1. technology and computing
2. software

Investment Research - Research Report
02 July 2015
Columbus A/S
Denmark, IT Consulting & Other Services
COLUM.CO (REUTERS) – columbusglobal.com – COLUM DC (BLOOMBERG)
BUY
Initiating coverage
Share price: DKK 5.1
Target price: DKK 7.0
Columbus15 - a self-help bestseller
Revenue (DKKm) and EBITDA margin
Source: ABG Sundal Collier
Other key data
Mkt cap. (m, DKK)
Mkt. cap. (m, USD)
Shares out. (m)
Shares dil. (m)
Free Float Shares, %
EV (m, DKK)
NIBD (m, DKK)
557
83
110.3
110.3
48.7
516
-47
Source: ABG Sundal Collier
Trading data (DKK)
Share price
Target Price
+/- to target
Daily traded shares (3 m, k)
Daily traded value (3 m, k)
5.1
7.0
38.6%
163
823
Source: ABG Sundal Collier, company data
Performance
Absolute
Market cap (m): DKK 557
Daily traded shares, -3m (k): 163
1m
3m
12m
-6.5% -14.4% -11.4%
YTD
7.4%
We initiate coverage of Columbus with a BUY recommendation and
target price of DKK 7. Columbus, once a leading global Microsoft
software reseller delivering standard software and solutions, has
transformed into an industry focused (retail, food and
manufacturing) consultancy with a focus on proprietary software
based on best practice processes. Its Columbus15 strategy,
implemented in 2011, is now almost complete (end 2015), and has
refocused the company and improved earnings. We expect to see a
new five year strategic plan to grow the company while sustainably
improving profitability. If successfully executed we believe
Columbus’s value could potentially double to DKK 11 per share.
Columbus15 a well executed strategy
 We believe that Columbus has, so far, successfully executed and
delivered the targets it set in Columbus15. The EBITDA margin
has improved from 4% in 2011 to 9% in 2014 while organic
revenue has remained static due to the business being refocused.
Highlights include 77% of revenue from core industries (up from
52% in 2012), growth in Columbus software (40% CAGR 201114), improved services profits (consultancy invoicing up 4pp) and
expansion of the global delivery model (consultants in India up 2x).
Columbus2020 – the pursuit for growth
 The Columbus2020 strategy, which is mentioned on the company’s
website, will likely focus on driving growth through four strategic
initiatives: People, Customer success, Business innovation and
Process excellence.
Source: Datastream

Share price
We forecast an EPS CAGR of 12% until 2017e, driven by 17%
revenue CAGR and the EBITDA margin improving from 9% in
2014 to 10% in 2017e. Our forecast includes minor acquisitions
with deal sizes around DKK 50m.
Our valuation metrics indicate a range of DKK 6-14 per share
 Our DCF valuation indicates a fair value range of DKK 6-14 per
share while our relative valuation indicates the stock should trade at
a 2016e P/E of between 10x-15x or 5x-10x on 2016e EV/EBITDA.
We set our target price at DKK 7 and initiate coverage with a BUY.
Source: SIX
Key Highlights (DKKm)
Year
2011
2012
2013
2014
2015e
2016e
2017e
Sales
794
881
880
878
1,130
1,250
1,359
EBITDA
31
57
71
79
91
109
132
Target price: DKK 7.0
EBIT
6.7
29
45
53
58
72
92
EBITDA
m arg.
3.9%
6.5%
8.0%
9.0%
8.0%
8.7%
9.7%
Risk: Execution
Please refer to important disclosures at the end of this report
Net
profit
6.9
7.5
28
53
44
57
72
EPS
-0.11
-0.04
0.18
0.46
0.38
0.50
0.64
EPS
grow th
<-100%
-66.8%
<-100%
>100%
-16.1%
29.8%
29.1%
FCFPS
0.17
0.02
0.40
0.34
-0.92
0.04
0.21
EV/
EBITDA
3.6
2.6
4.9
5.6
5.7
4.8
3.9
P/E
neg
neg
21.6
10.3
13.2
10.2
7.9
EV/
EBIT
16.6
5.1
7.6
8.3
9.0
7.3
5.7
FCF
yield
12.2%
1.0%
10.4%
7.3%
-18.3%
0.8%
4.1%
Div.
yield
0.0%
0.0%
3.3%
2.7%
2.5%
2.5%
2.5%
Methodology: DCF, relative valuation
Andrew Carlsen, [email protected], +45 35 46 30 13, Copenhagen Office
Research Report
Table of contents
Investment case....................................................................3
Columbus15 a strategy of refocusing ................................3
Columbus2020 a growth story ..........................................3
BUY recommendation and target price of DKK 7 ..............3
From Columbus IT to Columbus .........................................4
Targeting three industry verticals ......................................5
Industry focused software and consultancy solutions .......6
Strategic refocusing .............................................................8
Columbus IT a Microsoft software reseller ........................8
Columbus15 a focused strategy ........................................9
Columbus2020 ................................................................ 12
Growth focus expected ................................................... 13
Market overview.................................................................. 14
Benchmarking Columbus against its peers ..................... 15
Financial estimates ............................................................ 17
Revenue to grow significantly from recent acquisitions ... 17
EBITDA margin of 12% in 2017e .................................... 18
Valuation range DKK 6-14 per share................................. 19
DCF valuation - DKK 6-14 per share .............................. 19
Peer valuation ................................................................. 20
Relative valuation indicates DKK 6 per share ................. 21
A potential acquisition candidate ..................................... 21
Risks to our valuation ...................................................... 21
ABGSC Research Department ....................................... 27
02 July 2015
-2-
Columbus A/S
Investment Focus
Investment case
We initiate
coverage with a
BUY and TP of
DKK 7
We initiate coverage of Columbus with a BUY recommendation and target price of
DKK 7. We find the Columbus investment case compelling; once a leading global
Microsoft software reseller delivering standard software and IT solutions, the
company has transformed into an industry focused consultancy with a focus on
proprietary software based on best practice processes. Its Columbus15 strategy,
implemented in 2011, is now almost complete (end 2015), and has refocused the
company and improved earnings. We expect the company will implement a new
five year strategic plan to grow the company while sustainably improving
profitability. If successfully executed, we believe Columbus’s value could
potentially more than double to around DKK 11 per share.
Columbus15 a strategy of refocusing
The primary goal of COLUMBUS15, when initiated in 2011, was to transform
Columbus from a standard reseller of IT software and solutions to a global industry
consultancy with its own software and a specific focus on clients within the retail,
food and manufacturing industries. The execution and outcome of Columbus’s
strategy has been successful, exemplified by the improvement in earnings (255%
2011 to 2014) as the company has focused on selling its own software (higher
margin vs. Microsoft software), and it has increased the percentage of billable
consultancy hours to 55% (51%) in the same period. By focusing on core industries
and with its global delivery model, we believe Columbus will deliver value added
focused solutions to clients within its target industries.
Key performance indicators
Successful
achievements on
most KPIs
2012
881
58
52%
60
43
51%
Revenue (DKKm)
EBITDA (DKKm)
Core industries share
Columbus softw are (DKKm)
Global delivery consultants
Improve invoicing w ork
2013
880
72
64%
60
69
53%
2014
900
80
70%
70
95
55%
2015e
1000
90
75%
80
125
55%
Source: ABG Sundal Collier, company guidance 2015e
Columbus2020 a growth story
EPS growth of
12% until 2017e
Given the Columbus15 initiative is due to be completed by end-2015, we expect a
new strategic plan targeting growth to be announced in connection with the full-year
2015 results. We already know that four initiatives focused on personnel, customer
success, business innovation and process excellence will support Columbus in
reaching its goals for 20201. We forecast an EPS CAGR of 12% until 2017e, driven
by 16% revenue CAGR and EBITDA margins improving from 9% in 2014 to 10%
in 2017e. Our forecast includes minor acquisitions with deal sizes around DKK 50m.
BUY recommendation and target price of DKK 7
Columbus valued
at DKK 5.7 per
share assuming
5.4x EV/EBITDA
1
Assuming modest long term revenue growth CAGR of 3.5% and sustainable 10%
EBITDA margin, we arrive at a blended valuation for Columbus of DKK 11 per
share. Given that Columbus currently trades at, in our view, an unwarranted
discount to its main peers (small IT Services companies), we see significant upside
potential to our estimates if Columbus successfully increases its revenue growth
rate to ~6.5% (currently 4%) and EBITDA margin to ~12% (currently 9%) in line
with the levels delivered by some of its best peers. Assuming a similar valuation of
EV/EBITDA of 5.4x for 2016e, Columbus should be valued at DKK 5.7 per share,
which indicates 12% upside potential to the current share price.
These are referred to on Columbus’s website
02 July 2015
-3-
Columbus A/S
Investment Analysis
From Columbus IT to Columbus
Columbus is an industry consultancy company delivering consultancy services and
industry focused Enterprise Resource Planning software (ERP) to customers
worldwide within the food, retail and manufacturing industries. The company was
founded in 1989 and has been listed on Copenhagen Stock Exchange since 1998.
The company has ~1,000 employees and generated revenue of DKK 878m in 2014.
Columbus has been undergoing a metamorphosis since 2011 when management
decided to transform the company from an IT company selling and implementing
Microsoft enterprise resource planning (ERP) software into an international
industry consultancy delivering unique business solutions.
IT consultancy and software reseller
In 2014, Columbus generated 68% of its revenues from consultancy, 23% from
external software sales (Microsoft Dynamics AX and NAV) and 7% from its own
developed software. In 2008, Columbus targeted 12 industry verticals, however, it
has now narrowed its focus to just three industries in 2014: manufacturing, retail
and food.
Revenue split by product type and industry, 2014
2%
7%
23%
C A GR
-2 8 %
23%
C A GR
+3 3 %
19%
32%
C A GR
+4 8 %
C A GR
+3 8 %
68%
26%
Own software
External software
Consultancy
Other
Manufacturing
Retail
Food
Other
Source: Columbus, ABG Sundal Collier. CAGR = 2011-2014
Columbus’ proprietary software (7% of revenue in 2014)
Columbus’s proprietary software currently constitutes just 7% of revenues but 41%
of EBITDA in 2014. Columbus develops and sells industry specific business
applications that complement standard Microsoft solutions currently in the market.
