Pyramid — Stepping up a gear

mic (DB: M3B)

Last close As at 04/11/2024

2.52

0.06 (2.44%)

Market capitalisation

47m

More on this equity

Research: TMT

Pyramid — Stepping up a gear

In FY21, mic AG successfully transformed from a holding company into an operational company active in the point-of-sale market after the acquisition of Pyramid Computer and faytech. Following these acquisitions mic AG changed its name to Pyramid AG at its EGM on 4 March 2022. The company expects revenue of around €100m in FY22 and an EBIT margin of 9%. For subsequent years, it expects double-digit revenue growth, driven by market growth, customer wins and new market segments such as travel, mobility and healthcare. Based on consensus estimates, Pyramid is valued at a discount to its peer group of 24% based on FY22e EV/EBITDA.

Johan van den Hooven

Written by

Johan van den Hooven

Analyst

TMT

Pyramid

Stepping up a gear

Technology

Scale research report - Update

29 March 2022

Price

€2.54

Market cap

€47m

Share price graph

Share details

Code

M3BK

Listing

Deutsche Börse Scale

Shares in issue

18.6m

Net cash at 31 December 2021

€8m

Business description

mic AG (now known as Pyramid AG) has transformed itself from a holding company into an operational company via the reverse takeover of Pyramid Computer. Pyramid is a specialist in automation solutions in the retail, hospitality and food retail sectors. The two investments in Securize and Smarteag will be divested.

Bull

Point-of-sale solutions is a high-growth market.

Room for expansion via acquisitions.

Ample room to enter new market segments.

Bear

Integration risk of fast pace of acquisition strategy.

Competitive market segment.

Risk of dilution from further acquisition financing.

Analyst

Johan van den Hooven

+44 (0)20 3077 5700

In FY21, mic AG successfully transformed from a holding company into an operational company active in the point-of-sale market after the acquisition of Pyramid Computer and faytech. Following these acquisitions mic AG changed its name to Pyramid AG at its EGM on 4 March 2022. The company expects revenue of around €100m in FY22 and an EBIT margin of 9%. For subsequent years, it expects double-digit revenue growth, driven by market growth, customer wins and new market segments such as travel, mobility and healthcare. Based on consensus estimates, Pyramid is valued at a discount to its peer group of 24% based on FY22e EV/EBITDA.

Robust FY21 results despite market challenges

The company reported its audited FY21 results, having announced the preliminary results of its main subsidiary Pyramid Computer on 28 January 2022. Pyramid Computer’s revenues increased by 0.5% y-o-y to €58m and growth would clearly have been higher without the impact of the pandemic and global supply chain constraints. Normalised EBIT increased 10% y-o-y to €5.3m.

Acquisition of faytech pushes revenues to €100m

On 28 January 2022, the acquisition of faytech was completed for a maximum of €15.86m with effect from the beginning of the year, from which it expects pro forma revenues of around €30m in FY22. The financing of faytech will be finalised later in 2022 by means of an equity issue to faytech management (for a maximum of 3.4m shares). For Pyramid Computer, management expects FY22 revenue of €67–71m, bringing total pro forma revenues to €97–101m. Growth will come from continued market expansion, new customer wins and entering new market segments such as travel, mobility and healthcare. Pyramid expects EBIT of the combined entity to be in the €7.75–8.15m range. This reflects a lower margin compared to FY21, but faytech’s margins are lower than Pyramid Computer’s and this guidance excludes estimated synergies of around €1m, adding 100bp to the margin.

Valuation: Discount to peers

Consensus estimates include the results of acquired company faytech and expect revenues of €97m in FY22 and €115m in FY23. The company is trading at a discount of 24% compared to peers on FY22e EV/EBITDA while offering at least the same growth profile. If the company successfully executes its new strategy in the point-of-sale (POS) market, the valuation could move more in line with peers.

