Tinexta — Trust worthy

Tinexta has leading or strong market positons in its two largest business units. The greatest potential for long-term structural growth is in Digital Trust (40% of revenue and 34% of EBITDA) as it provides solutions that help companies transition to a digital world and streamline their internal operations. This business unit will expand through Europe to take advantage of recent EU regulatory changes that lay the base for a single, unified pan-European Digital Trust market, which will facilitate greater cross-border opportunities. The newest division, Innovation & Marketing Services (30% of revenue and 45% of EBITDA) provides consulting services that help clients develop and/or grow their businesses. The profile of this business unit is likely to change as M&A targets new niche services. The Credit Information & Management division (30% of revenue and 21% of EBITDA) is likely to produce the lowest growth given its key market, credit information, is the most competitive with more limited scope to differentiate the products and services.

Driven by high-single-digit growth in Digital Trust we forecast a 6% CAGR in organic revenue through FY21. With greater growth coming from the businesses with the highest margins, we expect group EBITDA margin to increase and EPS to grow by 9–10% over the forecast period. These growth rates are likely to be enhanced by further M&A as management looks to expand the core businesses internationally and into new or contiguous niche areas. We expect cash flow generation to improve as working capital intensity (as a percentage of sales) stabilises and fixed capital intensity reduces modestly. The track record with respect to M&A has been good, as demonstrated by a ROIC that has improved from 10% in FY14 to 14% in FY18.

We value Tinexta using a combination of SOTP and sense checking this with a DCF valuation. Our SOTP using a blend of quoted peer multiples suggests a valuation of €13.5/share. This is supported by our DCF valuation of €14.2/share, which assumes a good fade in revenue growth from 6%+ growth through our forecast period to 3% thereafter, which could prove to be conservative. The free cash flow yield is 6.3% in FY19 and 7.1% in FY20.

We see the following sensitivities as key determinants of the company’s prospects:

Tinexta (named Tecnoinvestimenti until November 2018) has undergone significant change in recent years through a combination of M&A and improving organic growth. It is currently focused on three business units, which include 16 subsidiaries and one equity-accounted joint venture:

Tinexta was founded in 2009 when Tecno Holding, owned by the main Italian Chambers of Commerce, contributed assets into the company, in exchange for a shareholding in Tinexta. Tecno Holding remains the reference shareholder with a stake of 56.1% of the company. The company’s free float is 34%.

These assets included the company InfoCert, which forms the base of the Digital Trust business unit, as well as other assets including parking lots, real estate and majority ownership of a construction company. From 2012, management began to manage the assets more proactively, ie non-core assets such as the parking lots were sold, and sought to invest in other professional services with a good growth profile. Management was confident of a strong long-term outlook for Digital Trust. Tinexta entered the Credit Information and Management business, a market that management knew well given the historical connection with the Chambers of Commerce, in 2012. In 2014, the company raised c €23m of equity and listed on AIM Italia, the Italian Stock Exchange market for SMEs. The Innovation & Marketing Services business unit (previously named Sales & Marketing Solutions) was created in 2016, again following an acquisition, and at the same time the company raised further equity as it moved to the STAR segment of the Italian Stock Exchange.

The transformation has been achieved with a significant level of M&A: a net €196m has been spent on acquisitions and disposals since 2014. Once Tinexta has established a foothold in a market, it typically follows up with smaller acquisitions that either expand the existing product or service offer or potential client base. In most acquisitions, Tinexta typically purchases a majority shareholding before buying out the minorities at a later date.

Before the end of June 2019, management has committed to buying out practically all of the remaining minority shareholdings of the existing group companies, at an estimated cost of €46.8m.

Beyond these, further M&A is expected, primarily in the Digital Trust and Innovation & Marketing Services business units, given the better growth prospects and margins. M&A in Digital Trust will continue to focus on geographic expansion away from Italy to the major economies of the EU. M&A in Innovation & Marketing Services is likely to be in contiguous or new niche markets, as has been the case since the business unit was created, and potentially new geographies. In addition to looking outward for growth, there is a new focus on opportunities to cross-sell services between the customers of the divisions given minimal overlap at present.