The company has a product portfolio of ~14 software solutions; those generating
the most revenue are: RapidValue, SCS: Supply chain solutions, ADM: Advanced
discrete manufacturing and BIS: Business integration solution.
According to the company, Columbus RapidValue incorporates 20 years of
knowledge from Columbus’s consultants and, hence, presents best practices within
core industries. The RapidValue software is used in mapping processes and
formalising process responsibilities. Columbus utilises its years of experience
within the three targeted industry verticals (manufacturing, retail and food) to
develop and enhance its RapidValue software, which is sold as an add-on to new or
existing clients’ Microsoft based ERP software. Columbus SCS is a product that
automates and streamlines processes in the distribution channel. SCS provides
retailers, manufacturers and distributors with support for inbound, warehouse, and
outbound processes. This includes warehouse management, inventory management
and distribution management. Columbus ADM is used in the manufacturing
industry. The software connects, automates and streamlines internal processes,
from the brainstorming phase to production and after-sale service.
02 July 2015
-4-
Columbus A/S
Investment Analysis
Consultancy services on a global scale (68% of revenue in 2014)
Columbus’s global delivery model provides customers worldwide with industry
specific consulting services. Through a combination of local consultants and
consultants from the global delivery centre in India (97 consultants ~10%), we
believe Columbus’s global delivery model should ensure cost efficient solutions.
Columbus’s consultancy services division offers five types of service; Turnkey
projects: Turnkey projects are rare in the targeted industries. A turnkey project
means that Columbus takes overall responsibility for the whole IT project. Hourly
based services: These range from consulting and project development to
configuration and setup, development and testing. Columbus’s consultants assist
customers in setting up business systems so they fit the customer’s needs. Support
and hosting: When a client requires assistance with operating and optimizing the
business system following implementation. Software: Columbus delivers both
Microsoft software and its own software solutions as add-ons.
External software, Microsoft reseller (23% of revenue in 2014)
Columbus is a certified Microsoft ERP reseller on a Gold partner level. Over the
years Columbus has won several Microsoft partner awards and is a 2015 global
ERP Partner of the Year finalist. Columbus’s business model builds upon the
Microsoft Dynamics that have a leading position with the small and mid-sized
enterprises, while its main competitors, SAP and Oracle ERP solutions, primarily
target larger enterprises. In 2012, Microsoft announced significant changes to the
Microsoft Enterprise partnership programme; these have meant that Columbus has
experienced a loss in revenue, 32% lower y-o-y 2012 to 2013 due to Columbus
receiving commission instead of booking revenue in combination with
commissions being recognised over three years instead of one, and a lower margin.
Its partnership with Microsoft and its role as reseller are, however, important to
Columbus as the Microsoft Dynamics suite is the access point for new clients for
Columbus’s consultancy services and proprietary software solutions.
Targeting three industry verticals
Columbus Manufacturing (32% of revenue in 2014): Columbus delivers
Microsoft Dynamics solutions for maximizing the efficiency and overall business
performance. As an add-on RapidValue software is an important piece of software
for the manufacturing industry. Columbus manufacturing solutions can, in 80% of
cases, meet industry requirements with their off-the-shelf solution and in other
cases Columbus is able to provide a bespoke customisation. Columbus’s customers
in this vertical include: Linak, Elfac, Odim and Otometrics.
In April 2015, Columbus was awarded its largest contract to date; the contract is
with MHI Vestas Off Shore Wind and is for more than 40,000 consultancy hours,
to be split between Columbus and Microsoft. The contract was evaluated against
two SAP templates.
Columbus Retail (26% of revenue in 2014): Columbus targets clients within the
retail industry with solutions and software based on the Microsoft platform to
deliver a complete shopping experience including point of sales, direct commerce,
customer care, supply chain and business planning, finance, warehouse and
transportation, market place integration and eCommerce. Columbus’s customers in
this vertical include: Bodum, IDdesign, ATEA and Fleggaard.
02 July 2015
-5-
Columbus A/S
Investment Analysis
In March 2015 Columbus won a contract with Concept Group, one of the biggest
fashion retailers in Russia with more than 200 stores in Russia and Eastern Europe.
Columbus Food (19% of revenue in 2014): The Columbus Food Solutions often
meet 80% of the industry specific requirements at the outset and have the potential
to incorporate more bespoke features. The software should help to improve
operational efficiency and facilitate collaboration across the supply chain, improve
the basis for optimal decision making through increased visibility and improved
food safety, and reduce risk. Columbus’s customers in this vertical include:
Carletti, Tulip and Royal Canin.
In February 2015, Columbus was awarded contracts with Hjem-Is and Domino’s
Pizza UK. In March 2015, Columbus was also awarded a contract with Sysco
Corporation, which had an annual turnover of USD 46bn in 2014.
Industry focused software and consultancy solutions
Columbus differentiates itself from other Microsoft Dynamics resellers by: 1)
offering proprietary developed add-on software, tailored for three key industries
(food, manufacturing and retail), and 2) offering industry knowledge and
consultancy know-how.
Columbus position in the value chain
Value added
ISV*
(software
development)
Microsoft Dynamics
(software platform)
Standard
software
Integrated
software
applications
Role based
solutions
Industry
specific
software
solutions
Development of
specific
functionality
Columbus
(consultancy services)
Custom
made from
adjustments
Implementation
International
rollout
Source: Columbus, ABG Sundal Collier *ISV (Independent Software Vendor)
In 2010, management took the strategic decision to solely focus on best practice
solutions within three industry verticals (retail, food and manufacturing) with the
Microsoft Dynamics software platform and its own developed software as an addon. Consultancy services are fundamental in the value creation process within IT
Services and in order to succeed consultants need to have in-depth knowledge and
skills within the industries that are being targeted. There is therefore a high
dependency on skilled employees in order to create value for the client but also to
ensure Columbus’s future profitability. Columbus is acutely aware that the
competencies, knowledge and engagement of its employees are key to its success.
Employee turnover is, however, around 10-20% annually, which is on par with the
industry level, we believe. If Columbus is unable to attract and recruit a suitable
calibre of talented consultants in the future, this could potentially limit future
growth.
Columbus revenue model
Columbus’s revenue model consists of perpetual licences and subscriptions. While
the perpetual licences model implies the client owns the software solutions, the
subscription model allows the client to subscribe to access to the software solution
including maintenance services, thus avoiding the initial upfront payment.
02 July 2015
-6-
Columbus A/S
Investment Analysis
On average ~50% of a new contract lifetime value is booked within the first year.
The remaining ~50% is allocated over the following five years, assuming that the
clients are retained for six years.
Revenue model (Index numbers)
Source: Columbus, ABG Sundal Collier
When the project implementation is finalised the customer is offered a service
agreement, “Columbus Care” (maintenance). Typically the service contract
duration is one to two years, but more than 95% of customers repeat purchase2.
Recurring revenue (maintenance) is estimated to be around 15-20% of initial
license payment, which includes both Columbus Software maintenance and
Microsoft maintenance.
Columbus in a global world
In 2014, 29% of Columbus’s revenues were generated in Denmark, 18% in the UK,
17% in the US and 12% in Norway. In 2014 Columbus experienced challenges
with sales execution in the US and a high unwanted attrition in employees in
Norway due to a competitor targeting Columbus employees. Compared to 2013,
these countries experienced a revenue decline of 14% and 16%, respectively.
Revenue (DKKm) split by country
Source: Columbus, ABG Sundal Collier
2
According to Columbus.
02 July 2015
-7-
Columbus A/S
Investment Analysis
Strategic refocusing
Columbus IT a Microsoft software reseller
Columbus IT started as an IT company selling and implementing enterprise
resource planning systems (ERP) and later became a preferred Microsoft Dynamics
AX and NAV retailer with established subsidiaries in several countries. Columbus
chose Microsoft Dynamics excluding other ERP software solutions such as SAP
and Oracle because the company believed that Microsoft would be the market
leader in the business solutions market for small to mid-sized companies.
Columbus enjoyed significant revenue growth of 16% revenue CAGR in the period
2005-08, with revenue peaking at DKK 991m in 2008. EBITDA margins improved
from 4% in 2005 to 6% in 2008. While delivering standard Microsoft Dynamic
software solutions was successful before the financial crisis, the recovery proved
difficult with increased competition, matured markets and evolving technology.
Columbus struggled to remain competitive with revenues and EBITDA margins
reaching a trough in 2011 at DKK 794m and 4%.
Revenue and EBITDA development
1,200
991
1,000
Columbus IT
892
836
736
800
808
881
880
400
5%
6%
4%
9%
6%
6%
16%
14%
8%
8%
4%
18%
878
794
630
600
20%
Columbus
12%
10%
8%
6%
4%
4%
200
2%
0
0%
2005
2006
2007
2008
Revenue
2009
2010
2011
2012
2013
2014
EBITDA margin (RHA)
Source: Columbus, ABG Sundal Collier
The ‘old’ Columbus was an international Microsoft reseller of IT solutions,
addressing 12 industries with a wide geographical spread. The ‘old’ Columbus
wasn’t that focused on selling its own software (which has higher margins).
Management has highlighted that pre-Columbus15, its sales personnel had no
incentive to sell own software, even though it was (and still is) a very profitable
business.
After several years of earnings stagnation the company launched a new strategy in
order to invigorate growth.
02 July 2015
-8-
Columbus A/S
Investment Analysis
Columbus15 a focused strategy
Columbus15 was launched in 2011 and set out the new strategy for the company.
The main goal was to rebrand Columbus, moving away from being an international
Microsoft reseller and transforming into an international consultancy with industry
focus. The implemented strategy included cost control and a tight focus on key
industries and key geographies. In order to stimulate growth and revitalise the
company management set five specific targets:
1) Extend industry leadership
Columbus has moved from a diluted industry focus on 12 industries to a targeted
100% focused on Food, Retail and Manufacturing. Columbus defines the three
industry verticals as its “core industry solutions”.
