Talenom - Defensive characteristics showing

Name: Evli
Price range: $

Talenom’s Q1 results slightly beat our expectations, with net sales of EUR 17.4m (Evli 16.9m) and EBIT of EUR 3.7m (Evli 3.5m). Net sales and EBIT guidance for 2020 was set at EUR 64-68m and 12-14m respectively. Growth outlook remains favourable and any plausible impact from the coronavirus pandemic for now appears limited. We adjust our target price to EUR 7.0 (6.7), HOLD-rating intact.

Q1 slightly better than expected
Talenom’s Q1 results were slightly better than expected. Net sales grew 17.4% to EUR 17.4m (Evli 16.9m) and EBIT amounted to EUR 3.7m (Evli 3.5m). Talenom gave a numeric guidance for 2020, expecting net sales of EUR 64-68m and EBIT of EUR 12-14m. Sales plans have progressed almost in line with plans despite the coronavirus pandemic. Investments are being made to customer interfaces and plans for a new concept for small customers were floated, which sounds promising but will likely have little sales impact before 2021. Additional financing of EUR 10m was secured for acquisitions and growth projects in Finland and Sweden.

Near-term risks limited
Our post-Q1 estimates revisions are minuscule and we expect 2020E net sales and EBIT of EUR 67.3m and EUR 12.5m respectively. Near-term risks due to the pandemic are limited, with transactional volumes possibly affected. A prolonged situation and an increase in defaults would have a heavier impact on 2021 due to customer bookkeeping obligations. The resilience of the bookkeeping market is noteworthy, and the near-term uncertainty may open more opportunities for inorganic growth.

HOLD with a target price of EUR 7.0 (6.7)
Talenom remains an attractive investment case through its track-record and defensive nature, valuation slightly less so, with the share price essentially at pre-COVID levels. We adjust our target price to EUR 7.0 (6.7), valuing Talenom at ~32x 2020E P/E, and retain our HOLD-rating.

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