The Digital Trust business unit provides solutions that enable and increase the confidence, ie trust, of users when signing or sending documents electronically. They provide surety with respect to the validity of the identities of individuals and businesses online, ie digital identities; the authenticity of electronic documents such as contracts; and the secure storage of documents.

The Digital Trust business unit should be a beneficiary of the economy-wide transition from analogue to digital. This includes the enhanced requirement for online security including knowing who and what one is dealing with, so is well aligned with initiatives such as know your client and anti-money laundering. In addition, there are opportunities that subsequently follow in the streamlining of business processes and infrastructure change. Recent regulatory changes (see below) mean that Tinexta can take advantage of this trend across the whole of the EU, having been a purely domestic Italian business. Digital Trust should be the key growth driver of the group.

The business unit has two main operating companies: InfoCert (99.9% owned) and Visura (60% owned). In addition, there are three other operating companies: Sixtema (80% owned from 1 April 2017); Camerfirma (51% owned since 1 May 2018) and LuxTrust (50% owned), which form part of the operating structure.

InfoCert is the market leader in Italy for certified electronic mail, digital signature, electronic invoicing and digital documents storage. In order to provide these services, InfoCert is registered as a Certification Authority and is accredited by the AgID, the Italian government agency for digital identity.

InfoCert’s activities should be thought of as in two distinct areas.

First is the established core business of off-the-shelf certified email that is more suited to smaller clients, eg individuals, SMEs and firms of lawyers and accountants, etc. Clients pay an annual subscription for this service. Italy is one of three countries in the world that uses certified email, the others being Hong Kong and Switzerland. It was introduced in 2005 to enable citizens and businesses to communicate securely with local and central government. The aims were to modernise bureaucracy and to help combat corruption. Certified email has the same legal value as a letter sent by registered mail with advice of receipt. Over time, the requirements to use certified email have increased. Since, July 2013, all communications (including invoicing) between companies and public administration must take place via certified email. In addition, since 2019 all invoices between companies must be via certified electronic invoice. This market has been flat for the last five years, but InfoCert has grown a few percentage points above this every year as it has gained share, especially with corporate clients. Modest growth is expected to continue.

Secondly, the company has invested in R&D to address the digital trust market for enterprises. InfoCert has two key services that form the base of its enterprise trust services: Trusted Onboarding Platform and GoSign:

InfoCert’s international aspirations and eiDAS

InfoCert’s aspiration is to create the leading pan-European digital trust provider by rolling out its services across other EU countries via M&A. This will be helped by the recent mandatory enforcement of the EU regulation, eIDAS (electronic Identification And trust Services). The regulation came into force in September 2014 but the recognition of a ‘notified eID’ became mandatory from September 2018.

eIDAS is a European regulation that establishes the framework to ensure electronic interactions between individuals, public authorities and businesses are safer and more efficient regardless of which country they take place within the EU. It introduces one single framework making it more straightforward to deliver business services across the EU by promoting interoperability ensuring that countries mutually recognise each other’s electronic identification and trust services. The intended benefits are less administrative burden and more convenience in transmitting and signing documents electronically; more efficient and innovative business processes; a significant reduction in costs and time through streamlined processes; safer electronic transmission of electronically signed transactions; enhanced document tracking; and increased security of cross-border legal contract execution or transmission of legally binding documents (including invoicing, procurement orders etc).

Electronic identification allows businesses and consumers to prove electronically that they are who they say they are and are then able to interact online securely. It enables them to carry out better checks on identities and allows easier expansion of customer bases.

