CREALOGIX Group — Innovating in open banking

CREALOGIX is an international leader in digital banking solutions. Founded in Zurich, Switzerland, in 1996 CREALOGIX develops and implements front-end software solutions for the financial services sector that enable digital banking for ‘the digital bank of tomorrow’. Driven by consumer pressure, as well as regulation, this market is dynamic and fast changing, with the group’s solutions typically used by traditional banks to enable their journey to digitalisation through the provision of a comprehensive, modern, omni-channel offering to their clients. The group’s front-end solutions integrate with the customer’s back-end systems, either developed in-house or, alternatively, core banking systems from for example Temenos, Avaloq or Infosys.

CREALOGIX’s primary target customers are traditional retail, private and commercial banks, as well as wealth managers that need to upgrade legacy systems. These 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.

As we have discussed previously, since FY18 CREALOGIX has been transitioning from a traditional licence-based business model to an online SaaS-based model. This has a negative impact on revenues and EBITDA in the transition period, but is expected to lead to increasing recurring revenues, double-digit EBIDA and double-digit EBITDA margins in the medium term.

In FY19, management accelerated investment in CREALOIX’s Digital Banking Hub to make it more modular (eg open banking, user experience, APIs, AI and security) and easier to deploy, with a reduced time to market. In addition, management started to establish a partner ecosystem to extend the group’s global footprint, particularly in the Asia-Pacific region.

In its FY20 results, its first under its new CEO, Oliver Weber, management set out a programme to reorganise and rationalise the business to:

With these targets in mind, management took a CHF7.0m provision to reorganise the business and accelerate the pace of change:

As a result of these changes, CREALOGIX is reducing headcount by 10% and closing a number of sites and, where possible, consolidating office space. Although the benefit will be felt in FY21, the full impact of these savings is not expected until FY22.

Management expects FY21 EBITDA to be above FY20 adjusted EBITDA (CHF2.4m), together with double-digit EBITDA margins and 60% recurring revenues in the medium term. However, management notes that COVID-19 may impact short-term targets, although to date, the pandemic has actually helped to accelerate the digital transition in banking (cf Deloitte highlights a 39% rise in the adoption of digital banking services Q1–Q220).

We expect more of the same. Management has slimmed down the product set to focus the group’s sales efforts, with the global sales team reorganised into segmental teams on a regional basis to help establish stronger client relationships. The group remains focused on international sales (particularly in the Middle East and Asia-Pacific) via partnerships with the likes of IBM, as well as a continuing focus on building SaaS and other recurring revenues (44% of FY20 revenues) to 60% of total revenues in the medium term.

Despite the short-term pain the SaaS transition has entailed, we believe it is a necessary and beneficial step for the business to take and the recurring revenues, increased visibility, higher margins and better client retention will improve the quality of CREALOGIX’s business and earnings in the medium term. In H221, we anticipate a reduction in the level of drag from the business transition to a SaaS model (management highlighted a CHF6.9m impact on sales and EBITDA in FY20), with a first full year post-transition in FY22 and double-digit EBITDA in the medium term.

The impact of COVID-19 in FY21 remains uncertain, on the one hand driving the adoption of digital banking solutions, but with the potential for continuing economic disruption. Although we believe we have taken a balanced view, the risk to our estimates is on the downside.

CFREALOGIX stock trades on 1.3x EV/sales in FY21e, falling to 1.2x in FY23e with an FY23e EV/EBITDA multiple of 11.4x and an FY23e P/E of 20.5x. For patient investors prepared to consider a medium-term time horizon, CREALOGIX offers an attractive valuation proposition as it emerges from the SaaS transition, as highlighted by the valuations of its quoted peer group (closest peers, Temenos and Q2 Software). In terms of valuation, looking at CREALOGIX’s trading peers (see Exhibit 9) suggests that a valuation of c 3–5x revenues and c 15x EBITDA (32% upside) could be achieved once the group transformation completes, although this level of valuation would require strong double-digit growth and sustained double-digit margins. We also recognise the wide variations in business models and valuation multiples across the peer selection.

