Talenom - Downgrade to HOLD
Earnings in line, CEO to change
Talenom’s Q2 earnings did not deliver any major surprises, with net sales of EUR 14.8m (Evli 14.4m) and EBIT of EUR 3.2m (Evli 3.2m) well in line with our estimates, with the main news being the change of CEO. Otto-Pekka Huhtala (former deputy CEO) has started as CEO as of the 29.7.2019. Talenom gave a limited update on the Talenom Financing Services, having provided EUR 31m financing during H1/19. The potential for the service area remains promising but we expect an insignificant near-term impact.
Estimates revisions mostly minor
We have made minor upwards revisions to our estimates, with only minor adjustments to our 2019 estimates, now expecting 2019 sales of EUR 59.9m and EBIT of EUR 11.7m. We have made slight adjustments to sales estimates to account for the Wasa Tilit and WT Företagstjänster acquisitions, also raising our 2020E sales growth estimate by 2pp to 18%. Talenom has also started to implement the new instance of automation, thus eliminating dependencies to other third-party accounting software. The implementation schedule is ahead of our previous estimates, prompting a minor adjustment to our H2/19 earnings estimates.
HOLD (BUY) with a target price of EUR 36.0 (35.0)
Talenom has enjoyed substantial share price inclines and although Talenom on our estimates is set to continue to deliver solid sales and earnings growth, valuation is becoming a stretch. Our target price and estimates value Talenom at a 2019 P/E multiple of 28.5x, which we still consider justifiable. We downgrade our rating to HOLD (BUY).