Main menu
Edison Group
  • Home
  • Equities

    Equities

    View All Equities

    Equities by Sector

    Chosa

    MCap

    SEK57m

    Last close

    SEK0.80

    ▲ 0.20 (33.33%)

    Vection Technologies

    MCap

    AUD47m

    Last close

    AUD0.04

    ▲ 0.00 (12.90%)

    Metro Bank

    MCap

    GBP684m

    Last close

    GBP1.02

    ▲ 7.90 (8.43%)

  • Sectors

    Sectors

  • Thematics

    Thematics

    View All Thematics

    Latest

  • Audiovisual

    Audiovisual

    View All Audiovisual

    Latest

STEMMER IMAGING — Record half-year results

STEMMER IMAGING — Record half-year results

STEMMER IMAGING (SI) started its life as a listed company by posting the highest half-year results in its history. We expect further improvement as SI benefits from its broad product portfolio, customisation expertise and extensive customer base across many industries to take advantage of double-digit growth in the machine vision industry. We expect this organic growth to be supplemented with acquisitions, as management has allocated half of the €51m (gross) raised at the IPO in February for this purpose. Management already has an exemplary track record in this area, the most recent acquisition being that of Data Vision this January, which made SI the largest machine vision supplier in the Benelux region.

Analyst avatar placeholder

Written by

STEMMER IMAGING

Record half-year results

Technology

Scale research report - Update

30 April 2018

Price

€34.37

Market cap

€223m

Share price graph

Share details

Code

S9I

Listing

Deutsche Börse Scale

Shares in issue

6.5m

Last reported net cash as at end Dec 2017
Before February placing raising €51m (gross)

€7.1m

Business description

STEMMER IMAGING Group (SI) is Europe‘s leading independent provider of machine vision technology solutions to science and industry, selling both directly and indirectly, via system integrators or OEMs.

Bull

■

Demand for machine vision solutions growing, driven by increased automation and IIoT.

■

Broad supplier base combined with in-house development capability enables SI to offer precisely tailored solutions to customers.

■

Not dependent on individual industry sectors.

Bear

■

Business model difficult to implement in the US.

■

Limited presence in Asia Pacific region at present.

■

Meaningful proportion of market purchases directly from component suppliers.

Analysts

Anne Margaret Crow

+44 (0)20 3077 5700

Katherine Thompson

+44 (0) 203 077 5730

STEMMER IMAGING (SI) started its life as a listed company by posting the highest half-year results in its history. We expect further improvement as SI benefits from its broad product portfolio, customisation expertise and extensive customer base across many industries to take advantage of double-digit growth in the machine vision industry. We expect this organic growth to be supplemented with acquisitions, as management has allocated half of the €51m (gross) raised at the IPO in February for this purpose. Management already has an exemplary track record in this area, the most recent acquisition being that of Data Vision this January, which made SI the largest machine vision supplier in the Benelux region.

Double-digit growth in revenues and EBITDA in H118

Revenue grew by 12.6% year-on-year during H118 to €47.4m. SI was able to take advantage of a positive market environment in the machine vision industry because of its broad customer base across numerous application areas. EBITDA climbed by 36.2% to €4.6m, supported by the revenue increase and a 1.6pp improvement in gross margin following a rise in the proportion of proprietary, higher-margin products such a software and services. Net cash increased by €1.6m during the period to €7.1m at the end of December 2017.

Double-digit growth expected in FY18

Citing a buoyant machine vision market driven by a shift in the industrial landscape to a highly automated world where machines communicate with each other using imaging information as key decision-making data, management has provided revenue guidance of €97-100m for FY18. This represents annual growth of 9.9-13.3%. Management expects this to generate a double-digit EBITDA margin, which represents a modest uplift on H117 performance.

Valuation: Trading in line with machine vision peers

SI’s FY18 EV/EBITDA multiple is close to the mean for our sample of companies making machine vision components and systems (21.8x vs 20.6x mean), as is its FY18 P/E multiple (32.7x vs 32.6x mean). Since consensus estimates indicate that SI is able to grow at the same pace as other companies in this sector (13.1% CAGR between FY17 and FY19 vs 13.0% mean), a similar rating appears justified.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

06/16

83.6

4.0

0.56*

0.0

61.4

N/A

06/17

88.3

4.3

0.64*

0.0

53.7

N/A

06/18e

99.8

8.5

1.05

0.0

32.7

N/A

06/19e

113.0

10.7

1.29

0.0

26.6

N/A

Source: Bloomberg. Note: *On number of shares at listing. Adjusted for currency effects, management incentives/bonuses and stock devaluation.

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.

Financials

Record half-year results in H118

STEMMER IMAGING has reported record half-year results for H118. Revenue grew by 12.6% year-on-year to €47.4m, driven primarily by organic growth in Germany and the Benelux region. SI was able to take advantage of a positive market environment in the machine vision industry because of its broad customer base across numerous application areas and industries. Gross margin increased by 1.6pp to 36.7 % because of a rise in the proportion of proprietary, higher-margin products such as software and services from 10.7% of the total to 11.1%. This is in line with management’s stated strategy of increasing the proportion of revenues from services. Personnel costs grew by 12.1%, which was in line with revenue growth, reflecting an increase in the number of employees and wage increases. Other operating expenses grew by 11.2%, which was slightly slower than sales. EBITDA climbed by 36.2% to €4.6m as EBITDA margin improved by 1.7pp to 9.6%.