Trust services covered by the regulation include:

To provide these trust services, the regulation requires providers to register as a qualified trust service provider (QTSP). Once registered, the QTSP can technically provide services in all EU countries, irrespective of country of incorporation. They are subject to annual audit by a national regulator to ensure compliance with the regulations. InfoCert is registered as a QTSP in Italy. In the EU there are 170 active QTSPs with a wide variation in numbers by country: 18 in Italy; two in Luxembourg; 21 in France; 11 in Germany; 26 in Spain; and one in Sweden.

Management expects to be a key driving force behind the consolidation and growth in these markets. In other words, management sees the need to operate locally to win business and adapt to national regulations that impact the business. Moreover, Tinexta/InforCert believes that there are often too many players for the market to become more efficient. Consequently, in 2018, InfoCert made its first move outside of Italy with the purchases of 51% of AC Camerfirma in Spain (fully consolidated) for €3.1m and 50% of LuxTrust (equity accounted) for €12m, which are both registered as QTSPs. These transactions are typical of the way that Tinexta likes to acquire businesses: initially acquiring a majority stake before subsequently buying out the minorities.

The Spanish market is claimed to be similar in nature to the Italian market and Camerfirma has a similar history to InfoCert, having been owned by Chambers of Commerce. Camerfirma also has activities in Latin America, principally in Chile, Colombia and Peru. LuxTrust will serve as the beach head into France, Belgium and the Netherlands. Despite being jointly owned with the founder since December 2018, the early signs are encouraging as the company is already in discussions with potential customers that are interested in the products. The next priority areas for M&A are the Nordic and DACH countries.

Roughly half of Visura’s business is the reselling of the core digital trust products and services of certified email, electronic signature and invoicing that InfoCert offers in its core mass-market business. The remainder is software solutions for lawyers (all civil court proceedings must be filed electronically with the Ministry of Justice) and accountants (mandatory filing of financial statements electronically with Chambers of Commerce). The key strategic rationale for the acquisition was to gain better access to the professional markets and lock-in a vertical market.

The initial 60% stake in Visura was acquired in July 2016 for €21.9m and a put/call was established for the remaining 40% at a valuation of 6x EBITDA for 2018, which will likely be exercised before the end of June 2019. We do not model the buyouts until they occur.

Digital Trust’s organic revenue growth for FY16–18 ranged from 7.7–9.4%, an average of 8.5%, with the majority of this growth being driven by the new services for larger enterprises, introduced from 2016. We assume 9–10% organic revenue growth for FY19–21 as the enterprise solutions continue their rate of growth and come to represent a greater part of the business.

Operational gearing (ie the proportion of incremental revenue that drops through to EBITDA) has averaged c 30%. We expect the same level of operational gearing going forward given the investment required to continue innovating in a rapidly changing environment. This produces organic EBITDA growth of 10% pa over our forecast period to FY21.

The Credit Information & Management business unit has two main operating businesses: Innolva (100% owned) and REValuta (83.1% owned). Three smaller businesses – Comas, Webber (both acquired in July 2018) and Promozioniservizi (acquired 30 October 2018) – are within Innolva’s management sphere.

Innolva offers data services that help banks and SMEs with the granting, ongoing assessment and recovery of credit in Italy. Innolva was created in 2017 with the merger of two group companies, Assicom (acquired in 2014) and Ribes (initial stake acquired in 2012) in response to tough market conditions, consolidation of the customer base and aggressive pricing from competition.

Prior to their merger, Assicom and Ribes had very similar databases, albeit both covered c 80–90% of what was required to be competitive. Also, each had a different customer focus: Assicom’s being SMEs and Ribes’ being banks. The companies were merged and the databases received investment in order to get to full coverage, become competitive and realise cost synergies.

The foundation of Innolva’s database is the financial statements of all companies in Italy from the Chambers of Commerce. For about 20 years, all companies in Italy have been required to file their financial statements in digital form via certified email with the Chambers of Commerce. The data is available to everyone for a cost, therefore by itself has limited added value. To this, Innolva adds other information including data on debts, judicial and corporate actions and legal notices regarding bankruptcy, etc, in order to provide data that is more valuable. For example, with respect to debts, every month all banks in Italy report credits over €30k and non-performing loans to the Bank of Italy.

