Edison Investment Research Limited: Edison issues outlook on CREALOGIX Group (CLXN)

London, UK, 16 October 2019

Edison issues outlook on CREALOGIX Group (CLXN)

CREALOGIX is a leading, global, digital banking engagement platform provider. Despite 17% revenue growth, FY19 EBITDA was slightly below our expectations at CHF1.9m as the company moves to a SaaS model faster than expected. The SaaS transition is expected to drag on results until FY21, before delivering a full year of benefit in FY22. We have lowered our forecasts and now anticipate 4% and 5% revenue growth in FY20 and FY21, with EBITDA of CHF2.6m and CHF4.7m respectively. Management also announced a transformation programme to position CREALOGIX for future growth, funded by a convertible bond refinancing (details on page 8) to secure additional headroom for working capital and M&A.

Looking at CREALOGIX's trading peers suggests that a valuation of c 2.5-3.0x revenues and c 15-20x EBITDA is achievable following a successful SaaS transition in line with management targets. Based on our FY22 estimates, this would suggest that an EV of CHF250m+ is achievable (a 100% premium to today's share price). For investors willing to take a medium-term view, CREALOGIX's valuation of 1.3x FY20e sales is attractive, particularly when compared to its closest peers. However, we would note that restricted share trading liquidity continues to limit exit opportunities. 

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