Consensus estimates

Year
end

Revenue
(€m)

EBITDA
(€m

Net profit
(€m

EPS
(€)

P/E
(x)

EV/EBITDA
(x)

12/20

0.6

N/A

(1.2)

(0.04)

N/A

N/A

12/21e

58.0

5.6

2.6

0.14

20.4

7.6

12/22e

97.3

8.2

4.9

0.21

11.8

5.1

12/23e

114.6

10.8

6.7

0.29

8.6

3.4

Source: Pyramid, Refinitiv. Note: Prices at 25 March 2022.

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.

FY21 results show solid performance

At its EGM on 4 March 2022, mic AG changed its name to Pyramid AG, after it acquired Pyramid Computer in May 2021 via a reverse takeover. Pyramid Computer’s preliminary FY21 results were published on 28 January 2022. During the year, the company faced the impact of the prolonged pandemic and turbulence in the procurement and logistics sectors. Despite these difficult market conditions, revenues increased by 0.5% y-o-y to €58m and normalised EBIT increased 10% y-o-y to €5.3m, driving an 80bp improvement in the margin to 9.1%. EBIT of €5m included negative one-off effects of €0.3m, which includes M&A costs. Net profit is expected to be at least 3.7m.

Exhibit 1: Pyramid Computer’s product portfolio (self-service touch-screen stations)

Source: Pyramid

Pyramid still has stakes in two small companies, Smarteag and Securize IT Solutions. In 2021, the company communicated that these companies did not fit its strategy any longer and it plans to divest them in due course. At the analyst meeting in December 2021, management indicated that it expects the sale of its stake in Securize in 2022. Within fixed assets, Securize is valued at the year-end stock market price of €0.53m (versus €0.46m in FY20). Smarteag is still valued at the amount of the loan to the company of €1m, which is the same as last year.

Exhibit 2: Pyramid Computer’s preliminary results FY21

€m

FY20

FY21

Change y-o-y

Revenues

57.7

58.0

0.5%

EBIT normalised

4.8

5.3

10.0%

EBIT margin

8.3%

9.1%

EBIT reported

4.8

5.0

Source: Pyramid

The company’s audited FY21 results (according to German HGB accounting standards excluding the consolidated results of Pyramid Computer) show a gross profit of €0.4m and a net loss of €2.3m, mainly related to the non-capitalisable portion of one-off transaction costs for the acquisition of Pyramid Computer and faytech, as well as the cost of the capital measures required for this.

Completion of faytech acquisition

On 29 July 2021, the company concluded a term sheet for the acquisition of faytech, followed by due diligence and negotiations about the purchase price. After signing the purchase agreement on 24 December, the completion of the acquisition was announced on 28 January 2022, with effect from 1 January 2022. faytech is a manufacturer of touch-screen devices for POS and industrial applications with worldwide production capacities, mainly in China. Customers include Bosch, Continental, Dell, Honeywell, Komatsu, NEC, Siemens and Tesat. The faytech acquisition brings new customers and strengthens Pyramid’s position internationally. According to the company, faytech generated FY20 revenues of €24.7m and EBIT of €1.7m.

Exhibit 3: faytech’s product portfolio

Source: Pyramid

According to the press release on 24 December 2021, the purchase price will be a maximum of €15.86m, which is based on the average value of 0.75x faytech’s sales and 6.95x faytech’s EBIT in FY21. Up to a maximum amount of €4.53m will be paid in cash and the remaining c €11.33m through a capital increase at €3.30 per Pyramid share via a contribution in kind to faytech management in the second half of 2022, following final determination of the relevant figures for 2021. The price per share may be reduced to €2.97 if the price per Pyramid share falls below a certain average (undisclosed) before the purchase price is determined. This will result in the issuance of a maximum of 3.4m new shares. In addition, an earnout component of a maximum of €7.14m has been agreed based on faytech’s FY22 results and Pyramid’s FY23 results including faytech. The earnout will be paid in new shares at a fixed issue price of €3.30, resulting in the issue of a maximum of 2.2m shares.

Due to the acquisition of faytech, management decided not to proceed with the plans to acquire Polygon from Zollner Elektronik, which was initially announced on 23 March 2021. Follow-up negotiations during the due diligence process did not result in an agreement.

