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Solteq - Finishing off a year of good progress

Solteq will report Q4 results on February 27th. Solteq will report exceptionally good results, aided by gains from the sale of its SAP ERP business to Enfo. We expect the operating profitability to have improved slightly from previous year levels. The divestment should further improve debt ratios sufficiently for Solteq to reinitiate dividend distribution and we expect a dividend proposal of EUR 0.03 per share. We retain our HOLD-rating and target price of EUR 1.50 intact ahead of the Q4 results.

Expect healthy profitability in Q4

We expect Solteq’s Q4 revenue to amount to EUR 15.7m and the adj. EBIT to EUR 1.5m. Solteq sold its SAP ERP business to Enfo Oyj during the quarter and is expected to book an approx. EUR 2.3m profit in Q4, which will clearly boost earnings. The sales of the SAP ERP business in 2019 is expected to be EUR 4m. With the sale of the business Solteq will focus more on the development of its own software products and services. We expect the sale to sufficiently improve debt ratios for Solteq to reinitiate dividend distribution, which have been on hold for two years due to bond covenants and expect a dividend proposal of EUR 0.03 per share.

SAP ERP business sale to affect growth

With the divestment of the SAP ERP business we have lowered our coming year estimates to account for the decrease in sales. With Solteq on a transformation journey towards becoming more focused on its own software products and related services we have not anticipated major growth in the near-term and with the divestment now expect a minor sales decline in 2020. We continue to expect for Solteq to remain on a margin improvement trajectory. 2020 guidance should in our view likely reflect growth in adj. operating profit compared to 2019.

HOLD with a target price of EUR 1.5

Apart from adjustments made based on the divestment of the ERP SAP business, our estimates remain unchanged. We retain our HOLD-rating and TP of EUR 1.5.

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