CREALOGIX is an international leader in digital banking solutions. Based in Zurich, it was founded in 1996 by Bruno Richle, Richard Dratva, Daniel Hiltebrand and Peter Süsstrunk. Richle, Dratva and Süsstrunk continue to work with the company and together own c 37% of the share capital. With c 700 employees, CREALOGIX provides front-end banking software solutions for mobile and PC banking. It has implemented projects for more than 550 customers, ranging from online banking and robo-advisory to mobile-first solutions. The company ranks in IDC’s global fintech top 100, having moved up to 70th position in the latest 2019 ranking after improving its position every year since its initial inclusion in 2016.

The company has a leading position in the Swiss market, where 19 of the 30 largest Swiss banks use its digital online/mobile applications. Outside Europe, CREALOGIX now has offices in Saudi Arabia and Singapore, together with representation in Canada and a number of other countries in Asia. In FY20 revenues from Asia and the Middle East grew 54% y-o-y, now representing 13% of overall revenues, and the company has plans to extend operations in these regions. In FY20, 62% of sales were international (ie outside Switzerland), representing a small fall from 64% in FY19 reflecting the underlying strength of the Swiss market as well as domestic regulatory changes. Nevertheless, the direction of travel is clear and management expects the proportion of international sales to continue to rise to 70% or more in the medium term.

The total addressable global market for digital banking software is estimated to be worth $60bn, of which third-party spending represents an estimated $14bn. Of this third-party figure, approximately 40% of the market, or $5.9bn, is for digital front office solutions, forecast to grow at 8% between 2020–22 (source: Temenos, February 2020). The US is the largest market, representing c $25bn. The digital banking software market remains a fragmented competitive landscape, with competition varying by country and region, including incumbent banking software vendors, specialist front office providers and leading fintech companies.

CREALOGIX has continued to modularise and consolidate its Digital Banking Hub, investing in new product development as well as ‘sunsetting’ peripheral and legacy features. New developments include a Conversational Engagement App, a cloud-based offering that allows banks to communicate securely with their customer base, enabling delivery of, for example, chat or video-based investment advice. Management has also introduced an enhanced multi-banking solution to support open banking, targeted at the Swiss and German markets. This solution offers a one-stop shop to both corporate and retail customers, allowing them to monitor and manage their liquidity across banks and bank accounts.

As proof of the competitiveness of its Digital Banking Hub, in September 2020 CREALOGIX won a Europe-wide competitive tender to develop a customer portal for a consortium of seven state development banks in Germany. The contract is for the implementation, maintenance and optimisation of a common customer portal, enabling fully digital processing of loan submissions for the consortium over 10 years. A sliding subscription fee will apply for use of the platform.

The seven institutions are Investitions-und Förderbank Niedersachsen (NBank), Hamburgische Investitions-und Förderbank (IFB HH), Investitions-und Strukturbank Rheinland-Pfalz (ISB), Investitionsbank des Landes Brandenburg (ILB), Investitionsbank Schleswig-Holstein (IB.SH) and Wirtschafts-und Infrastrukturbank Hessen (WIBank), with a partnership option for Bremer Aufbau-Bank (BAB).

Historically, CREALOGIX has offered a range of revenue models to its customers, predominantly a perpetual licence model, with additional annual support and maintenance fees, as well as services income. The new default delivery will be a hosted cloud or rental offering, which involves a recurring annual subscription fee. Clients upgrading their contracts are being encouraged to switch to rental although there will always be some that continue to prefer the perpetual licence model.

The move to SaaS affects organic revenue growth and margins because, in its first year, as an example, a CHF1m traditional (one-off) perpetual licence deal would typically generate CHF1m, together with an additional 20% of maintenance revenues. However, on a SaaS basis, an equivalent contract might be only c CHF0.45m pa (ie CHF1.8m over four years). Additionally, SaaS revenues are recognised pro-rata, so if the contract above was signed in the last month of the period, it would only generate CHF38k of revenue in that period. However, the SaaS model is more lucrative and ‘stickier’ over the long term, breaking even after four years and generating significant revenue upside thereafter (ie CHF0.45m vs CHF0.2m annually for the perpetual licence model).

Management has indicated that the initial impact from the SaaS transition was seen in FY18, with revenues and EBITDA CHF4m lower (part-year effect) than under a licence/maintenance model. The impact increased to approximately CHF7m in FY19 and CHF6.9m in FY20. Assuming a three-year transition period, we forecast a drag of CHF4m (part-year effect) in FY21, before a full-year post-transition with double-digit EBITDA in FY22 and double-digit EBITDA margins in FY23.

