Pareto: Mintra has ~80% customers in ‘oil, gas and maritime’, which are earning more money than ever. So is Mintra

Mintra is reporting best quarters in its history. The trend is going to continue. At the same time Mintra is the cheapest in Nordic Software Universe. Growth is going to accelerate in H2. We are long Mintra

Summary of Pareto note from today

Attractive counterparty exposure at <10x EBIT 
In the tech space, ‘market tailwind’ and ‘favorable customer exposure’ are sentences not used frequently these days. However, Mintra has an ~80% customer exposure towards ‘oil, gas and maritime’, which are companies earning more money than ever. This trickles down on Mintra, which has already this year (H1) generated ~7% of current EV in FCF – valuation not possible to find elsewhere in the Nordic Software Universe. In addition, growth will pick up going forward, and we believe it’s just a matter of time before Mintra’s stock price is rerated up. BUY/TP NOK 7 reiterated – please see updated slides. 

In H1, Mintra has already generated ~7% of current EV in FCF …
[With skyrocketing energy prices and shipping rates, Mintra’s customers are earning more money than ever (~80 of its customers works within oil, gas and shipping). This trickles down on Mintra, and so far this year it has generated NOK ~50m in FCF. This is almost 2x last year’s total result, and equals ~7% of the current EV (NOK ~680m)

… and in H2, it will add growth to the mix
Although stellar cash generation, growth is yet to pick up as H1 revenues were up only ~2% y/y, which we believe are one of the key reasons for why the stock hasn’t rallied post the Q2 report. However, this will pick up over the coming quarters. Most of Mintra’s customers pay upfront, which has a positive impact on cash flow (WC effect), but has a lagging effect on reported revenues. Combined with Mintra’s order intake being up ~14% y/y in H1, we are confident it just a matter of time before reported revenues gets a boost as well.

Trading at 7x run-rate EV/EBITDA – Buy reiterated
With the rare combination of market tailwind, favorable customer exposure and stellar cash generation, we find the current low valuation puzzling. On run-rate Q2 figures, Mintra trades at ~7x EV/EBITDA and ~9x EV/EBIT, levels not possible to allocate elsewhere in the Nordic Software Universe. In addition, annual FCF yield of +10% and a net cash position, lays the potential for continued M&A or cash distribution. We believe it’s just a matter of time before Mintra’s stock price will be rerated higher, either by the stock market or by a private investor taking it off the stock exchange. BUY/TP NOK 7 reiterated

Disclosure: 

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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