical ingredients, including narcotics. This is complemented by a cloud-based platform for processing data from the sensors and applying AI to interpret it. The technology is suitable for smart industry, smart agriculture, smart home and portable applications. The acquisition gives m-u-t access to consumer applications for the first time. Details of the transaction were not disclosed. We note that management has allocated €10–15m for further technology and market development, which will be financed through existing cash resources and bank loans.

Valuation

The share price has increased by over 60% during the past 12 months. A comparison of m-u-t’s prospective EV/sales, EV/EBITDA and P/E multiples with those in our sample of European-listed companies involved in instrumentation shows m-u-t trading at a discount to the sample mean on all metrics. We note that consensus estimates show m-u-t growing more quickly than the mean for our sample, while the improvement in EBIT margin is taking it close to the sample mean. This indicates potential for share price appreciation if the improvement in margin achieved in FY17 can be sustained.

Exhibit 3: Listed peers

Name

Market cap ( €m) 

EV/Sales 1FY (x)

EV/Sales 2FY (x)

EV/EBITDA 1FY (x)

EV/EBITDA 2FY (x)

PE 1FY (x)

PE 2FY (x)

Year 1 EBIT margin (%) 

CAGR

(%) 

Halma

5,795

5.0

4.7

21.3

19.5

30.9

27.9

20.6%

6.9%

Hexagon Ab-B

16,858

5.2

4.8

16.1

14.7

23.5

21.3

25.0%

6.3%

Isra Vision

977

6.2

5.5

21.9

19.2

43.1

38.2

20.6%

11.6%

Jenoptik

2,089

2.5

2.4

16.3

15.1

27.7

25.1

11.4%

6.9%

Oxford Instruments

591

1.9

1.8

10.6

10.3

16.9

15.8

14.9%

-2.4%

Spectris

3,751

2.2

2.1

12.2

11.3

17.8

16.4

15.1%

3.1%

Vaisala

805

2.2

2.0

14.2

12.1

23.9

20.1

12.5%

4.4%

Viscom

220

2.0

1.9

11.4

10.9

19.1

18.3

15.8%

13.5%

Mean

3.4

3.2

15.5

14.1

25.4

22.9

17.0%

6.3%

m-u-t*

121

1.6

1.4

8.3

6.9

22.2

19.5

14.9%

9.1%

Source: Bloomberg. Prices at 23 May 2018. Note: *based on consensus estimates.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com0

DISCLAIMER
Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors.

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Nynomic

View All

Latest from the Industrials sector

View All Industrials content

Research: Industrials

Tyman — Strategic progress in all regions

FY18 to date has been in line with management’s full-year expectations, building on the good financial progress delivered in FY17. We believe the competitive position in all three divisions continues to be enhanced via investment and, including post-year end acquisitions of Ashland Hardware and Zoo Hardware, we anticipate further profit growth in FY18 and beyond. There is little appreciation of overseas earnings exposure or the significant strategic strides taken in the current share price, in our view.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free