SpareBank on Mintra – a highly potential public to private candidate

After the strongest quarter ever in Q1, Mintra reported another strong Q2 beat. Below is a summary of the broker reports.

I wrote here about the investment case a few weeks ago.

We are long Mintra.

Pareto Securities Report

Q2 EBIT 34% ahead of expectations
Mintra reports Q2 EBITDA of NOK 24m (22% ahead of PAS est.), EBIT of 18m (34% ahead of PAS) and FCF of 7m (ahead of PAS at 1m). The main reason for the beat is related to lower-than-expected cost, partly explained by improved revenue mix towards higher margin services (eLearning up, Consultancy down). The order intake also continued to grow, up 8% y/y to NOK 39m, and should convert to revenue growth over the coming quarters, which has been moderate so far this year (Q2’22 revenues up 1% y/y). Looking at valuation, it’s difficult to find a lower priced tech stock in the Nordics – so far this year (H1), Mintra has already generated ~8% of its EV and on run-rate multiples it’s priced at 6x EV/EBITDA and 8x EV/EBIT. We believe growth will pick up over the coming quarters and combined with stellar profitability, this is a stock to own in our view. Buy reiterated TP – 7.0 NOK

SpareBank Report

Mintra (2Q22 report): Earlier today, MNTR delivered its 2Q22 figures where we are interested in the 1) organic growth, 2) deviations on OpFCF and 3) any comments in the outlook with regards to signs of pent-up demand within energy in particular. Following the report, trailing 12m EBITDA margin stand at 29%, which is what we model for the full year and hence, we are likely to increase our estimates some 5-10% and look into our current Neutral recommendation. The organic growth is not impressive (low single digit), but given the 2023 double digit OpFCF yield valuation on the current share price and its new owners, we see it as a potential public to private candidate that at least has solid margins (trailing 12m OpFCF margin of 22%).

Revenues landed at NOK62.6m, which was 5% above our NOK59.9m estimate. That correspond to a organic growth of 1%, a sequential decline from the organic growth of 3% in 1Q21.

With the operational scalability in its business model (e-learning and software primarily), OpFCF landed at NOK21.3m, which also was above our NOK16m estimate, driven by both lower than expected opex (lower opex in 2Q vs. 1Q due to holiday pay in Norway), but also lower capex, which landed at 4.4% to sales. If the company intends to grow double-digit, we believe below 5% capex to sales is a too low level and as such, we put more emphasis to the beat on EBITDA, which came in at NOK24m vs. our NOK21m estimate.

Limited hard facts where given in the outlook section, but we note that the beat on EBITDA was not related to changes in gross margin (87%) and hence, related to recurring opex improvements (to right size the company towards its low single digit organic growth). We also note that reporting will be changed from quarterly to a six month basis. Coupled with the fact that the company is net cash of NOK115.5m, trades at 2023e EV/EBITDA of 6.7x and an OpFCF yield of 11.2% on our current estimates with Ferd as the largest owner – we see MNTR as a highly potential public to private candidate.

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The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

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