Industry solutions as a % of total revenue, 2011-2014
Columbus has a
target of “above
75%” of revenue
from its core
industry solutions
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
77%
64%
48%
31%
2011
2012
2013
2014
Industry solutions / total sales
Source: Columbus, ABG Sundal Collier
Revenue from its core industries has increased from DKK 263m (31%) in 2011 to
DKK 685m (77%), a revenue CAGR of ~40% in the period 2011-14. Due to the
focused strategy of targeting clients within industries where Columbus has
significant experience in developing value-added solutions the company has a
significant higher win ratio, according to management. Columbus has achieved its
2015 target of more than 75% of revenue from core industries by 2015 in 2014.
2) Sell more of its own software
Columbus has many years of experience in developing industry-related solutions
and has chosen to spin off its development activities into a separate company called
To-Increase. The rationale behind this is to focus resources and make a broader
sale of these products possible. In Columbus’s financial statements the software
development company is described as an independent software vendor (ISV).
Columbus’s software development business unit is one of the main drivers of the
group’s margin improvement.
In 2014, proprietary software accounted for DKK 62m of revenue or 7% of total
revenue. While proprietary software revenue contribution is relatively low it
contributed to 41% of EBITDA in 2014. Hence, Columbus’s focus on selling more
of its own software - the EBITDA margin on its own software is close to 50%
while EBITDA margins on third party software and consultancy services are
around 6% we estimate. The share of revenue coming from own software has
remained at 7% of revenue since the strategic refocus; however, measured as a
percentage of total software sales, Columbus has increased the relative sale of its
own software from 20% in 2011 to 24% in 2014.
02 July 2015
-9-
Columbus A/S
Investment Analysis
Columbus software as share of total software sales – Q2’13-Q1’15
The company focuses
on innovation and
developing of its own
software, in order to
differentiate itself
from competitors and
improve margins.
Source: Columbus, ABG Sundal Collier
Columbus estimates that for every 1pp increase in total revenue from own software
sales, EBITDA increases by DKK 6m thus indicating an incremental EBITDA
margin of 66%.
Left: Revenue split 2014, Right: EBITDA split 2014
8%
41%
59%
92%
ISV
Consultancy
ISV
Consultancy
Source: Columbus, ABG Sundal Collier: Numbers are after allocating HQ/eliminations
EBITDA margin business area, 2009-2014
80%
67%
70%
60%
50%
48%
43%
41%
40%
31%
31%
30%
20%
10%
1%
4%
3%
6%
5%
6%
0%
2009
2010
2011
ISV (own software)
2012
2013
2014
Consultancy & external software
Source: Columbus, ABG Sundal Collier: Numbers are after allocating HQ/eliminations
ISV revenue as a percentage of total revenue has increased from 7% in 2011 to 8%
in 2014. We see the focus on own software continuing to be a strong contributor to
further margin expansion. Revenue from ISV has shown superior growth rates
(30% CAGR) relative to the company’s overall growth rates (3.5%) in the period
2011-14.
02 July 2015
- 10 -
Columbus A/S
Investment Analysis
3) Optimize global delivery
Columbus established a global delivery centre in India in 2012 in order to expand
its global delivery model in a cost efficient manner. In Q2’13 the centre employed
65 consultants, which has increased by ~50% to 97 consultants as at year-end
2014. By year-end 2015, Columbus expects to have 125 consultants at its global
delivery centre in India.
Global delivery (production) days have increased from 967 days in Q1’13 to 1,465
days in Q1’15, an increase of ~51%, exemplifying the increased utilisation of the
Global delivery centres capacity. The Global Delivery centre was established due
to the lack of access to qualified consultants in Columbus’s global operating
markets. By compiling deliveries into one centre the company should benefit from
scale advantages, achieve a more homogeneous product offering and standardise
the quality of its projects. It should also reduce costs through lower staff expenses,
meaning lower prices for customers and a more competitive product.
Global delivery days, Q4’13 to Q1’15
1800
1700
Remaining
competitive in a
global market
requires a certain
degree of off shoring
1600
1500
1400
1300
1200
1100
1000
900
Q1'15
Q4'14
Q3'14
Q2'14
Q1'14
Q4'13
800
Global delivery, days (volum e) 4Q average
Source: Columbus, ABG Sundal Collier
Management estimates that 7-8% of consultancy deliveries come from the Global
Delivery centre in India. The company’s long-term target is 20% of consultancy
deliveries. The global deliveries potential from the centre in India is, however,
somewhat limited, as one of Columbus’s strengths in the local market is the fact
that the consultants speak the local language and have local knowledge.
Focusing on five key
markets that hold the
greatest potential
02 July 2015
Geographic focus
Columbus15 has focused the company on core geographies. Since 2011 the
company has discontinued/divested operations in the following countries: Spain,
Italy, France, Germany, Switzerland, Austria, Netherlands, Poland, Middle East,
South America and Central America. This leaves the company with five main
markets accounting for 87% of the total revenue in 2014 (87% in 2011): Denmark,
Norway, UK, US and Russia. Another task for the new management was to
standardise working procedures and processes in order to deliver the same high
quality product globally. By discontinuing unprofitable and low margin products
and geographical segments and focusing on selling its own software Columbus has
been able to improve EBITDA margins by 5pp from 4% in 2011 to 9% in 2014.
- 11 -
Columbus A/S
Investment Analysis
Each 1pp increase
in the share of
invoiced hours
contributes DKK
10m to EBITDA ~13% of 2014
EBITDA
Improve service profits (ISP)
Columbus has introduced several internal initiatives in order to increase the
percentage of billable hours, a key driver of profitability. Columbus estimates that
for each 1pp increase in billable hours EBITDA will increase by DKK 10m
annually. One of the initiatives introduced by management is “Club25” where the
top consultants, measured on total billable hours, are rewarded on a monthly basis.
The company has successfully improved the billable hours percentage from 51% in
2011 to 54% in 2014. The company targets 55% billable hours in 2015. However,
Q1’15 showed a decline in chargeable work in consultancy of 2pp; this was
primarily due to operational challenges in Norway where the consultants utilisation
rates are low.
Chargeable work in consultancy, 2011-2014
56%
The company’s
original target for 2015
was 60%. The target
was revised to 55% in
the 2014 report due to
the US and Norwegian
markets
underperforming.
In Q1’15 the number
was 56%.
53%
54%
52%
51%
51%
2011
2012
55%
54%
50%
48%
46%
44%
42%
40%
2013
2014
2015e
Chargeable work in consultancy
Source: Columbus, ABG Sundal Collier
Columbus2020
Having successfully delivered on Columbus15, Columbus has established a solid
track record for increasing earnings, with a reinvigorated drive for future growth.
Key performance indicators
Successful
achievements on
most KPIs
2012
881
58
52%
60
43
51%
Revenue (DKKm)
EBITDA (DKKm)
Core industries share
Columbus softw are (DKKm)
Global delivery consultants
Improve invoicing w ork
2013
880
72
64%
60
69
53%
2014
900
80
70%
70
95
55%
2015e
1000
90
75%
80
125
55%
Source: ABG Sundal Collier, company guidance 2015e
The company has improved on all KPIs as listed above since 2011 and with 2015
as the final year of the strategy we expect management will announce a new fiveyear strategy in connection with its year end results. Columbus15 was a
transformational journey and management has successfully returned Columbus to a
sustainably profitable business with 2014 earnings at an all-time high (DKK 53m).
02 July 2015
- 12 -
Columbus A/S
Investment Analysis
Growth focus expected
Focus will be on
the level of growth
achievable in the
next five years
Since 2007 Columbus’s revenue has been flat to slightly declining. While the
Columbus15 strategy has been focused on growth in its core industries and own
software, which has been achieved, revenue growth has been offset by the
discontinuation of non-profitable and low-margins business areas. We understand
from management that the decline in growth, especially external software, has
come to an end, and that we are unlikely to see any other business units
discontinued.
We expect that Columbus2020, when announced, will unveil another growth
strategy. Columbus has already indicated that its four strategic pillars of future
growth will be: people, customer success, business innovation and process
excellence. According to Columbus a more detailed Columbus2020 strategy is to
be revealed with the release of the 2015 annual report.
We believe another part of the growth strategy will entail growth from acquisitions
as management has indicated a certain level of critical mass is required in order to
become a preferred partner to clients. We believe there are ample opportunities for
acquisitions depending on the target market or solution. Already, as part of
Columbus15, both consultants and software offerings have been added to the group
in pursuit of future growth and we forecast roughly DKK 100m in acquisitions
should be expected in the next three years.
02 July 2015
- 13 -
Columbus A/S
Investment Analysis
Market overview
The ERP software market is dominated by SAP (24% market share) and Oracle
(12%), according to Gartner 2013. Microsoft has a 5% market share and the
remaining market is highly fragmented with a significant number of smaller local
software producers or producers with a specific industry specialty. The Columbus
business model is built on selling and implementing Microsoft Solutions and
developing software that can be added on to Microsoft’s solutions. While SAP and
Oracle have primarily been targeting large enterprises, both have ventured in to the
SME market in which Microsoft has it primary focus.
Worldwide ERP software market share of USD 25.4bn in 2013
SA P, 2 4 %
There are 74 Microsoft
ERP partners in
Denmark, indicating a
highly fragmented
market
O thers,
40%
O rac le,
12%
Sage, 6 %
I M B, 2 %
C onc ur,
2%
Kronos , 3 %
I nfor,
6%
M ic rosoft,
5%
Source: Gartner, Market Share Analysis: ERP Software, Worldwide, 2013
In addition to the ERP software producers mentioned above, Columbus’s direct
competition is very fragmented. Direct competition consists of “Value Added
Resellers” (VAR); many operate on a local or regional basis, and only a few have
international capacity. Columbus’s international competitors include: Tectura,
Prodware Group, and Avanade. In Scandinavia, Columbus’s main competitors
include: EG, CGI, Acando, Evry, KMD and Visma. Most of Columbus’s
competitors are privately owned companies and are therefore not included in our
valuation table.