Innolva’s data services are typically sold as an annual subscription but larger customers will have three-year deals. The churn rate for larger corporate clients is low but higher for smaller corporates where competitors have increased commercial pressure.

In addition to the provision of the data, Innolva offers debt recovery services via c 50 internal lawyers.

The credit information market overall is highly competitive with three players: Cerved is the market leader in this specific sector, with Innolva and Crif roughly the same size. Market demand is described as stable but pricing pressure is high so this is an industry in which consolidation would help to stabilise the competitive tensions. Unlike in the other business units, international growth options are low.

Promozioniservizi is a consultancy that helps SMEs apply for long-term lower cost financing to banks but accessing guarantees from the Guarantee Fund of Mediocredito Centrale, owned by Invitalia, which is owned by the Ministry of the Economy and Finance. It helps the SMEs determine whether they are likely to qualify for the credit and then complete the application process. The Guarantee Fund has been in existence since 2000. Promozioniservizi was acquired in 2018 for €4.5m, equivalent to 2.4x historical sales and 6.4x historical EBITDA, which had grown by 35% and 15%, respectively. Management expects good growth given the possibilities of scaling up the activities on a national scale (currently focused on the local market around Vicenza) and there are opportunities for cross-selling, most notably with Warrant Group (see later).

Comas and Webber, acquired in 2018 for a combined €9m, are effectively resellers of Innolva’s services. The businesses have a much lower margin, but these should ramp up quickly as the cost structures are rationalised.

The majority of REValuta’s revenue is from the provision of residential property valuation services to banks. As well as on the initial application for a mortgage, in Italy, any property with a mortgage must have its value re-appraised every year. The reappraisal involves a general assessment of the area and market rather than a detailed survey of the mortgaged property. Management believes it is the largest provider of this service.

REValuta has multi-year contracts with banks, although these may not be exclusive, under which there is a fixed fee per appraisal. Market share gains have ensured that REValuta has tended to grow faster than GDP. Economic cyclicality may affect new mortgage volumes but the requirement for annual re-appraisals should cushion any cyclicality. Management is looking to expand the business by winning contracts with new banks, adding appraisers as required and M&A.

Tinexta is likely to exercise the put/call options that will take the shareholding from 83% to 95% before the end of June 2019.

Over the medium term, management believes this division is capable of low-single-digit organic revenue growth. The core Innolva business is likely to be below average and the other businesses above average. We assume 3% organic revenue growth from FY19–21. The consolidation of Promozioniservizi, Comas and Webber add c 5 % to revenue growth in 2019.

The business has fought hard to hold and grow EBITDA margin during the last few years through cost cutting. The consolidation of the recent acquisitions, with lower margins, would suppress reported numbers but they represent a good source of cost synergies.

The Innovation & Marketing Services business unit has two main operating businesses: Co.Mark and Warrant Hub. The business unit was created on the acquisition of Co.Mark in March 2016 as Tinexta sought new areas of growth outside the more mature Credit Information & Management business unit described above. Warrant was acquired in November 2017. In addition to buying out the minorities of the two core businesses, it is likely there will be further M&A in this business unit as Tinexta looks to expand to contiguous industries in Italy and to take the existing offers overseas.

Tinexta acquired its original 70% holding in Co.Mark in March 2016 for €32.5m and negotiated put/call options for the remaining 30% at c €15m to give a total implied valuation of c €45m given the net cash position of c €2m. In 2015, Co.Mark’s revenue was €15.1m and EBITDA was €5.2m therefore historical acquisition multiples were 3.0x sales and 8.7x EBITDA. The company has grown revenues mid-single-digits in the period 2016-18. In the February Plan Presentation management stated that the put/call options for the remaining 10% shareholding will likely be exercised before the end of June 2019.