The impact of the COVID-19 pandemic remains difficult to predict and has the potential to lead to a global economic downturn. Despite this prospect, in the short term at least, there have been positives for CREALOGIX, as institutions have been forced to digitise their services, driving demand for digital banking. This is borne out by a recent Deloitte report, highlighting a 39% rise in the adoption of digital banking services between Q120 and Q220. In Asia, the impact of a growing middle class and younger generations who expect accessible banking solutions is driving demand for mobile-led solutions. Wealth management solutions are also set to follow a mobile-first path.

As we have highlighted in previous notes, economic and regulatory uncertainties, including Brexit, have the potential to affect decision-making by CREALOGIX’s customers. There is also a competitive risk that fintechs and challenger banks could make significant inroads into the traditional banking sector, leading to consolidation that would reduce CREALOGIX’s addressable customer base. Major back-end software vendors and ERP software providers could also become more active in the front end, while specialist direct competitors could develop stronger solutions (eg Temenos).

FY20 net sales increased by 1.7% to CHF103.7m (FY19: CHF101.9m). Despite the onset of the COVID-19 pandemic, net sales in H220 were 13.2% higher than H120. The performance in Switzerland was driven by a clear focus on a new product (the digital banking platform) and the introduction of QR-bills in Q420. Recurring revenues rose to 44% (FY19: 42%) of the overall mix, with SaaS revenues rising by 15% to 16.4% of total revenues. Management quantified the impact of the SaaS transition on the FY20 results at CHF6.9m to both sales and EBITDA but continue to believe that short-term costs are more than outweighed by the long-term benefit to the business.

CREALOGIX reported adjusted EBITDA of CHF2.4m (FY19: CHF1.9m), excluding CHF7.0m of one-off reorganisation costs, with a reported EBITDA loss of CHF4.6m. The reorganisation costs were announced in July 2020 to accelerate the SaaS transition and return the business to medium-term growth and profitability. The group reported a net loss of CHF12.4m (including goodwill amortisation of CHF4.9m) (FY19 loss of CHF6.3m) and an adjusted net loss per share of CHF0.15 (FY19: CHF0.94).

FY20 adjusted free cash flow was CHF7.9m (including CHF0.9m of reorganisation costs), up by CHF10.4m from a negative free cash flow of CHF2.5m in FY19. Following the CHF25m refinancing of its convertible bond in November 2019 (five-year term, 1.5% coupon), CREALOGIX had FY20 gross cash of CHF 36.0m and net cash of CHF5.1m (FY19: net debt of CHF2.1m).

Despite concerns at the time of the interims around the impact of the COVID-19 pandemic, CREALOGIX produced a strong H220 performance (13.2% revenue growth vs H120) to largely deliver on expectations for FY20. FY20 revenue of CHF103.7m was 1.8% below our FY20 estimate of CHF105.5m, with adjusted EBITDA of CHF2.4m approximately CHF0.15m below our estimate of CHF2.6m. We had forecast a normalised EPS loss of CHF0.27 versus an actual loss of CHF0.15.

CREALOGIX has established a strong track record of delivering software solutions to the banking industry in Switzerland and over the past few years has focused on expanding its international footprint. The company intends to be at the forefront in providing solutions to meet the needs of the dynamic and fast-changing global digital banking markets, scaling its platform to serve a larger, more international customer base.

To achieve this, the group has invested heavily in the development of its software platform to address the competitive challenges to the banking sector, spending 21% of sales on R&D in FY18 and 20% in FY19 (costs expensed). These heightened levels of R&D will continue in FY20 and FY21 as CREALOGIX continues to invest in its Digital Banking Hub, in line with its transformation programme. This should ensure market-leading speed to market and scalability to position CREALOGIX for strong sales growth in the medium to long term.

Historically, operational investment has been supplemented by strategic acquisitions, with Elaxy in FY16 and Innofis in 2018. Although management’s focus is internal, reorganising and streamlining the business, management has previously indicated that part of the proceeds from the CHF25m convertible bond refinancing might be used for future M&A. We do not expect any deals in 2020, but M&A may move back up the agenda in 2021/22.