Columbus’s IT position in the market
Service
Customer segment
Columbus
Small and mediumsized companies
(1 - 100 employees)
Low er midmarket
(100 - 499
employees)
Midmarket
(100 - 999
employees)
Upper midmarket
(500 - 999
employees)
Larger companies
(>1,000 employees)
SAP, Oracle
Softw are
Microsoft
Source: Columbus, ABG Sundal Collier
Columbus operates in the highly fragmented IT Services and Software markets and
there is considerable uncertainty in estimating market sizes and future growth rates.
According to Gartner, the global enterprise software segment is expected to
experience significant growth of 6.5% CAGR in the period 2014-19e while IT
Services is expected to grow at a 4.2% CAGR.
Gartner forecast global IT spending growth
Market grow th (LCY)
Enterprise softw are
IT Services
2014
5.7%
3.4%
2015e
6.3%
3.7%
2016e
6.4%
4.0%
2017e
6.6%
4.2%
2018e 2019e
6.6% 6.8%
4.5% 4.7%
CAGR
6.5%
4.2%
Source: Gartner Q1’15 IT spending report, IT spending by industry 2011
02 July 2015
- 14 -
Columbus A/S
Investment Analysis
The global enterprise software market is estimated3 to be around DKK 93bn while
IT Services market is estimated to be DKK 282bn.
Estimated market sizes 2015
Source: Columbus, Q1’15 IT spending report, IT spending by industry 2011, ABG Sundal Collier
The Scandinavian IT market
Columbus generates ~41-43% of its revenue in Denmark and Norway. According
to a presentation by a Scandinavian peer EG, the Scandinavian IT market
(Denmark, Norway and Sweden) is expected to grow by a CAGR of 3.2% from
2013 to 2016, 1.2% higher than the historical growth from 2010 to 2013, which
was affected by the financial crisis. Higher growth rates of 4.5-5.6% in the period
of 2013-2016 are expected in the SME segment, which is a particular focus of
Columbus and EG. According to the presentation by EG, the Scandinavian IT
market is estimated to be DKK 28.4bn in 2013 and DKK 31.3bn in 2016.
Benchmarking Columbus against its peers
We almost find the market size and growth overview above redundant in relation to
assessing Columbus’s historical and potential performance due to the sheer size
and fragmentation of the IT market. Due to the highly fragmented nature of the
market we prefer to conduct a general benchmarking exercise against similar IT
companies in size and market exposure in order to evaluate Columbus’s historical
performance. We compare Columbus’s historical performance on sales growth and
EBITDA margins with other value-added software resellers and IT consultancies.
However, we use EG, a privately owned company, as a reference peer due to a
number of similarities to Columbus such as size (DKK 1.6bn in revenue in 2014),
revenue split (46% consultancy, 30% software of which own software is 55%) and
as it is a leading ERP software provider (Microsoft Dynamics and SAP).
Sales growth, Columbus and peers
Sales grow th
Main peers
Itera ASA
HiQ International AB
Enea AB
Digia Oyj
Data Respons ASA
Cybercom Group AB
Connecta AB
Acando AB Class B
Affecto Oyj
Prodw are SA
Colum bus A/S
Median m ain peers
Market cap
(DKKm )
2006
2007
2008
2009
2010
2011
2012
2013
2014 CAGR
1,368
73
52
26%
11%
5%
40%
47%
13%
37%
73%
7%
86%
18%
21%
9%
25%
62%
116%
31%
20%
94%
45%
7%
21%
12%
16%
29%
53%
6%
20%
35%
37%
-8%
-10%
-15%
-2%
-11%
-3%
-10%
-11%
-22%
-11%
-9%
5%
-7%
9%
-3%
-12%
13%
2%
11%
-1%
16%
17%
-1%
-7%
20%
-3%
12%
4%
12%
28%
2%
7%
-27%
-18%
-1%
-9%
-6%
2%
5%
34%
6%
-5%
-23%
-1%
-5%
-11%
-11%
-7%
0%
23%
-5%
6%
5%
-2%
6%
6%
N/A
29%
-8%
-1%
5%
7%
-5%
5%
14%
11%
8%
12%
11%
24%
574
411
17%
31%
21%
28%
11%
21%
-16%
-11%
-3%
0%
-2%
12%
11%
0%
0%
-5%
0%
5%
4%
9%
205
2,348
1,408
94
607
411
Source: FactSet, ABG Sundal Collier
3
Gartner
02 July 2015
- 15 -
Columbus A/S
Investment Analysis
For the 10-year period of 2005-2014, Columbus has delivered revenue CAGR of
4% and main peers have delivered CAGR of 9%.
Despite a lower growth rate we argue that: 1) Columbus has divested several
unprofitable business units in order to return the company to sustainable levels of
profitability, and 2) the industry is characterized by consolidation. Growth rates are
blurred by M&A. For example, Prodware has completed eight acquisitions and two
divestments since November 2010. We note that Prodware did not complete any
acquisitions in 2013, resulting in negative revenue growth rates in 2014. Itera
acquired Visual Funk A/S in 2010, contributing to a total sales growth of 16% in
2011. Growth rates have been in the -5% to +6% range ever since. It is therefore
clear that a comparison of growth rates is difficult and can be misleading; however,
it can give an indication of the level of long-term growth rates that are, generally,
achievable including acquisitions. We infer from the table that growth rates
significantly above Columbus’s 4% revenue CAGR are achievable. We have also
looked at EG (not listed) as a reference; we highlight that since 2009 the EG group
has conducted 21 acquisitions and delivered 12% revenue CAGR until 2014.
EBITDA margin, Columbus and peers
EBITDA-m argin
Main peers
Itera ASA
HiQ International AB
Enea AB
Digia Oyj
Data Respons ASA
Cybercom Group AB
Connecta AB
Acando AB Class B
Affecto Oyj
Prodw are SA
Colum bus A/S
Median m ain peers
Market cap
(DKKm )
2006
2007
2008
2009
2010
2011
2012
2013
2014
AVG.
13%
20%
11%
16%
8%
11%
14%
8%
15%
3%
12%
17%
10%
15%
8%
11%
14%
10%
12%
0%
10%
15%
8%
37%
2%
9%
10%
5%
1%
-12%
4%
15%
12%
16%
0%
8%
11%
7%
6%
-2%
3%
15%
13%
6%
2%
14%
10%
8%
9%
-5%
6%
14%
31%
10%
4%
3%
7%
8%
10%
-2%
9%
11%
25%
6%
6%
5%
4%
5%
9%
1%
5%
11%
26%
6%
7%
6%
1,368
73
52
13%
20%
10%
15%
6%
11%
11%
8%
10%
8%
7%
9%
7%
8%
15%
16%
14%
5%
9%
10%
7%
9%
0%
574
411
5%
10%
6%
12%
6%
11%
4%
8%
8%
7%
4%
9%
6%
8%
8%
6%
9%
7%
6%
9%
205
2,348
1,408
94
607
411
Source: FactSet, ABG Sundal Collier
Columbus’s average EBITDA margin for the period of 2006-2014 was 6% while
its main peers delivered a 9% EBITDA margin. However, since 2011, when the
strategy was devised and implemented, Columbus has successfully improved
EBITDA margins from 4% (2011) to 9% (2014) while many of its peers have
experienced a declining trend in EBITDA margins. However, despite 21
acquisitions, EG has in the period of 2009 until 2014 delivered approximately a
10% EBITDA margin or 12% EBITDA when normalised for acquisitions.
EG revenue and EBITDA
Revenue
Grow th
EBITDA
EBITDA margin
Normalised margin
2010
1017
88
8.7%
9.1%
2011
1330
30.8%
128
9.6%
11.3%
2012
1502
12.9%
143
9.5%
10.9%
2013
1611
7.3%
174
10.8%
12.1%
2014
1636
1.6%
177
10.8%
14.0%
Source: EG company presentation, ABG Sundal Collier
We believe the measures taken by management to increase the share of high
margin software, increase invoicing of consultancy hours and increased use of offshoring has supported Columbus in improving its margins. Hence we believe
Columbus targeting high revenue growth (organic or acquisitions) while attaining
double digit EBITDA margins is achievable.
02 July 2015
- 16 -
Columbus A/S
Investment Analysis
Financial estimates
Revenue to grow significantly from recent acquisitions
We modestly forecast organic revenue growth in local currency of 1% in 2015,
while adding a positive FX impact of 2.9% and the recent two acquisitions brings
us to 29% growth in 2015. Our revenue forecast of DKK 1,130m for 2015 puts us
13% above company guidance of revenue at approximately DKK 1,000m in 2015.
We arrive at a revenue CAGR of 15.7% for the 2014-17e period, which should be
compared with a 4% revenue CAGR in the period of 2005-2014.
Revenue forecast
1,600
1,400
102
91
1,200
We forecast DKK
80m in own
software revenue
in 2015e, in line
with company
guidance.
80
1,000
800
58
37
53
32
58
67
600
400
1,159
1,050
777
771
762
828
822
811
2009
2010
2011
2012
2013
2014
1,257
200
We forecast
consultancy and
external revenue of
DKK 1,050m,
which is DKK
130m above
guidance.
0
Consultancy & external software
2015e
2016e
2017e
ISV (own software)
Source: Columbus, ABG Sundal Collier
Growth rates for 2014-2017e are partly driven by an increased forecast organic
growth, and partly from FX impact and acquisitions. In 2015, revenue growth will
be especially affected by the acquisition of Interdym BMI, contributing 25% of the
28.7% revenue growth.
Composition of growth rates
2012
9.0%
2.0%
0.0%
11.0%
Total organic grow th
FX impact
M&A impact
Total revenue grow th
2013
2.2%
-3.2%
0.9%
-0.2%
2014
-1.3%
-2.2%
3.3%
-0.2%
2015e
1.0%
2.9%
24.8%
28.7%
2016e
3.2%
0.0%
7.4%
10.6%
2017e
4.2%
0.0%
4.6%
8.7%
Source: Company data, ABG Sundal Collier
No more discontinuation of low margin business
Since 2012, the underlying growth in consultancy (6% CAGR) and flat
development in own software revenue has been offset by a decline of 14% CAGR
in non-core revenue (discontinued and divested businesses) and third party
software revenue. We are under the impression4 that the revenue growth from third
party software has plateaued and is expected to grow slightly in 2015.