The bulk of Co.Mark’s revenue is from consulting to help SMEs to identify, develop and grow export markets. The typical client is an SME that lacks the required skills to internationalise its business. The services offered include an end-to-end service from a strategic analysis of products and positioning, identification of customers/end markets, negotiation of contracts and managing interactions with customers.

The services are provided by temporary export specialists (TES™) who have linguistic, strategic and commercial expertise in operating in overseas markets. The service is delivered both by back-office and front-office presence that is generally on a weekly basis. The contract is typically annual and paid in monthly installments and a success fee is calculated on the actual sales boost delivered. For a flat fee of €30k pa (paid monthly), each client receives a weekly half-day visit from the TES. To ensure efficient utilisation of a TES’s time, each covers an area of roughly 35sqkm to minimise travelling time between the half-day appointments.

Management believes that Co.Mark is the market leader, the original founder having effectively created the market, and then grown the business leveraging on strong brand reputation, acquisition of talent, constant training (in-house academy) and data analytics. A typical competitor is a small local and unstructured business.

Since acquisition, Co.Mark has grown the business by increasing geographic coverage on a national basis, the number of TESs to c 100 and the number of active clients. With respect to geographic coverage, management believes it is well represented in the key northern industrial triangle formed by Turin/Milan, Bologna and Venice.

The average tenure of a Co.Mark client is c two years, which has increased since acquired by Tinexta in 2016. As well as increasing the revenue visibility, this helps reduce customer acquisition costs. New clients are targeted by the company’s marketing department. In addition, local word of mouth is important given the customers are typically well connected in the local communities.

The Italian government has been supportive of this industry, with a view to boosting exports, by offering a ‘voucher’ scheme, ie a subsidy in 2015 and 2017. The voucher scheme contributes marginally to total revenue (less than 10%) and generally does not produce recurring revenues.

Under the new CEO, Co.Mark is rolling out the business strategy that will be based on service differentiation and in cross-selling opportunities within Tinexta and through indirect channels. Management is looking for M&A opportunities within Italy to enter into highly complementary markets. It should be noted that Co.Mark opened a subsidiary in Spain in 2016, which in 2018 reported revenues of c €1m.

The initial 70% stake in Warrant Hub (originally Warrant Group) was acquired in November 2017 for €33.9m, implying a valuation for the whole company of €48.4m.

The majority (c 80%) of Warrant’s revenue is derived from consulting to help companies gain tax credits and other incentives or contributions principally from governmental institutions (Italian Ministry of Economic Development, EU) to subsidise their R&D and their investment and development projects. The company employs c 100 consultants of whom more than half are engineers who have expertise in R&D and in government requirements in order to be more successful in gaining the subsidies.

There are two revenue sources: the upfront fee for the work prior to application, which is relatively small; and the success fee (a percentage calculated on the tax credit/benefit awarded, the percentage generally decreases as the size of the benefit increases), which is much more significant.

There are a number of smaller activities in Warrant including consultancies that help entrepreneurs/innovators industrialise/organise the process of innovation: how to develop an idea into a commercially viable product. These have grown strongly too and are expected to continue doing so.

Warrant performed strongly in 2018. On acquisition, Warrant was reported as having revenue of c €21m and EBITDA of €6.3m and was expected to close 2017 with revenue exceeding €30m (growing over 50% versus 2016) and EBITDA growing even more than revenue. It ended 2018 with revenue of €53.8m and EBITDA of €26.8m, the put and call options have been renegotiated so the final total consideration will be c €72m. The growth was driven by exceeding expectations with respect to success fees on larger applications, and the consultants were effectively operating beyond what is viewed as sustainable. This rate of growth is unlikely to repeat in 2019 given that the Italian economy is slowing, so some clients are less likely to invest in R&D, and assuming the work rate of the consultants normalises. The company has a short-term capacity constraint with respect to the number of consulting engineers. Warrant is looking to train and add 10–15 engineers but they will take c 12 months to train and become revenue generators.

