Gofore - Downgrade to HOLD

Gofore’s profitability in H2 fell below our estimates (EBITA EUR 3.0/4.1m act./Evli) largely due to a lower billing rate. Growth is expected to continue to be rapid in 2019, with net sales guidance of EUR 71-79m (2018: 50.6m). We have lowered our profitability estimates, expecting EBITA-margins of around 13.5% in the near to mid-term. With fairer valuation on our revised estimates we downgrade to HOLD (BUY) with an ex-div TP of EUR 8.5 (9.8).

Profitability impacted by a lower billing rate

Gofore’s profitability in H2 fell below our expectations, with EBITA at EUR 3.0m (Evli EUR 4.1m), at an EBITA-margin of 11.5%. The weaker profitability was largely due to a lower billing rate, with wage inflation, the integration of Solinor, and the sales mix also having an impact. Gofore’s guidance for net sales in 2019 is EUR 71-79m, revised from the previous EUR 65-73m mainly due to the acquisition of Silver Planet, with no profitability guidance given.

Margin development uncertainty remains

We have raised our sales estimates to account for the Silver Planet acquisition, while lowering our profitability estimates. Although some elements of the weaker profitability in H2 in our view could be seen as temporary, we take a more conservative stance to margin development and expect EBITA-margins slightly below the 15% long-term financial objective. We expect the Silver Planet acquisition to have a minor positive impact on margins. Our revised estimates for 2019 net sales and EBITA are 73.3m (prev. 67.5m) and 9.8m (prev. 10.4m) respectively. Our estimates assume EBITA-margins of around 13.5% in the near to mid-term (prev. ~15.5%).

HOLD (BUY) with an ex-div target price of EUR 8.5 (9.8)

On our revised estimates Gofore trades at a slight premium on 2019E EV/EBITDA. We continue to see a premium to peers as justifiable due to the expected rapid growth but with our lowered estimates valuation appears fairer. We downgrade to HOLD with an ex-div target price of EUR 8.5 (9.8).

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