Gofore - Upgrade to BUY

Strong organic growth in 2020 despite pandemic
Gofore reported H2 revenue of EUR 40.6m (pre-announced) and EBITA and adj. EBITA figures of EUR 5.0m/5.1m respectively (Evli EUR 4.8m/5.5m). The BoD proposes a dividend distribution of EUR 0.24 per share (Evli EUR 0.25). In 2021 Gofore expects that its revenue and adj. EBITA in 2021 will grow compared to 2020. Despite the pandemic, Gofore posted solid organic growth figures of 15.5% for the full-year 2020 and total growth of 21.7%.

Rapid growth to continue
Gofore completed the acquisition of change execution consulting specialist CCEA and its fully owned subsidiary Celkee, expected to have a revenue impact of approx. EUR 6m in 2021. With the newest acquisition and the Qentinel Finland acquisition in the latter half of 2020 as well as expectations of around 10% organic growth we now expect revenue growth of 28% in 2021, rapidly closing in on over EUR 100m annual sales. We expect adj. EBITA margins to remain relatively flat near the 15% adj. EBITA-% target, with the low scalability of the business model providing little further upside. Gofore had a healthy cash position of EUR 21m at the end of 2020, supporting potential further acquisitions. Overall demand appears to have remained at good levels after the initial dip in the early stages of the pandemic and the outlook remains favourable.

BUY (HOLD) with a target price of EUR 21.0 (16.0)
On our revised estimates we adjust our target price EUR 21.0 (16.0), valuing Gofore at approx. 30x 2021 P/E, and raise our rating to BUY (HOLD). Compared to peers, near-term valuation is quite stretched, but the solid performance and expectations of rapid growth along with further M&A potential certainly merits a higher valuation.