Over the medium term, management believes this business unit is capable of 3–5% organic revenue growth. Following a strong 2018, especially at Warrant Group, growth is likely to be at the low end of this range in 2019 before recovering thereafter. We assume 3% organic revenue growth in 2019 and 5% growth thereafter.

We assume the EBITDA margin falls by 2pp in 2019 due to lower success fees and incremental investment in new consultants. This produces a modest EBITDA decline in 2019 before a gradual recovery thereafter.

Chairman: Enrico Salza. Enrico Salza is chairman of Tecno Holding, the majority shareholder of Tinexta. He is also chairman of Intesa San Paolo Highline (and past chairman of Intesa San Paolo), a member of the board of Italian Banking Association, Assonime (association of Italian joint stock companies), the Venice Cini Foundation. He has held positions on the boards of companies including Banca Fideuram (Intesa San Paolo Group), Swedish Match, UBS Italia and Il Sole 24 Ore. He has also been president of the Chambers of Commerce of Turin, national vice president of the Chambers of Commerce and a member of the Board of Confindustria.

Chief Executive Officer: Pier Andrea Chevallard. Pier Andrea Chevallard has been the managing director of Tecno Holding from 2009. In 2015 he became the chief executive officer and general manager of Tinexta (ex Tecnoinvestimenti). From 2001–14 he served as secretary general of the Milan Chamber of Commerce. He was also director of Promos (Special Export Promotion Company of the Chambers of Commerce of Milan), managing director of Parcam and a member of the board of directors of Fiero Milan SpA.

Chief Executive Officer, General Manager, InfoCert SpA: Danilo Cattaneo. Danilo Cattaneo has been at InfoCert since 2010 and is chairman of Sixtema, Camerfirma and board member of LuxTrust. From 1998-2010 he held sales and account management positions at Oracle Corporation and from 1995-98 that he was a consultant at Andersen Consulting, Sintel Consulting and Magaldi Research Division. Prior to that he was a researcher and associate lecturer at Middlesex University in London.

We believe the key sensitivities for Tinexta are as follows:

With the release of FY18 results, management provided new guidance for FY19 and the new three-year business plan to FY21. From the FY18 base revenue of €238.7m and EBITDA ex one-offs of €66.2m, at constant perimeter, the guidance for 2019 is 5% revenue growth to greater than €250m and for EBITDA ex one-offs of €68–70m. In FY21, guidance is for revenue to be greater than €290m and EBITDA ex one-offs to grow faster than revenue over that period. The guidance for FY19–21 implies a CAGR in total revenue of 6.7% pa, therefore management is anticipating an acceleration in revenue growth after the 5% in FY19, which follows from ongoing growth in Digital Trust and an improved outlook for Innovation & Marketing Services after a pause in FY19. Our forecasts for revenue are roughly in line in FY19 and FY21.

Tinexta’s organic revenue growth was -1.8% in FY16, -0.1% in FY17 and +7.4% in FY18. Through this period total revenue growth has been much stronger due to M&A, adding 17–30% growth in any year. The good consistent organic growth profile of Digital Trust in FY16 and FY17 was offset by weakness in Credit Information & Management.

Our forecasts for the business units are highlighted in the individual sections above. In aggregate, these generate organic revenue growth of 5.4–6.5% in FY19–21. FY19 will benefit from some flow through from the acquisitions made in FY18, which we estimate will add just over 2% to revenue growth.

We expect EBITDA ex one-offs to grow between 6% and 7% pa in FY19–21, ahead of revenue growth, with the steady margin progression of Digital Trust initially offset by the FY19 decline of Innovation & Marketing Services.

Due to the relative organic revenue growth rates above and the different margins in the business units, group EBITDA margin ex one-offs has increased from 20.6% in FY16 to 27.7% in FY19. Organic clean EBITDA growth was -0.8% in FY16, 1.3% in FY17 and 12.2% in FY18. As with the revenue growth above, the weakness of Credit Information & Management offset the consistent margin improvement of Digital Trust. FY18 growth was helped by the very strong performance in Innovation & Marketing Services.