4
Source: Columbus management.
02 July 2015
- 17 -
Columbus A/S
Investment Analysis
Acquisitions are inevitable
The IT Service & Consultancy industry is currently characterised by consolidation
and acquisitions. We believe that Columbus will likely to continue to expand its
business through acquisitions in order to gain sufficient scale. The three recent
acquisitions in 2015 highlight this strategy: Interdyn BMI and Sherwood Systems
in the US to build presence in a growth market and the acquisition of MW data in
Denmark to gain access to proprietary software. In addition to acquisitions already
announced we forecast acquisitions of, on average, DKK 50m (EV) both in 2016
and 2017. Based on the average EV/sales multiple for the last three acquisitions
(0.9x), we estimate that sales of ~DKK 57m will be added in 2016e and 2017e.
EBITDA margin of 12% in 2017e
During the period of 2011 to 2014, the EBITDA margin has increased ~5pp. We
see room for further margin expansion and forecast a 10% EBITDA margin in
2017e up from 8% in 2015e.
Key drivers for our 10% EBITDA margin in 2017e are: 1) increased share of revenue
from own software, with EBITDA increasing by DKK 6m per 1pp increase in total
revenue (68% incremental margin), 2) EBITDA increasing DKK 10m per 1pp
increase in the share of invoiced consultancy hours, 3) increased usage of the Global
Delivery centre in India with ~125 consultants (by year-end 2015).
Revenue (DKKm) and EBITDA margin
Margins negatively
affected n 2015e by
acquisitions.
Source: Company data, ABG Sundal Collier
EBITDA margin forecast
80%
67%
70%
60%
50%
43%
41%
40%
48%
48%
52%
53%
31%
31%
30%
20%
10%
1%
4%
5%
3%
6%
6%
5%
7%
9%
2015e
2016e
2017e
0%
2009
2010
2011
2012
ISV (own software)
2013
2014
Consultancy & external software
Source: Company data, ABG Sundal Collier
We expect the loss of revenue in the US and Norway in 2014 (ABGSCe DKK
44m) and negative DKK 30m impact on EBITDA in 2014 to be somewhat reversed
in 2016 given that Columbus now has new management in place in Norway and the
US team has been expanded by the acquisition of Inter Dyn BMI and Sherwood
Systems.
02 July 2015
- 18 -
Columbus A/S
Investment Analysis
Valuation range DKK 6-14 per share
We employ a scenario-based DCF valuation and a relative valuation to peers.
DCF valuation - DKK 6-14 per share
Our base case DCF arrives at a value of DKK 11 per share indicating 109% upside
potential to the current share price. We have outlined our assumptions below. We
assume a WACC of 8.5% and tax rate of 22%. Our thesis is that Columbus will
experience a modest 3.5% revenue CAGR and EBITDA margin peaking at 10%.
We assume
Columbus’s long term
growth to equal
forecast underlying
market growth ~3.5%
Assumptions underlying our valuation
Revenue grow th (organic)
Total revenue grow th
EBITDA m argin
Tax rate
2015e
1.0%
28.7%
8.0%
23.5%
2016e
3.2%
10.6%
10.1%
22.0%
2017e 2017-2027 Term inal
4.2%
3.5%
2.0%
8.7%
3.5%
2.0%
12.1%
12.0%
12.0%
22.0%
22.0%
22.0%
Source: ABG Sundal Collier
DCF output
Weighted Cost of Capital - WACC
Risk free yield
Market risk premium
Equity beta
Extra risk factor
Company specific risk premium
Cost of equity (Re)
EBITA tax rate
Cost of debt after tax (Rd)
Capital w eights and WACC
Debt
Equity
Implied net debt / equity
WACC
Cash flow assumptions
4.00%
5.00%
0.9
0.0%
4.5%
8.5%
22%
3.1%
0%
100%
0%
8.5%
Forecast period
Sales grow th
EBITA margin
2015e
29%
5.1%
Adaption period - Stage 2 ->
Sales grow th
EBITDA margin end stage 2
EBITA margin end stage 2
Depreciation / sales
CAPEX / sales end stage 2
Term inal value year
FCF grow th TP
EBITA margin TP
CAPEX / sales TP
DCF value summary
2016e
10.6%
5.8%
2017e
8.7%
6.8%
2027
3.5%
10.0%
7.2%
2.8%
3.2%
2028
2.0%
7.2%
3.2%
Present value FCF in stage 1
Present value FCF in stage 2
Present value FCF in Terminal period
Total enterprise value
129
440
469
1,039
Market value of debt
All other adjustments
Value of shareholders equity
98
-18
1,118
Number of shares
110
DCF value per share (DKK)
Potential to DCF value
11
109%
Source: ABG Sundal Collier
While our base case indicates a DCF value of DKK 11 per share, we find it
relevant to highlight the possible down- and up-side in the valuation range.
Assuming Columbus is not successful in increasing its EBITDA margins beyond
the peak at 8%, which is what we have forecast for 2015, then our DCF value is
DKK 8.5 per share, implying 70% upside to the current share price. However, if
Columbus succeeds in sustaining growth at 5% while increasing its EBITDA
margin to 12%, then our DCF value is DKK 14 per share.
DCF scenario
EBITDA
m argin
2017-2027
Revenue grow th 2017-2027
10.6
0.0%
3.5%
6%
6.1
6.5
8%
7.6
8.5
10%
9.1
10.6
12%
10.6
12.6
5.0%
6.7
9.0
11.3
13.6
Source: ABG Sundal Collier
02 July 2015
- 19 -
Columbus A/S
Investment Analysis
Peer valuation
We find it difficult to construct a suitable peer group comparison for Columbus due
to its relatively small size and it is difficult to find peers with a similar mix of
consultancy services and software that are listed. The main peers who are value
added resellers of ERP software and provide consultancy but are not listed include:
Visma, EG, Tectura, Avanade, EG, CGI Denmark, mcaConnect, TRibridge, eBECs
Ltd and Junction solutions. We have thus updated our IT Services and Software
peers table with small mid cap sized IT consultancy peers. Not all peers are within
the markets that Columbus operates in but they have exposure towards IT Services
and software solutions.
Peer valuation
P/E
EV/EBITDA
EV/EBIT
FCF yield (%)
EBITDA m argin
CAGR
EPS
Market
Cap
(DKKm )
2015e 2016e 2017e 2015e 2016e 2017e 2015e 2016e 2017e 2015e 2016e 2017e 2015e 2016e 2017e 14-'17
IT services
NNIT A/S
16.9 16.9 15.7
9.0
8.2
7.4 13.5 12.5 11.2
4.9
3.7
4.9 15.6 15.8 16.1
5.4
3,800
Accenture Plc
20.2 18.6 16.9 11.1 10.3
9.6 12.6 11.6 10.8
5.7
6.5
7.3 16.5 16.6 16.6
8.1 404,421
CGI Group Inc. Class A
15.5 14.2 13.6
8.8
8.0
7.4 11.5 10.3
9.4
7.1
8.1
8.9 18.2 18.4 18.6
8.7
82,285
Tieto Oyj
13.5 12.8 12.1
7.8
6.8
6.8
9.9
9.2
8.8
5.6
7.7
7.9 13.1 14.4 13.9
4.4
11,556
Cognizant Technology Solutions Corporation
20.7Class
17.9
A 15.3 13.6 11.1
9.6 15.3 12.2 10.3
4.1
5.0
5.8 19.6 19.8 19.6
15.6 249,712
Infosys Limited
17.3 15.4 13.7 11.8 10.2
9.0 12.8 11.0
9.5
4.4
4.9
5.2 27.4 27.8 27.6
9.0 237,962
Tata Consultancy Services Limited
21.0 18.4 16.3 15.6 13.4 11.7 16.6 14.2 12.3
3.3
4.2
4.9 28.5 28.5 28.3
14.8 525,601
Wipro Limited
14.6 13.2 12.2 10.3
8.9
7.8 11.6 10.1
8.6
5.9
5.8
6.7 22.4 22.3 22.4
8.9 141,271
Micropole SA
17.3
8.6 N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4.6
6.0 N/A
N/A
134
Computer Sciences Corporation
13.4 12.4 11.2
4.5
4.2
3.9
8.3
7.6
6.8 10.6 11.1 N/A 18.1 18.3 18.4
8.4
60,583
Average
16.6 14.4 13.5 10.0
8.7
7.8 12.3 10.6
9.4
