Edison Issues Initiation on Piteco
LONDON, May 4, 2016 /PRNewswire/ -- Piteco is the leading player in the Italian treasury management systems (TMS) market. It has a strong track record of profitability, generates very healthy c 42% operating margins and has excellent cash generation. In July 2015, it raised c €11.5m (gross) in new money and listed on AIM Italia. It plans to use the funds to accelerate growth, both organically (boosting R&D, for example, it has introduced a hosted cloud offering) and through acquisitions (it made a small acquisition in Italy in late 2015 and is investigating other growth opportunities there and in the US).
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The stock looks attractive, trading on c 15x our earnings in FY16e, which falls to c 14x in FY17e and to c 13x in FY18e. Our DCF model values the stock at 483c, 23% above the current share price. Our DCF calculation uses conservative assumptions including a 5.3% CAGR in net sales revenue over 10 years, and a long-term operating margin (40%) that is below current levels and a discount rate of 9%. It has also been adjusted for the dilution impact from the convertible bonds.
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Edison Investment Research
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