Associate income should see strong growth due to the first-time inclusion of LuxTrust and organic growth thereafter.

We forecast 9–10% pa EPS growth in FY19–21.

Tinexta’s ROIC (defined as taxed clean EBIT/average shareholders’ funds and net debt) has increased from 10% in FY15 to 14% in FY18.

As the company has grown, the dividend payout ratio has increased from 23% in FY15 to 33% in FY18. The stated dividend policy is to maintain this payout ratio. The cash cost of the dividend, c EU12m is covered 3.7x by FCF in FY19.

Tinexta’s cash flow conversion (operating cash flow/EBITDA) has varied between 93% and 98% since FY16. We expect it to improve modestly from 96% in FY18 to 98% in FY21. Its operating cash flow (OCF) generation (OCF/sales) has been on an improving trajectory, from 13% in FY16 to 18% in FY19. Mainly, this has been due to the improving operating margin from organic revenue growth and the changes in business mix. Free cash flow (FCF) generation (FCF/sales) has been a bit more variable than operating cash flow, although it has increased over time from 11.6% in FY16 to 12.6% in FY18, as investment in capex and intangibles has been variable, ranging from 2.0–5.5% of sales.

We expect operating cash flow to improve relative to sales (from 18% in FY18 to 21% in FY21) given the improvements to EBITDA margin and we assume no significant change in working capital intensity. The absolute spend on capex and intangibles is forecast to decline modestly, and, hence free cash flow generation relative to sales should improve to over 17% by FY21.

At the end of FY18, Tinexta had net debt of €125m, which represented net debt/EBITDA of 1.9x. This has trended down from 2.4x in FY16 and we forecast it to trend to 1.5x by the end of FY19 and 1.0x by the end of FY20 in the absence of the well-flagged buying out of minorities, which we do not model until they happen. On 29 March 2019, Tinexta announced that it has signed a loan for up to €50m (representing 0.7x our 2019 EBITDA forecast) to finance these acquisitions. The net debt at the end of December 2018 comprised of cash and financial investments of €43m and gross debt of €168m.

The combined value of goodwill and intangibles on the balance sheet is €270m, roughly 80% of which is goodwill. This compares with the total asset base of €448m and shareholders’ funds of €145m.

We have looked at Tinexta’s valuation in comparison to other quoted companies with similar exposure. We have also carried out a DCF analysis.

The table below includes the growth estimates and valuations of companies with similar industry exposure as Tinexta. Some caution is warranted given many are not direct peers as they do not compete head to head, and have different business mixes and geographic exposure.

Relative to its closest peer and direct competitor Cerved, Tinexta’s growth is expected to be more consistent, yet it trades at lower EV/EBITDA and P/E multiples. Some discount may be warranted given the limited free float and market value.

To take account of Tinexta’s business mix we have performed a SOTP valuation, which uses the average multiples for the different peers above, and applies them to our forecasts for the three business units. We exclude the high outlier valuations of DocuSign for the Digital Trust multiple and Fair Isaac for the Credit Information & Management multiple. Our SOTP valuation suggests a fair value for Tinexta of c €14 across both FY19 and FY20.

While recognising the high sensitivity to the key assumptions, we have valued Tinexta using a DCF model and include a sensitivity analysis.

Our near-term forecasts to FY22 are detailed in the Financials section above. To summarise, these are:

Beyond FY22, we assume a quick reduction in organic revenue growth to 3% and then keep this stable until FY30. The EBITDA margin increases by 20bp per annum so that by FY30 it is 29.7% (vs 27.5% in FY18). The investment in working capital and fixed assets grows in line with sales. These assumptions, with a WACC of 8.5% and terminal growth of 2%, suggest a valuation of €14.2/share.