Recurring revenues consist of support and maintenance (CHF28.1m or 27% of FY20 revenues vs 28% in FY19), along with hosting SaaS services, up by 15% from CHF14.7m in FY19 (14% of revenues) to CHF17.0m in FY20 (16% of revenues). In total, these two segments represented 44% of FY20 revenues (vs 42% in FY19). We expect the proportion of recurring revenues to continue to rise on the back of hosted/SaaS growth, with management targeting 60% recurring revenues in the medium term.

in FY20 62% of CREALOGIX sales (64% in FY19, 57% in FY18) arose from outside Switzerland (see Exhibit 6), with the group targeting 70%+ in the medium term. Currently, clients are served mainly from offices in its core hubs of Switzerland and Germany (with six offices), although CREALOGIX has 11 offices in total, including Singapore in the Far East. As fast-growing, but less well served markets management is focused on opportunities in Asia and the Middle East and for the moment at least, the competitive North American market remains a lower priority. As part of its business reorganisation, CREALOGIX expects to consolidate its number of offices from 11 in FY20 to nine in FY21.

CREALOGIX continues to build its partner ecosystem to allow it to serve customers around the world. This approach frees up resources to allow CREALOGIX to concentrate on its core business, the development and sale of digital banking software products.

CREALOGIX is recognised in IDC’s top 100 global fintech list and a leader in the digital banking space, particularly for mobile banking software solutions.

An Economist Intelligence Unit survey highlighted some of the major factors affecting digital banking today as well as the major trends expected over the next few years; with new technologies, changing consumer expectations, increasing competition, regulatory considerations and the macroeconomic cycle all driving change in the market.

Digital banking continues its major growth, with increasing use of smartphone and mobile devices around the world. Investment in digital banking has overtaken compliance as the priority area for banking sector IT budgets as customer expectations and increasing competition, as well as regulatory change (eg Payment Services Directive 2 (PSD2) put pressure on banks to upgrade their front-end systems. The transformation process to digital banking remains in its early stages, with traditional banks still dominating despite the proliferation of specialist digital banks now emerging.

In a white paper published by CREALOGIX, the company cites a Visa Digital Payment study, which shows that number of Europeans who regularly use a mobile device (eg a smartphone, tablet or wearable device) to make payments tripled in 2017 to 54% of respondents compared with 18% in 2016. Smartphones are expected to take 80% of the online banking market by 2020 (source: AT Kearney). Although the data are not yet available, we expect to see another major step forward in digital adoption in 2020, as lockdown has prompted largescale investment and adoption of digital technologies.

According to Deloitte, the EMEA retail banking market shows a range of digital maturity, highly correlated with internet penetration in each territory. However, feedback from its EMEA Digital Banking Maturity Study revealed the real driver of digital banking maturity in different jurisdictions was from market pressure – both from customers (ie expectations regarding service levels) and from competitors (ie a banking digital ‘arms race’).

The changing backdrop is driving increasing spend by banks and financial providers on front-end systems and Gartner forecasts that front-end system spend will rise to c 50% of banks’ total IT spend by 2020, from c 10% in 2010. The front-end solutions in this space need to be more agile than the back-end core banking systems and must offer a seamless experience. Innovation is clearly much more prevalent in the front end than at the back end.

In our research, we have identified five primary areas of competition for front-end solutions provided to the financial services industry, with many of CREALOGIX’s closest competitors either privately owned, or part of larger software groups.

Specialist software providers such as CREALOGIX have a particular advantage with front-end systems (as opposed to non-consumer facing software). Differentiation in digital is through superior design of the customer experience, understanding the user journey through continuous customer feedback loops and applying design thinking and intensive research of demographic shifts. Solutions need to be very client centric and winning propositions are based on building the best user interface, tailored to each client.

In our view, CREALOGIX has a number of advantages over other specialist software providers, including the breadth of its platform, its focus on front-end solutions, its track record and proven position in the Swiss market, its growing international footprint and the transparency associated with being a public company.

The global banking sector is facing unprecedented challenges. Increased regulation in the wake of the global financial crisis means banks must hold increasingly higher levels of capital against their assets, putting pressure on profitability. The implementation of MiFID II and PSD2 in January 2018 has added further complexity. Under PSD2, EU banks are required to provide legitimate third parties with access to their customers’ account data, enabling them to aggregate data and initiate payments.

Open banking APIs are enabling an array of market opportunities, encouraging new business models, innovation, new financial services ecosystems and digital customer connectivity.

