14.08.2018 - Equity Research Report (english) // buy

Research Comment - KPS AG - english

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Unternehmen: KPS AG
ISIN: DE000A1A6V48
Branche: Dienstleistungen
Rating: buy
Kurs bei Erstellung in €: 9,16
Kursziel in €: 12,50
Mögl. Interessenskonflikt gem. §34b Abs.1 WpHG und FinAnv: 5a;7;11

Margin improvements in the third quarter – Forecast currently very con-servative – Forecasts for 2018/19 confirmed – Target price: € 12.50 – Rating: Buy

KPS AG published the figures for the third quarter of 17/18 on 10/08/2018 and was able to present significant margin improvements. Sales were up by 5.5% to € 41.9m (previous year: € 37.7m) and EBIT fell by 31.2% to € 4.6m (previous year: € 5,9m). Thus, an EBIT margin (own calculation) of 11.0% was achieved in the third quarter and, after the two preceding quarters, is again in the double-digit range for the first time. The PPA depreciation and amortization from the acquisitions made a significant contribution to the EBIT decline. EBITDA fell by 18.2% to € 5.7m (previous year: € 6.2m).

The company confirmed the guidance of € 160m to € 170m in sales with an EBIT of € 16 to € 20m. We also confirm our forecasts and continue to expect sales revenues of € 170.00m and EBIT of € 16.26m. However, sales, in particular, show that our current forecasts are conservative. For the fulfillment of the forecast, sales of € 39.75m would have to be achieved in the fourth quarter, which would be at the lower end by the quarterly comparison. The EBIT forecast for Q4 is slightly above the average of the three previous quarters, but EBIT should tend to rise against the background of the projects progression. In the first quarter in particular, four major projects were launched, which only made a smaller contribution to sales and earnings in Q1 during the start-up phase. The projects gain in scope over time and thus should deliver higher contributions.

According to management, additional projects are already on the horizon and also a dividend at the previous year’s level is expected (previous year: € 0.35 per share). The current projects should gain in scope and also in potential contributions and we expect the company to return to the usual high EBIT margins of over 15% in the medium term. On the basis of our unchanged DCF model, we have determined a fair value of € 12.50 and continue to award the rating buy.


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