Management changes

Before the acquisition of Pyramid Computer, Andreas Empl was the only executive board member, but after the acquisition Josef Schneider (founder of Pyramid Computer) was also appointed CEO. On 28 January 2022, the appointment of two members of faytech’s management board to its own executive board was announced, that is, Arne Weber (founder of faytech) and Peter Trosien (CEO of faytech), with effect from 1 February 2022.

Strong financial position

The acquisition of Pyramid Computer was financed via several equity issues, resulting in an increase in the number of shares outstanding from 5.8m to 18.6m as of May 2021. Equity increased to €41.7m in FY21, up from €8.0m in FY20, mainly due to these equity issues. The equity ratio remained strong in FY21 at 87.1% compared to 88.3% in FY20. Net cash was around 8m in FY21, part of which will be used to finance faytech.

Outlook

Pyramid is positive about the outlook for FY22, based on continued growth at its existing customers and new projects won in the second half of FY21. As well as existing activities in the food and retail sectors, Pyramid would like to win further high-revenue projects from new industries like travel, mobility and healthcare. In July 2021, it provided FY22 guidance for both Pyramid Computer and faytech. Revenues for Pyramid Computer are expected in the range of €67–71m, which reflects strong growth of 16–22% y-o-y, while a pro forma revenue level of around €30m is expected for faytech (+14% y-o-y). At the EBIT level, the company expects €6.0–6.4m for Pyramid Computer and €1.7m for faytech, bringing the total to a pro forma level of €7.7–8.1m.

According to management, this guidance assumes that the global pandemic and supply chain situation will ease from mid-2022 onwards. Exhibit 4 below shows the pro forma results when combining Pyramid Computer and faytech, with the EBIT figures before any potential synergies.

On 29 July 2021, the company said it expects savings in manufacturing and operating costs of more than €1m per year, driven by production optimisation (modular concepts, building blocks), addressing management positions and the increase in global market reach. This amount was reiterated during the analyst call in December 2021 and labelled as short-term synergies in FY22. Management expects revenue growth of around 15% for the combined company from FY23.

Exhibit 4: Pro forma results Pyramid Computer and faytech combined

€m

FY20

FY21

FY22e

Pyramid Computer

57.7

58.0

67–71

faytech

24.7

26.3

30.1

Total revenues

82.4

84.3

97.1–101.1

Pyramid Computer

5.3

6.0–6.4

faytech

1.3

1.71

EBIT before synergies

6.6

7.75–8.15

Source: Pyramid, analyst presentation December 2021

Valuation shows a discount to peers

Acrelec is one of the company’s closest peers, but it is not listed. Based on consensus estimates for Pyramid (which include the contribution from faytech), its valuation is at a discount to its listed peers of 24–53% on EV/sales and EV/EBITDA in 2022e. If we see successful execution of the company’s new strategy in the POS market, the valuation could move more in line with peers.

Exhibit 5: Peer group comparison

Share price

Market cap

EV/sales (x)

EV/EBITDA (x)

P/E (x)

€m

2022e

2023e

2022e

2023e

2022e

2023e

Aures Technologies

20.50

82

0.8

0.7

6.6

5.5

10.5

9.2

Data Modul

58.00

205

0.7

0.7

6.7

6.1

17.4

16.0

NCR Corp

41.12

5,601

1.4

1.2

6.9

4.1

12.1

10.3

S&T

16.90

1,117

0.6

0.6

6.2

5.2

14.5

12.2

Vectron Systems

5.00

40

1.0

0.9

11.6

9.5

31.2

62.4

Median

0.8

0.7

6.7

5.5

14.5

12.2

Pyramid

2.48

46.0

0.4

0.3

5.1

3.4

11.8

8.6

Premium/(discount)

(47%)

(53%)

(24%)

(38%)

(18%)

(30%)

Source: Refinitiv. Note: Prices at 25 March 2022.


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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.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

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