6.1
7.2
7.5 17.7 18.2 19.4
11.1 156,141
Median
16.9 14.2 13.6
9.6
8.6
7.6 12.1 10.7
9.4
5.7
6.1
6.7 18.1 18.3 18.5
8.8 82,285.4
Softw are
SimCorp A/S
27.9 25.0 22.1 19.2 17.7 15.8 20.1 18.4 16.4
3.6
3.8
4.2 27.3 27.8 28.7
18.1
11,060
Oracle Corporation
14.8 13.6 12.5
8.8
8.6
7.7
9.3
8.8
8.2
6.9
7.5
7.1 46.7 45.3 47.3
5.1 1,169,963
SAP SE
16.7 15.6 14.5 11.9 10.7
9.9 12.9 11.7 10.8
4.8
5.8
5.9 34.0 34.6 34.3
7.6 573,699
Microsoft Corporation
18.2 15.6 14.0
8.6
8.2
7.3 10.8
9.9
8.9
6.6
7.1
7.8 35.7 36.4 38.0
5.3 2,398,183
Sage Group plc
20.3 19.2 17.8 14.2 13.3 12.4 15.6 14.6 13.5
5.5
5.8
6.3 29.8 29.9 30.0
8.6
58,164
Average
19.6 17.8 16.2 12.6 11.7 10.6 13.8 12.7 11.6
5.5
6.0
6.3 34.7 34.8 35.7
8.9 842,214
Median
18.2 15.6 14.5 11.9 10.7
9.9 12.9 11.7 10.8
5.5
5.8
6.3 34.0 34.6 34.3
7.6 573,699.1
Main peers
HiQ International AB
16.0 15.0 14.0 11.2 10.2
9.7 11.8 10.7 10.1
5.7
6.7
7.0 12.9 13.4 13.3
11.9
1,878
Enea AB
16.3 14.5 13.4
9.4
8.4
7.8 11.2
9.7
8.9
3.5
6.2
6.8 24.4 24.9 24.7
10.7
1,093
Digia Oyj
17.3 11.4
9.4
9.6
2.6
5.5 13.4
8.5
6.6
3.3
7.8
8.9
9.9 32.2 13.6
49.1
673
Data Respons ASA
14.6 10.1
7.8
8.7
6.2
4.6
9.1
6.4
4.8
6.2
9.4 12.8
7.4
9.0 10.6
26.8
519
Cybercom Group AB
8.3
7.2
6.8
4.2
3.5
3.0
6.0
4.7
3.9 13.6 12.6 14.6
7.3
7.4
7.7
12.7
326
Acando AB Class B
10.0
7.6
7.2
6.6
5.4
4.8
7.1
5.9
5.1 11.1 14.2 14.8
9.0
9.6
9.8
13.7
1,099
Affecto Oyj
7.8
7.3 N/A
5.2
4.7 N/A
5.7
5.2 N/A
N/A
N/A
N/A 11.0 11.1 N/A
N/A
528
Prodw are SA
4.4
3.5
2.9
2.6
2.1
1.5
5.3
3.8
2.5 17.7 22.2 24.8 18.0 18.7 19.8
31.7
376
Innofactor Plc
12.5
9.9
8.5
7.5
5.9
4.8 10.5
7.8
6.2
9.8 15.0 16.3 10.9 12.0 12.3
28.0
229
Average
11.9
9.6
8.8
7.2
5.4
5.2
8.9
6.9
6.0
8.9 11.8 13.3 12.3 15.4 14.0
23.1
689
Median
12.5
9.9
8.2
7.5
5.4
4.8
9.1
6.4
5.7
8.0 11.0 13.7 10.9 12.0 12.8
20.3
523.0
Colum bus (ABGSC Estim ates)
13.2 10.2
7.9
5.8
4.9
4.0
9.1
7.4
5.8 -18.3
0.8
4.1
8.0
8.7
9.7
12.0
574
Discount/prem ium to Main peers
6%
3% -3% -23% -9% -16%
1% 15%
2%
IT services and Softw are average
Discount/prem ium to average
18.1 16.1 14.9 11.3 10.2
9.2 13.0 11.7 10.5
-27% -37% -47% -49% -52% -56% -30% -36% -45%
Based on ABGSC DCF value
Colum bus (ABGSC Estim ates)
Discount/prem ium to Main peers
27.7 21.3
132% 122%
16.5
89%
11.4
59%
9.5
75%
7.9 18.0 14.4
51% 103% 107%
5.8
6.6
6.9
26.2
26.5
27.5
10.0
499,177
11.3
87%
Source: Factset, ABG Sundal Collier
02 July 2015
- 20 -
Columbus A/S
Investment Analysis
Relative valuation indicates DKK 6 per share
We believe Columbus is best valued by comparing the company to our main peer
group that has IT Services companies of a similar size and of which some are direct
competitors to Columbus on various markets. We argue the discount to main peers
on 2016e EV/EBITDA is unwarranted due to Columbus delivering higher revenue
growth (16% CAGR vs. 7.5% CAGR) while sustaining EBITDA margins. We
acknowledge that its FCF yield is hampered by our acquisition assumptions for
2016e and 2017e. Valuing Columbus at 5.4x 2016 EV/EBITDA values the share at
DKK 6.6 with a 31% upside to the current share price.
A potential acquisition candidate
We briefly highlight that Columbus could be an acquisition target for some of its
peers. In 2010, EG Holding tried to acquire Columbus at a share price of DKK 3.1
per share, this corresponded to a P/E of 11x at the time. Applying some of the
recent acquisition multiples, EV/sales 0.7x for the Acando acquisition of Connecta,
or 1.1x to 1.7x EV/sales HiQ International paid for its recent three acquisitions
values Columbus in the range of DKK 8 to DKK 18 per share. However, we note
that Columbus’s majority share holder in Consolidated Holdings (51.27% of
shares) and owner, Ib Kunøe, rejected the offer back in 2010.
Risks to our valuation
Retaining and attracting the right people is a significant risk in the IT consultancy
business. In 2014 Columbus experienced revenue decline in the US and Norwegian
market (~29% of group revenue). This was attributed to the loss of key employees
due to the competition in Norway and a lack of sales execution in the US market.
The estimated impact on 2014 EBITDA was DKK 30m (~27% negative impact).
Columbus has found a new country manager for the Norwegian market in Q1’15
and according to management the new team is in place. There is, however, a
significant risk of the new team in Norway not being able to regain lost business
and the expanded US team not being able to execute on sales.
Rapid technology development and dependence on Microsoft Dynamics is a
significant risk to Columbus. The development and implementation of customer
solutions is based on Microsoft Dynamics platform and Columbus is dependent on
the partnership with Microsoft. Microsoft ERP software might not be as
competitive as its major peers’, SAP and Oracle, offerings thus hampering
Columbus’s potential to grow due to its dependency on Microsoft.
Project related risks include estimating the right project value and executing and
delivering at the agreed time and price.
02 July 2015
- 21 -
Columbus A/S
Investment Analysis
Income Statement (DKKm)
2008
2009
2010
2011
2012
2013
2014
2015e
2016e
2017e
Sales
COGS
Gross profit
Other operating items
EBITDA
Depreciation on tangibles
Depreciation on intangibles
EBITA
Goodw ill impairment charges
Other impairment and amortisation
EBIT
Interest net
Dividends received
Exchange differences
Other financial items
Net financial items
Associated income
Other EO items
Pretax profit
Tax
Net profit
Minority interest
Net profit discontinued
Net profit to shareholders
EPS
EPS Core
Total extraordinary items before tax
Total extraordinary items after tax
Tax rate
Gross margin
EBITDA margin
EBITA margin
EBIT margin
Pretax margin
Net margin
Grow th rates Y/Y
Sales grow th
EBITDA grow th
EBIT grow th
Net profit grow th
EPS grow th
Profitability
ROE
ROE Core
ROCE
ROCE Core
ROIC
ROIC Core
Core earnings num bers
EBITDA Core
EBITDA Core margin
EBITA Core
EBITA Core margin
EBIT Core
EBIT Core margin
Pretax profit Core
Net profit Core
Net profit to shareholders Core
Net Core margin
991
-259
731
-671
61
-8.1
-17
36
-12
0.0
24
-6.5
0.0
-1.4
0.0
-7.9
0.3
0.0
16
6.9
23
1.1
0.0
24
0.32
0.47
0.0
0.0
42.6%
73.8%
6.1%
3.6%
2.4%
1.6%
2.3%
2008
na
na
na
na
na
2008
na
na
na
na
na
na
2008
61
6.1%
36
3.6%
36
3.6%
28
35
36
3.6%
836
-215
621
-585
35
-5.8
-17
12
-18
0.0
-5.3
-2.3
0.0
-2.6
0.0
-4.9
0.2
0.0
-10
-7.6
-18
-1.0
0.0
-19
-0.24
-0.01
0.0
0.0
76.0%
74.3%
4.2%
1.5%
-0.6%
-1.2%
-2.1%
2009
-15.6%
-41.6%
<-100%
<-100%
<-100%
2009
-8.1%
-0.5%
-1.8%
3.5%
-2.7%
-2.7%
2009
35
4.2%
12
1.5%
12
1.5%
7.5
-0.1
-1.1
-0.1%
808
-211
596
-533
63
-4.7
-18
41
0.0
0.0
41
-1.3
0.0
0.5
0.0
-0.8
-0.2
0.0
40
-13
27
-2.2
-14
11
0.12
0.27
0.0
0.0
-31.5%
73.9%
7.8%
5.1%
5.1%
5.0%
3.4%
2010
-3.4%
78.2%
>100%
>100%
<-100%
2010
4.5%
