London, UK, 21 November 2018

Edison issues outlook on CREALOGIX Group (CLXN)

CREALOGIX (CLXN) has established a strong track record of delivering software solutions to the banking industry in Switzerland and is transitioning the business to international markets. FY18 numbers were below expectations, mainly due to the faster than anticipated switch to SaaS, which spreads out revenue. International revenues represent 57% of the total (50% in FY17). CREALOGIX acquired the 80% remainder of Elaxy BS&S in July, have acquired Innofis to target the Middle Eastern markets earlier this year. The stable, cash-generative nature of Elaxy BS&S balances the higher-risk, stronger growth profile of Innofis. Given the attractive industry dynamics, and with CREALOGIX ideally positioned to capitalise on these, the shares look attractive on c 21x our FY20e EPS.

A DCF scenario incorporating 10% organic revenue CAGR over 2019-29e falling thereafter to 2%, operating margins tapering up to a level of 15% from FY22e, along with a 9% WACC, would suggest a valuation of CHF217, 68% above the current share price. Increasing the margin target to 20% lifts the valuation to CHF284, while reducing the margin to 10% cuts it to CHF150. These valuations are after the dilution impact from the outstanding convertible bonds.

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