This means credit institutions and banks will need to have the requisite IT interfaces in the form of APIs (as provided by CREALOGIX software solutions). At the same time, their customer bases are being targeted by challenger banks, as well as a range new fintechs offering alternative products (such as peer-to-peer lending, crowd funding, bitcoin and other alternative investment solutions). To maintain competitiveness, traditional banks regularly need to update their propositions. While the large global banks have the financial resources to develop their own solutions in house, smaller institutions have no choice but to purchase technology.

This investment requirement has polarised markets, with the consolidation of banks holding unproductive assets, or unwilling or unable to maintain this high level of investment. This can be seen in the number of banks in long-term structural decline across the globe, for example, in Switzerland, according to a recent report by Ernst & Young, the number of banks fell by 33% between 2000 and 2017, while the number of branches was down by 23% and the number of employees down by 12%. Traditional banks have costly branch networks that can be streamlined with the help of digital banking.

A 2017 report from Autonomous pointed out that Germany has over 32,000 bank branches compared with 7,370 supermarkets, and this number is expected to fall dramatically in the coming years. Data compiled by the consumer charity Which? show the UK has lost nearly two-thirds of its bank and building society branches over the past 30 years, with the number of branches falling from 20,583 in 1988 to 7,586 in 2018.

The group launched its Digital Banking Hub in 2015, with subsequent ongoing development and refinement to reflect changing customer requirements. The hub gives small and mid-sized banks the opportunity to offer highly competitive digital banking offerings. The hub is a modular system that has been tailored for customers, having been developed in conjunction with them. It has a modern interface, with APIs and includes pre-built, out-of-the box modules with certain key characteristics offering a comprehensive platform for online banking across all channels (Exhibit 6). The APIs enable the hub to integrate fintechs, third-party modules and in-house widgets.

The hub enables financial institutions to integrate specific product offerings from fintechs into their complex IT landscape and connect them with existing solutions. Consequently, financial institutions can achieve significant improvements in the banking experience for their customers.

The platform’s primary verticals are Transaction & API Banking, Mobile Banking and Digital Payment. Customers will take both the flagship online Transaction & API Banking and Mobile Banking solutions to create a multi-channel offering. Additionally, CREALOGIX offers a range of online and mobile security products and has a strategic alliance with Entersekt, a provider of advanced transaction authentication and mobile app security software.

The Digital Banking Hub is open and can be integrated into all systems; a user-friendly navigation concept can link from various CREALOGIX modules to third-party applications. The product is white labelled, with each client bank adapting the style to suit its existing design. It is cost effective, because the system is based on a lean and open architecture and is perfectly compatible with all standard devices. The group uses Java and HTML5 programme languages, with Java in the back end and HTML5 upfront. The product uses modern concepts including responsive design (resizes with different devices) and zero footprint (no software installation required on the device). The product offering has a six-month upgrade cycle.

The implementation of the group’s solutions helps bank IT departments shift their focus from development to business support. This is an attractive proposition because banks need ever-more flexibility to cope with regulatory changes and to compete for new customers with challenger banks.

Despite increasing take-up of the SaaS model, CREALOGIX offers a range of revenue models to its customers. The group’s traditional Swiss client base still prefers the perpetual licence model plus implementation, along with annual support and maintenance fees (in the range of 18–21% depending on the overall solution). Many banks in continental Europe prefer onsite cloud implementation, due to attitudes towards security risk and regulation. However, attitudes towards SaaS are now starting to change in Europe and most new customers are signing up to SaaS solutions in the cloud.

The group’s UK clients (c 30 customers acquired via MBA Systems) operate on a hosted SaaS basis, initially committing for five years before moving on to annual rolling contracts. CREALOGIX also offers a SaaS licence for five to seven years, while onsite rental remains an option. CREALOGIX regularly receives change requests from clients (eg adding functionality, acquiring a hub or other changes), which generates additional licence and services revenues.

CREALOGIX also uses systems integration resellers as a route to market, which enables it to cover the entire value chain, through consultancy, conceptualisation, integration and operation. CREALOGIX’s systems integrator partners include, as well as privately-owned companies, Hewlett-Packard Enterprise (NYSE:HPE), CGI (TSE:GIB.A), Cognizant (NASDAQ:CTSH) and Adesso (ETR:ADN1) and, as recently announced, IBM. The systems integrators provide any services required.

It is worth noting that although increasing partner business over the next two to three years should drive an increase in recurring revenue, it may also have a negative impact on top-line growth as partners sign contracts directly with CREALOGIX’s customers, with the revenue recognised on their books.