Outlook

Noting that VDMA (German Machinery and Plant Manufacturing Association), the German trade association for machine vision, predicts c 10% market growth during CY18 and citing SI’s ability to take advantage of this because of its competitive product portfolio and capacity for innovation, management has provided revenue guidance of €97-100m for FY18. This represents annual growth of 9.9-13.3%. Management expects this to generate a double-digit EBITDA margin, which represents a modest uplift on H117 performance.

Strong balance sheet

Operating cash flow almost doubled to €2.2m despite accommodating a €0.9m increase in inventories, some of which relates to individual large projects delivered towards the period end and will therefore reverse in H218, and a €0.9m reduction in other liabilities that related to the partial payment of a retention bonus. At €0.5m, capital expenditure was at similar levels to H117. As management follows an asset-light model, capital expenditure is typically modest. In H118 expenditure included work required following the lease of a fourth office in Germany. Net cash increased by €1.6m during the period to €7.1m at the end of December 2017. There is no debt on the balance sheet.

Successful IPO

SI AG listed on the Scale index of the Deutsche Börse on 27 February 2018. As part of the listing process it raised €51m (gross) through the issue of 1.5m new shares at €34.0/share, a 30% increase in capital. At the same time, as part of the placement, SI Holding, which had previously held a 100% stake in SI AG, sold 1.5m existing shares (including an overallotment option), reducing its stake to 54%. The funds raised by the company will be used primarily to finance potential acquisitions and to invest in product development, particularly software.

Progress on execution of strategy

SI has an exemplary track record of identifying and integrating acquisitions (see our February initiation note). Management intends to continue this strategy, selecting companies that will consolidate its position in existing geographies, expand its footprint or add complementary products, particularly software. The most recent acquisition was Netherlands-based Data Vision in January 2018. Data Vision is a highly specialised provider of machine vision solutions and components. Management expects that the significant overlap between products offered by Data Vision and STEMMER IMAGING will provide substantial purchasing synergies. In addition, it is likely that Data Vision will be able to win business with much larger companies now that it is part of a bigger group. This happened with Iris Vision, also in the Netherlands, which SI acquired in 2012. The addition of Data Vision’s sales team will strengthen the group’s presence in the Benelux region. SI is now the largest machine vision supplier in the region measured by revenue. Management expects Data Vision to contribute c €4-5m additional annual revenues. Details of the price paid for Data Vision have not been disclosed.

Valuation

At the end of the first day of trading, the share price was €37.70, which represented a gain of more than 10% on the issue price of €34.00. The share price peaked at €40.61 on 9 March 2018, but has dropped back since then and is currently close to the issue price.

SI’s FY18 EV/EBITDA multiple is close to the mean for our sample of companies making machine vision components and systems (21.8x vs 20.6x mean), as is its FY18 P/E multiple (32.7x vs 32.6x mean). Since consensus estimates indicate that SI can grow at the same pace as other companies in this sector (13.1% CAGR between FY17 and FY19 vs 13.0% mean), a similar rating appears justified. While SI is trading at a premium to the value-added distributors (21.8x vs 13.7x mean EV/EBITDA, 33.1x vs 20.8x mean P/E), none of these is focused on the machine vision industry.

Exhibit 1: Peer comparison

Company

Market
cap ($m)

Year 1
EV/Sales (x)

Year 2
EV/Sales (x)

Year 1 EV/
EBITDA (x)

Year 2 EV/
EBITDA (x)

Year 1
P/E (x)

Year 2
P/E (x)

Year 1 EBITDA
margin (%)

CAGR
(%)

Manufacturers

Basler

707

3.7

3.1

16.5

14.8

28.5

25.9

22.5

10.1

Cognex Corp

8,365

9.2

7.7

27.4

21.2

33.8

26.1

33.7

17.3

Isra Vision

985

5.1

4.6

18.1

16.0

35.6

31.5

28.2

11.7

Mean

6.0

5.2

20.6

17.3

32.6

27.8

28.1

13.0

Value-add distributors

Addtech B shares

1,466

1.7

1.6

15.6

14.0

21.3

19.0

11.0

11.2

APC Technology Group

14

0.8

0.7

12.0

9.7

18.8

12.5

6.7

12.8

Diploma

1,915

2.8

2.8

15.5

14.8

22.4

21.2

18.4

4.3

discoverIE GROUP

420

0.9

0.8

11.8

9.7

19.4

16.5

7.3

12.6

Electrocomponents

3,755

1.7

1.6

13.8

12.9

22.1

19.5

12.0

8.8

Solid State

30

0.5

0.5

5.9

6.8

8.4

10.2

8.6

9.1

Mean

1.6

1.5

13.7

12.2

20.8

17.7

10.7

9.8

STEMMER IMAGING

275

2.2

2.0

21.8

17.7

33.1

27.0

10.1

13.1

Source: Bloomberg. Note: Prices as at 25 April 2018. Grey shading indicates exclusion from mean.

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.com

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

Nanogate — FY17 sets record for EBITDA and revenues

Nanogate has trebled in size since 2014. It has achieved this by developing new surface technologies which offer the optical qualities of glass and the durability and shine of chrome plated parts. These technologies are used to create components that are lightweight, easy to maintain and aesthetically attractive. It has also started to take this technology to a global customer base, expanding by acquisition into North America and Eastern Europe. The record revenues and EBITDA reported for FY17 show a continuation of this successful strategy.

Continue Reading

Subscribe to Edison

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

Sign up for free