9.8%
14.2%
14.2%
8.4%
8.4%
2010
63
7.8%
41
5.1%
41
5.1%
40
27
25
3.1%
794
-200
594
-563
31
-4.9
-19
6.7
0.0
0.0
6.7
-1.3
0.0
-0.4
0.0
-1.7
1.3
0.0
6.3
0.6
6.9
-1.2
-17
-11
-0.11
0.05
0.0
0.0
9.0%
74.8%
3.9%
0.8%
0.8%
0.6%
0.7%
2011
-1.7%
-51.4%
-83.5%
-74.8%
<-100%
2011
-4.0%
2.0%
3.7%
3.7%
2.2%
2.2%
2011
31
3.9%
6.7
0.8%
6.7
0.8%
6.3
6.9
5.7
0.6%
881
-240
641
-584
57
-4.4
-24
29
0.0
0.0
29
-0.5
0.0
-1.5
0.0
-2.0
-3.8
0.0
23
-16
7.5
-3.9
-7.4
-3.7
-0.04
0.03
0.0
0.0
-67.7%
72.7%
6.5%
3.3%
3.3%
3.1%
1.3%
2012
11.0%
85.7%
>100%
9.4%
-66.8%
2012
-1.4%
1.3%
10.0%
10.0%
2.8%
2.8%
2012
57
6.5%
29
3.3%
29
3.3%
23
7.5
3.6
0.8%
880
-216
664
-593
71
-5.4
-20
45
0.0
0.0
45
-0.3
0.0
-3.6
0.0
-3.9
-4.1
0.0
37
-9.3
28
-3.1
-5.7
19
0.18
0.23
0.0
0.0
-25.0%
75.4%
8.0%
5.2%
5.2%
4.7%
3.6%
2013
-0.2%
24.1%
56.1%
>100%
<-100%
2013
6.9%
9.0%
16.6%
16.6%
10.3%
10.3%
2013
71
8.0%
45
5.2%
45
5.2%
37
28
25
3.3%
878
-204
674
-595
79
-4.9
-21
53
0.0
0.0
53
-0.2
0.0
6.0
0.0
5.8
0.0
0.0
59
-6.0
53
-1.9
0.0
51
0.46
0.46
0.0
0.0
-10.1%
76.7%
9.0%
6.1%
6.1%
6.7%
6.1%
2014
-0.2%
12.1%
17.9%
90.6%
>100%
2014
16.9%
16.9%
26.9%
26.9%
14.6%
14.6%
2014
79
9.0%
53
6.1%
53
6.1%
59
53
51
5.8%
1,130
-269
861
-770
91
-6.3
-27
58
0.0
0.0
58
-0.1
0.0
0.0
0.0
-0.1
0.0
0.0
57
-14
44
-1.9
0.0
42
0.38
0.38
0.0
0.0
-23.5%
76.2%
8.0%
5.1%
5.1%
5.1%
3.9%
2015e
28.7%
14.5%
7.7%
-17.4%
-16.1%
2015e
12.4%
12.4%
25.9%
25.9%
12.4%
12.4%
2015e
91
8.0%
58
5.1%
58
5.1%
57
44
42
3.7%
1,250
-300
950
-841
109
-7.0
-30
72
0.0
0.0
72
0.2
0.0
0.0
0.0
0.2
0.0
0.0
72
-16
57
-1.9
0.0
55
0.50
0.50
0.0
0.0
-22.0%
76.0%
8.7%
5.8%
5.8%
5.8%
4.5%
2016e
10.6%
20.1%
25.6%
28.5%
29.8%
2016e
14.6%
14.6%
35.1%
35.1%
15.4%
15.4%
2016e
109
8.7%
72
5.8%
72
5.8%
72
57
55
4.4%
1,359
-326
1,033
-901
132
-7.6
-32
92
0.0
0.0
92
0.6
0.0
0.0
0.0
0.6
0.0
0.0
93
-20
72
-1.9
0.0
71
0.64
0.64
0.0
0.0
-22.0%
76.0%
9.7%
6.8%
6.8%
6.8%
5.3%
2017e
8.7%
21.3%
27.7%
28.1%
29.1%
2017e
16.7%
16.7%
47.9%
47.9%
19.4%
19.4%
2017e
132
9.7%
92
6.8%
92
6.8%
93
72
71
5.2%
Source: ABG Sundal Collier, company data
02 July 2015
- 22 -
Columbus A/S
Investment Analysis
Cash Flow Statement (DKKm)
EBITDA
Net financial items
Paid tax
Non-cash items
Cash flow before change in WC
Change in WC
Operating cash flow
CAPEX tangible fixed assets
CAPEX intangible fixed assets
Acquisitions and disposals
Free cash flow
Dividend paid
Share issues and buybacks
Other non cash items
Decrease in net IB debt
Balance Sheet (DKKm)
Goodw ill
Indefinite intangible assets
Definite intangible assets
Tangible fixed assets
Other fixed assets
Fixed assets
Inventories
Receivables
Other current assets
Cash and liquid assets
Total assets
Shareholders equity
Minority
Total equity
Long-term debt
Pension debt
Convertible debt
Deferred tax
Other long-term liabilities
Short-term debt
Accounts payable
Other current liabilities
Total liabilities and equity
Net IB debt
Net IB debt excl. pension debt
Capital invested
Working capital
EV breakdow n
Market cap. diluted (m)
Net IB debt adj.
Market value of minority
Reversal of shares and participations
Reversal of conv. debt assumed equity
EV
Capital efficiency
Total assets turnover
Capital invested turnover
Capital employed turnover
Inventories / sales
Customer advances / sales
Payables / sales
Working capital / sales
Financial risk and debt service
Net debt / equity
Net debt / market cap
Equity ratio
Net IB debt adj. / equity
Current ratio
EBITDA / net interest
Net IB debt / EBITDA
Interest cover
2008
2009
2010
2011
2012
2013
2014
2015e
2016e
2017e
61
-7.9
-2.9
0.0
50
na
35
-5.4
-20
-29
-20
-0.2
4.8
na
na
35
-4.9
1.1
-8.8
23
42
65
-2.9
0.0
-6.0
56
-0.7
6.0
-126
-64
63
-0.8
-5.6
-23
34
-24
9.6
-2.9
-0.1
-0.1
6.6
-0.6
47
119
173
31
-1.7
-3.5
-7.3
18
36
54
-7.0
-29
-0.8
18
-5.7
0.0
-21
-8.2
57
-2.0
-8.9
14
60
-18
42
-7.5
-17
-16
1.8
-5.0
0.0
-2.4
-5.7
71
-3.9
-8.7
-12
46
27
73
-3.8
-15
-11
43
-1.6
0.7
-9.0
33
79
5.8
-7.5
-1.8
76
-0.7
75
-3.8
-15
-17
39
-15
7.8
-5.5
26
91
-0.1
-14
0.0
77
-24
53
-4.9
-20
-130
-102
-14
0.0
65
-51
109
0.2
-16
0.0
93
-12
81
-5.4
-22
-50
4.3
-14
0.0
0.6
-9.3
132
0.6
-20
0.0
112
-11
102
-5.3
-24
-50
23
-14
0.0
-1.7
6.8
2008
2009
2010
2011
2012
2013
2014
2015e
2016e
2017e
161
0.0
50
12
37
260
25
213
8.4
54
560
234
9.8
244
9.4
0.0
0.0
0.8
4.2
102
61
139
560
56
56
371
148
154
0.0
48
9.5
33
246
23
168
12
66
515
222
10
232
6.3
0.0
0.0
0.8
0.0
181
60
34
515
120
120
319
106
157
0.0
50
7.3
25
239
0.9
218
9.2
68
536
288
12
300
1.4
0.0
0.0
0.4
0.0
16
64
154
536
-52
-52
345
131
156
0.0
59
9.0
30
255
2.0
179
8.2
46
490
275
7.6
283
1.3
0.0
0.0
0.4
1.4
3.0
71
130
490
-44
-44
319
94
171
0.0
54
11
22
258
0.9
194
8.4
39
500
273
7.5
281
1.3
0.0
0.0
0.3
1.0
0.0
64
153
500
-38
-38
349
113
168
0.0
48
9.7
19
245
0.0
154
9.5
75
484
280
3.6
284
1.3
0.0
0.0
0.1
0.1
2.4
53
143
484
-72
-72
312
86
199
0.0
51
8.6
19
277
0.3
165
8.8
99
550
326
4.2
330
1.3
0.0
0.0
0.3
5.2
0.0
59
155
550
-98
-98
345
87
279
0.0
62
11
19
372
0.3
203
0.0
49
625
354
6.1
360
1.7
0.0
0.0
0.3
0.0
0.0
70
192
625
-47
-47
464
111
329
0.0
69
12
19
430
0.4
225
0.0
40
695
395
8.0
403
1.9
0.0
0.0
0.3
0.0
0.0
77
212
695
-38
-38
533
123
379
0.0
75
14
19
487
0.4
245
0.0
47
778
451
9.9
461
2.0
0.0
0.0
0.3
0.0
0.0
84
231
778
-45
-45
601
134
185
56
9.8
0.0
0.0
251
2008
na
na
na
na
na
na
na
2008
23%
30%
44%
23%
1.00
9.3
0.9
4.4
181
120
10
0.0
0.0
311
2009
1.55
2.42
2.56
2.9%
3.2%
7.2%
15.2%
2009
52%
67%
45%
52%
0.98
15.2
3.4
3.4
262
-52
12
0.0
0.0
222
2010
1.54
2.43
2.69
1.5%
3.0%
7.7%
14.7%
2010
-17.4%
-20%
56%
-17.4%
1.3
49.5
neg
14.8
148
-44
7.6
0.0
0.0
112
2011
1.55
2.39
3.26
0.19%
2.5%
8.5%
14.2%
2011
-15.6%
-30%
58%
-15.6%
1.2
23.1
neg
3.0
179
-38
7.5
0.0
0.0
148
2012
1.78
2.64
3.66
0.17%
1.9%
7.7%
11.8%
2012
-13.7%
-22%
56%
-13.7%
1.1
>50
neg
33.9
414
-72
3.6
0.0
0.0
346
2013
1.79
2.66
3.87
0.05%
1.9%
6.6%
11.3%
2013
-25%
-17.8%
59%
-25%
1.2
>50
neg
85.4
535
-98
4.2
0.0
0.0
441
2014
1.70
2.68
3.95
0.02%
2.0%
6.3%
9.8%
2014
-30%
-18.9%
60%
-30%
1.3
>50
neg
95.4
557
-47
6.1
0.0
0.0
516
2015e
1.92
2.80
4.14
0.03%
2.0%
6.2%
8.8%
2015e
-13.1%
-8.4%
58%
-13.1%
0.96
>50
neg
169.9
557
-38
8.0
0.0
0.0
527
2016e
1.89
2.51
3.69
0.03%
2.0%
6.2%
9.4%
2016e
-9.4%
-6.8%
58%
-9.4%
0.91
neg
neg
208.6
557
-45
9.9
0.0
0.0
522
2017e
1.84
2.40
3.48
0.03%
2.0%
6.2%
9.4%
2017e
-9.7%
-8.0%
59%
-9.7%
0.92
neg
neg
257.1
Source: ABG Sundal Collier, company data
02 July 2015
- 23 -
Columbus A/S
Valuation and Return Analysis
Valuation and ratios (DKKm)
Share data
Shares outstanding adj.
Diluted shares (adj, avg)
Diluted shares adj.
Shares outstanding (adj, avg)
Sales per share
EBITDA per share
EBITA per share
EBIT per share
EPS
Dividend per share
Operating cash flow per share, OCFPS
Free cash flow per share, FCFPS
EBITDA Core per share
EBITA Core per share
EBIT Core per share
EPS Core
BVPS
BVPS adj.
Net IB debt / share
Share price
Share price (high)
Share price (low )
Market cap. (m)
Valuation
P/E
P/OCFPS
P/FCFPS
EV/Sales
EV/EBITDA
EV/EBITA
EV/EBIT
Dividend yield
FCF yield
P/BVPS
P/BVPS adj
P/E Core
EV/EBITDA Core
EV/EBITA Core
EV/EBIT Core
EV/cap. employed
Investm ent ratios
CAPEX / sales
CAPEX / depreciation
CAPEX tangibles / tangible fixed assets
CAPEX intangibles / definite intangibles
Depreciation on intangibles / definite intangibles
Depreciation on tangibles / tangibles
2008
2009
2010
2011
2012
2013
2014
2015e
2016e
2017e
81.34
77.04
81.34
77.04
12.9
0.79
0.46
0.31
0.32
0.00
0.46
-0.26
0.79
0.46
0.46
0.47
2.88
0.29
0.69
2.3
7.3
2.1
185
2008
7.2
5.0
neg
0.25
4.1
7.0
10.5
0.0%
-11.2%
0.79
7.9
4.9
4.1
7.0
7.0
0.84
2008
2.6%
103%
45%
40%
33.4%
67.0%
81.85
78.80
83.00
77.65
10.6
0.45
0.16
-0.07
-0.24
0.00
0.83
0.71
0.45
0.16
0.16
-0.01
2.71
0.24
1.47
2.2
3.3
1.9
178
2009
neg
2.6
3.1
0.37
8.8
25.4
neg
0.0%
32.6%
0.80
9.3
neg
8.8
25.4
25.4
0.88
2009
0.3%
12.6%
31%
0.0%
36.0%
60.5%
105.74
93.05
106.41
92.39
8.68
0.68
0.44
0.44
0.12
0.00
0.10
0.07
0.68
0.44
0.44
0.27
2.72
0.76
-0.49
2.5
2.8
2.0
260
2010
20.1
23.8
34.7
0.27
3.5
5.4
5.4
0.0%
2.9%
0.90
3.2
9.1
3.5
5.4
5.4
0.89
2010
0.4%
13.4%
39%
0.2%
35.0%
64.5%
105.74
105.74
105.74
105.74
7.51
0.29
0.06
0.06
-0.11
0.00
0.51
0.17
0.29
0.06
0.06
0.05
2.60
0.56
-0.42
1.4
2.6
1.3
148
2011
neg
2.7
8.2
0.14
3.6
16.6
16.6
0.0%
12.2%
0.54
2.5
26.1
3.6
16.6
16.6
0.47
2011
4.5%
149%
78%
48%
32.1%
54.2%
105.74
105.77
105.77
105.74
8.33
0.54
0.27
0.27
-0.04
0.00
0.39
0.02
0.54
0.27
0.27
0.03
2.58
0.46
-0.36
1.7
1.7
1.3
179
2012
neg
4.3
>50
0.17
2.6
5.1
5.1
0.0%
1.0%
0.65
3.7
49.3
2.6
5.1
5.1
0.61
2012
2.7%
86%
65%
31%
44.0%
38.3%
106.23
108.93
109.06
106.11
8.08
0.65
0.42
0.42
0.18
0.13
0.67
0.40
0.65
0.42
0.42
0.23
2.64
0.61
-0.68
3.8
4.1
1.7
404
2013
21.6
5.7
9.6
0.39
4.9
7.6
7.6
3.3%
10.4%
1.4
6.3
16.7
4.9
7.6
7.6
1.6
2013
2.1%
75%
40%
31%
41.3%
55.8%
110.26
112.84
113.76
109.34
7.78
0.70
0.47
0.47
0.46
0.13
0.66
0.34
0.70
0.47
0.47
0.46
2.96
0.69
-0.89
4.7
6.2
3.8
518
2014
10.3
7.1
13.7
0.50
5.6
8.3
8.3
2.7%
7.3%
1.6
6.8
10.3
5.6
8.3
8.3
1.9
2014
2.2%
74%
44%
30%
41.1%
57.0%
110.26
110.26
110.26
110.26
10.2
0.82
0.52
0.52
0.38
0.13
0.48
-0.92
0.82
0.52
0.52
0.38
3.21
0.12
-0.43
5.1
6.2
4.7
557
2015e
13.2
10.5
neg
0.46
5.7
9.0
9.0
2.5%
-18.3%
1.6
43
13.2
5.7
9.0
9.0
1.6
2015e
2.2%
74%
43%
32%
43.2%
56.1%
110.26
110.26
110.26
110.26
11.3
0.99
0.66
0.66
0.50
0.13
0.74
0.04
0.99
0.66
0.66
0.50
3.58
-0.03
-0.34
5.1
6.2
4.7
557
2016e
10.2
6.8
>50
0.42
4.8
7.3
7.3
2.5%
0.8%
1.4
-173.23
10.2
4.8
7.3
7.3
1.4
2016e
2.2%
74%
43%
32%
43.2%
56.1%
110.26
110.26
110.26
110.26
12.3
1.20
0.84
0.84
0.64
0.13
0.92
0.21
1.20
0.84
0.84
0.64
4.09
-0.03
-0.40
5.1
6.2
4.7
557
2017e
7.9
5.5
24.6
0.38
3.9
5.7
5.7
2.5%
4.1%
1.2
-194.04
7.9
3.9
5.7
5.7
1.3
2017e
2.1%
73%
39%
32%
43.2%
56.1%
Source: ABG Sundal Collier, company data
02 July 2015
- 24 -
Columbus A/S
Disclosure
Analyst certification
I/We, Andrew Carlsen, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to
below, the views expressed in this report accurately reflect my/our personal view about the companies and securities covered in this report. I/We
further certify that I/we have not been, nor am/are or will be, receiving direct or indirect compensation related to the specific recommendations or
views contained in this report.
Stock ratings distribution
ABG Sundal Collier Ratings and Investment Banking by 01/07/2015
Sell
15%
Type of Rating
Buy
Hold
Sell
Buy
41%
Research Coverage
% of
Total Rating
41%
44%
15%
Investment Banking Clients (IBC)
% of
% of
Total IBC
Total Rating by Type
54%
7%
31%
4%
15%
6%
IBC: Companies in respect of which ABGSC or an af f iliat e has received compensat ion f or invest ment banking services wit hin t he past 12 mont hs
Hold
44%
Analyst stock ratings definitions
BUY = We expect this stock’s total return to exceed the market’s expected total return by 5% or more over the next six months.
HOLD = We expect this stock’s total return to be in line with the market’s expected total return within a range of 4% over the next six months.
SELL = We expect this stock’s total return to underperform the market’s expected total return by 5% or more over the next six months.
TRADING BUY = We expect this stock’s total absolute return to exceed 10% over the next six weeks.
TRADING SELL = We expect this stock’s total absolute return to fall below negative 10% over the next six weeks.
Analyst valuation methods
When setting the individual ratings, ABG Sundal Collier assumes that a normal total absolute return (including dividends) for the market is 8% per
annum, or 4% on a 6-month basis. Therefore, when we rate a stock a buy, we expect an absolute return of 9% or better over six months. We have
more rigorous guidelines for trading buys and trading sells on small cap stocks, defined as having a market capitalisation below USD 1.5 billion. For
trading buys on small cap stocks, we must identify a potential absolute return of 15% or more over the next six weeks. This more rigorous guideline
reflects the fact that the low trading volume for small cap stocks inhibits the ability to trade them within a narrow price band.
ABG Sundal Collier analysts publish price targets for the stocks they cover. These price targets rely on various valuation methods. One of the most
frequently used methods is the valuation of a company by calculation of that company’s discounted cash flow (DCF). Another valuation method is the
analysis of a company’s return on capital employed relative to its cost of capital. Finally, the analysts may analyse various valuation multiples (e.g.
the P/E multiples and the EV/EBITDA multiples) relative to global industry peers. In special cases, particularly for property companies and
investment companies, the ratio of price to net asset value is considered. Price targets are changed when earnings and cash flow forecasts are changed.
They may also be changed when the underlying value of a company’s assets changes (in the cases of investment companies, property companies or
insurance companies) or when factors impacting the required rate of return change.
Stock price, company ratings and target price history
Currency: DKK
Company: Columbus A/S
Current Recommendation: BUY
Current Target Price: 7.0
Date: 02/07/2015
Current Share Price: 5.1
8
7
7.0
6
5
4
3
2
1
B
0
02/01/2012
07/05/2012
10/09/2012
14/01/2013
20/05/2013
23/09/2013
27/01/2014
02/06/2014
06/10/2014
09/02/2015
15/06/2015
Source: Datastream & ABG Sundal Collier
02 July 2015
- 25 -
Columbus A/S
Disclosure
Important Company Specific Disclosure
The analyst(s) and members of the analyst’s household own 0 shares in Columbus A/S. Employees and Partners in ABG Sundal Collier own 0 shares
in Columbus A/S. ABG Sundal Collier has a delta position equal to 0 shares in Columbus A/S.
ABG Sundal Collier ASA or an affiliate has a corporate broking agreement at the time of this report’s publication.
ABG Sundal Collier ASA or an affiliate is not engaged in providing liquidity in the subject company’s securities at the time of this report’s
publication.
At the time of issuance of this report the analyst or a member of the analyst’s household did not serve as an officer, director or advisory board
member of the subject company.
ABG Sundal Collier is not aware of any other actual, material conflicts of interest of the analyst or ABG Sundal Collier of which the analyst knows or
has reason to know at the time of the publication of this report.
All prices are as of market close on 01/07/2015 unless otherwise noted.
Disclaimer
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Sundal Collier AB or ABG Sundal Collier Partners LLP and any of their affiliated or associated companies and their directors, officers,
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This report is provided solely for the information and use of professional investors, who are expected to make their own investment decisions without
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distribution only under such circumstances as may be permitted by applicable law. Research reports prepared by ABG Sundal Collier are for
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situation or needs of any specific recipient. ABG Sundal Collier accepts no liability whatsoever for any losses arising from any use of this report or its
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© Copyright 2015 ABG Sundal Collier ASA
02 July 2015
- 26 -
Columbus A/S
Coverage
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