The company sells to both the business side and the IT department. However, the position of chief digital officer is becoming much more common in banks and is usually the best point of contact. The sales cycle is normally six to 18 months, with 12 months on average. CREALOGIX will typically be required to develop a proof of concept, but the scale of this will depend on the customer’s requirements. For example, the customer might be concerned with the look or feel of the solution for the end customer. Alternatively, clients may wish to integrate third-party software or in-house widgets or customise the hub so that it looks and functions like the customer’s other corporate websites. Ultimately, the customer needs to make the decision on whether to invest in-house or in new front-end software.

With a new CEO at the helm who has a background in business transformation, CREALOGIX has already taken steps to reorganise the business, setting aside a CHF7.0m provision in FY20 to accelerate the ongoing business transformation. As set out earlier in the note, we expect a residual impact from the SaaS transition on our FY21 estimates, before a full-year post-transition in FY22.

Following the FY20 results, we have taken the opportunity to reassess the impact of CREALOGIX’s transition to a SaaS-led business model and revised our forecasts accordingly.

On this basis, we conservatively forecast year-on-year revenue growth of 5% in FY21–23, reflecting the uncertain economic climate, with an improved EBITDA contribution in FY21 of CHF5.9m (a margin of 5.4%), climbing to CHF10.3m in FY22 (9.0% margin, with the full benefit of the reorganisation and cost cutting launched over the summer) and double-digit EBITDA margins showing through in FY23.

Underlying the top-line revenue numbers, we expect growth to be led by the maintenance and hosting/SaaS segments, with recurring revenues constituting 47% of total revenues in FY21 and 54% in FY22 (FY19: 44%). Meanwhile, goods and licensing revenues decline materially, both in absolute and relative terms, with services revenues treading water as the focus remains on building the recurring revenue base.

In line with its transformation programme, we anticipate capex of CHF2.4m in FY21, CHF2.5m in FY21 and CHF2.7m in FY22.

Absent any significant acquisitions, we expect CREALOGIX to show strongly increasing cash generation in line with management’s revised medium-term guidance (double-digit EBITDA margins, strong cash flow generation), with CHF10.9m in FY22 and CHF13.2m in FY23.

Beyond a small number of immediate peers, it is hard to identify truly comparable quoted companies to CREALOGIX. There are a range of pure SaaS businesses listed in the US where the SaaS rental model is most advanced, but in the UK, where the SaaS rental model is increasingly the norm, and in Europe (where, for example, German companies are switching to rental, and Switzerland, which has been slower to switch) there are few listed pure SaaS businesses. Given this, we focus on financial software providers which, as CREALOGIX, have a partial but increasing exposure to SaaS revenues.

Based on our universe (Exhibit 9), we include a number of software companies that include a digital banking engagement platform as part of their offering, while there is also a rationale to look at UK/European financial software businesses of a similar size to CREALOGIX. Finally, we include a selection of North American SaaS businesses, which highlight the potential valuation to which CREALOGIX can aspire as it transitions to SaaS.

Although it is substantially larger in size, Temenos (Swiss – low growth, high margin) is the closest domestic comparator to CREALOGIX – particularly after its acquisition of Kony. Q2 Software (US – high growth, low margin) is also a close comparable, although both companies are substantially larger and more highly rated than CREALOGIX. Of the other two identified digital banking engagement platform providers, Backbase (NL) is a private company and EdgeVerve (India) is part of the Infosys group.

In terms of valuation, looking at CREALOGIX’s trading peers suggests that a valuation of c 3–5x revenues and c 15x EBITDA could be achievable as CREALOGIX emerges from its SaaS transition (although we recognise the wide variations in business models and valuation multiples across the group). If we apply the peer group EBITDA multiple to our estimates for CREALOGIX, this would suggest an EV of CHF155m in FY22 and CHF187m in FY23, a premium of c 32% to today’s EV and a 27% uplift in share price. A multiple of 3x revenues would imply an EV target of CHF350m+ in the medium term.

We recognise that these levels of multiple would require a recovery in EBITDA margins to a sustainable double-digit level and assume continuing strong revenue growth. However, for investors willing to take a medium-term view, CREALOGIX’s valuation at 1.2x FY22e sales is compelling, particularly when compared to its closest peers. However, we would note that liquidity continues to limit exit opportunities in the short term.

In assessing the investment case for CREALOGIX, we highlight the following sensitivities: