OCTOBER 2012 - ANALYSIS OF GOWEX 1 Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales GOWEX is a company which operates in the telecommunications sector, and which has a position as a leading company in the Spanish market in installing and managing networks for WiFi access points. GOWEX is listed on the Alternative Stock Market (Mercado Alternativo Bursátil, MAB) of the Spanish Stock Market. The company has focused its business model towards the Wireless division, which accounts for 86% of the company's gross margin, as against the telecommunications market, which was the company's original core business. GOWEX is a pioneering company, which so far does not face significant competition in Spain, and whose international presence is reporting gradual growth. The main threat to the company is the possibility of major operators entering the market. Since 2008, the company has reported recurrent and growing profits at all levels of the Income Statement, and reported important growth in 2011 (+34% in revenue, +76% in EBITDA and +41% in net profit). Business margins and profit indicators are high. This positive trend has continued in the first half of 2012, with heavy growth in both revenue (+60% against the first half of 2011) and in profits (+62% in EBITDA and +70% in net profit). GOWEX commands a healthy financial position, with low debt (€12.0 million) and high liquidity (€31.4 million), so that the net cash position stands at €19.4 million. AFI has carried out a valuation of GOWEX which shows a value of €12.55/ share, meaning that the target price has risen 22% compared to our report in May 2012, offering upside potential of 12% from the current share price. However, our outlook is less favourable than that published by the company. The implicit ratios in the valuation (EV/ EBITDA 2012e x6.3 and PER 2012e x10.1) are compelling, in our opinion, for a company with GOWEX's growth potential. In short, we believe that GOWEX is an attractive investment opportunity, given its appropriate strategic positioning, its recurrent capacity to generate cash and the liquidity available to finance its growth process at international level. The valuation of €12.55/ share is the central scenario of a broad range of prices, considering the volatility which could affect GOWEX's results due to the nature of its business. Over the next few months, the share price could be affected by M&A transactions, relating to the rights issue under way and its positioning in the American market through the issue of ADRs. BASIC LISTING DATA (22 nd October 2012) TICKER GOW PRICE (EUR) 11.23 SECTOR TELECOMMUNICATIONS No. OF SHARES ISSUED (No. SHARES) 12,934,268 MARKET CAP. (EUR) 143,823,609 FREE FLOAT (%) 25.3% AVERAGE DAILY VOLUME 2012 (No. SHARES) 11,047 MAX / MIN PRICE 12 MONTHS (EUR) 11.30 / 4.33 COMPARATIVE PERFORMANCE (GOWEX vs. IBEX 35) 3M 6M 12M YTD ABSOLUTE 88.0% 84.0% 129.2% 135.9% RELATIVE 68.7% 69.5% 139.3% 144.7% KEY FINANCIAL FIGURES (EUR) 2008 2009 2010 2011 SALES 24,191,422 35,179,613 49,640,989 66,697,902 EBITDA 2,307,690 5,518,174 9,371,277 16,517,015 NET PROFIT 862,191 2,876,561 5,130,355 7,220,340 ROE 9.1% 23.0% 22.4% 20.5% DATA PER SHARE (EUR) 2009 2010 2011 DIVIDEND PER SHARE 0.0000 0.0784 0.0783 EARNINGS PER SHARE 0.29 0.45 0.57 VALUATION RATIOS (x / %) 2010 2011 2012e PER (PRICE/ EARNINGS) 13.5 x 10.1 x 10.1 x EV/ EBITDA (MARKET CAP. + NET DEBT/ EBITDA) 3.1 x 2.6 x 6.3 x PRICE/ BOOK VALUE 3.0 x 2.1 x 3.2 x DIVIDEND YIELD 1.54% 3.31% 0.70% Source: Factset GOWEX vs. IBEX 35 since start of trading
About GOWEX (GOW-MAB, ALGOW-NYSE Alternext) http://www.gowex.com/en/investors-shareholders/
GOWEX (GOW-MAB, ALGOW-NYSE Euronext) it’s been 13 years operating in the Telecommunication sector and it’s currently leading the creation of WiFi Cities offering Free & Premium WiFi connectivity in streets and transportation. The company is now exporting the innovative business models in many cities in Europe, Latin America, Asia and in emerging countries.
In 2010, it has become the first and only Spanish SMB to make a “dual listing”, publicly traded in the MAB (GOW) and the NYSE-Euronext (ALGOW). The company's total revenue in 2011 amounted to 66,7 million euros. On July 2011 GOWEX subscribed a 7 million € capital increase with a 100 % over-demand (doubling expectations).
With offices in Madrid, Burgos, Buenos Aires, London, San José (Costa Rica), Paris and Shanghai, GOWEX develops a sustainable business model in their WiFi networks, based in efficient and technical quality of their patented platforms: The Roaming platform, which allows users to connect freely in all the cities, the Geolocalization Content and Advertisement platform, which provides a financing business through marketing and advertisement agreements.
In 2011, GOWEX joined the Wireless Broadband Alliance and received a prize for the “Best Web Company” in the Internet Day
In February 2012, Jenaro Garcia GOWEX CEO, received the “Entrepreneur of the Year Award” by Ernst & Young in the category of Innovation
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Transcript
OCTOBER 2012 - ANALYSIS OF GOWEX 1
Analyst
Pablo Mañueco Galindo
Analistas Financieros Internacionales
GOWEX is a company which operates in the telecommunications sector, and
which has a position as a leading company in the Spanish market in installing and
managing networks for WiFi access points. GOWEX is listed on the Alternative
Stock Market (Mercado Alternativo Bursátil, MAB) of the Spanish Stock Market.
The company has focused its business model towards the Wireless division, which
accounts for 86% of the company's gross margin, as against the
telecommunications market, which was the company's original core business.
GOWEX is a pioneering company, which so far does not face significant
competition in Spain, and whose international presence is reporting gradual
growth. The main threat to the company is the possibility of major operators
entering the market.
Since 2008, the company has reported recurrent and growing profits at all levels of
the Income Statement, and reported important growth in 2011 (+34% in revenue,
+76% in EBITDA and +41% in net profit). Business margins and profit indicators
are high.
This positive trend has continued in the first half of 2012, with heavy growth in
both revenue (+60% against the first half of 2011) and in profits (+62% in EBITDA
and +70% in net profit).
GOWEX commands a healthy financial position, with low debt (€12.0 million) and
high liquidity (€31.4 million), so that the net cash position stands at €19.4 million.
AFI has carried out a valuation of GOWEX which shows a value of €12.55/ share,
meaning that the target price has risen 22% compared to our report in May
2012, offering upside potential of 12% from the current share price. However,
our outlook is less favourable than that published by the company. The implicit
ratios in the valuation (EV/ EBITDA 2012e x6.3 and PER 2012e x10.1) are
compelling, in our opinion, for a company with GOWEX's growth potential.
In short, we believe that GOWEX is an attractive investment opportunity,
given its appropriate strategic positioning, its recurrent capacity to generate cash
and the liquidity available to finance its growth process at international level.
The valuation of €12.55/ share is the central scenario of a broad range of
prices, considering the volatility which could affect GOWEX's results due to
the nature of its business. Over the next few months, the share price could
be affected by M&A transactions, relating to the rights issue under way and
its positioning in the American market through the issue of ADRs.
BASIC LISTING DATA
(22n d
October 2012)
TICKER GOW
PRICE (EUR) 11.23
SECTOR TELECOMMUNICATIONS
No. OF SHARES ISSUED (No. SHARES)
12,934,268
MARKET CAP. (EUR) 143,823,609
FREE FLOAT (%) 25.3%
AVERAGE DAILY VOLUME 2012 (No. SHARES)
11,047
MAX / MIN PRICE 12 MONTHS (EUR)
11.30 / 4.33
C O M P A R A T I V E P E R F O R M A N C E ( G O W E X v s . I B E X 3 5 )
3M 6M 12M YTD
ABSOLUTE 88.0% 84.0% 129.2% 135.9%
RELATIVE 68.7% 69.5% 139.3% 144.7%
K E Y F I N A N C I A L F I G U R E S ( E U R )
2008 2009 2010 2011
SALES 24,191,422 35,179,613 49,640,989 66,697,902
EBITDA 2,307,690 5,518,174 9,371,277 16,517,015
NET PROFIT 862,191 2,876,561 5,130,355 7,220,340
ROE 9.1% 23.0% 22.4% 20.5%
D A T A P E R S H A R E ( E U R )
2009 2010 2011
DIVIDEND PER SHARE 0.0000 0.0784 0.0783
EARNINGS PER SHARE 0.29 0.45 0.57
V A L U A T I O N R A T I O S ( x / % )
2010 2011 2012e
PER (PRICE/ EARNINGS) 13.5 x 10.1 x 10.1 x
EV/ EBITDA (MARKET CAP. + NET DEBT/ EBITDA)
3.1 x 2.6 x 6.3 x
PRICE/ BOOK VALUE 3.0 x 2.1 x 3.2 x
DIVIDEND YIELD 1.54% 3.31% 0.70%
Source: Factset
GOWEX vs. IBEX 35 since start of trading
Gowex vs. IBEX 35 since start of
trading
OCTOBER 2012 - ANALYSIS OF GOWEX 2
Analyst
Pablo Mañueco Galindo
Analistas Financieros Internacionales
CONTENTS
Description of the company ..................................................................................................................................................... 3
Analysis of GOWEX business ................................................................................................................................................. 4
Profit and loss account ............................................................................................................................................................. 11
Profit and loss account 2008 - 1H 2012 ................................................................................................................................ 11
Result of valuation .................................................................................................................................................................... 21
Flow to be discounted 3,407 9,039 16,399 21,911 230,161
Net Asset Value (VAN) of flows 144,230
(+) Long term financial investments 414
Enterprise Value 144,644
(+) Net financial position 1H12 19,391
(+) Operating free cash flow 2H12 (966)
(+) Net financial position close 2012e 18,425
(-) Deferred tax liabilities (2,366)
Equity Value 160,703
No. shares in circulation* (in shares) 12,807,089
Value per share (in €) 12.55
Source: AFI * Subtracting the number of treasury shares
According to the valuation carried out, the value of GOWEX's equity stands at €160.7 million. Estimated value per share is €12.55 /
share. The estimated valuation of GOWEX shares is above the company share price on the date this report was drawn up (22 October
2012), which is €11.23 / share, offering upside potential of 12%.
The estimated valuation of GOWEX at €12.55 / share implies an implicit EV/ EBITDA ratio of 6.3x and a PER of 10.1x, calculated on
the estimated 2012 results, which in our opinion is reasonable for a company with significant growth potential.
As far as peers are concerned, the implicit EV/ EBITDA ratio in the Boingo share price at 22 October 2012 amounts to 6.0x, in line with
that of GOWEX. iPass expects to report negative results in 2012, so we have not been able to calculate a valuation ratio.
OCTOBER 2012 - ANALYSIS OF GOWEX 22
Analyst Pablo Mañueco Galindo
Analistas Financieros Internacionales
We have also carried out a sensitivity analysis to the Ke discount rate, and have increased it by and reduced it by 10% and 20%. The
share price would be in the range of €10.17-16.27 / share.
SENSITIVITY ANALYSIS TO Ke ( Amounts in thousands of €)
ke WACC EV EqV €/ share
21.7% 18.5% 114,166 130,226 10.17
19.9% 17.0% 127,876 143,935 11.24
18.1% 15.6% 144,644 160,703 12.55
16.3% 14.1% 165,572 181,632 14.18
14.5% 12.7% 192,362 208,421 16.27
Source: AFI
OCTOBER 2012 - ANALYSIS OF GOWEX 23
CREATED BY:
Pablo Mañueco Galindo
This report has been prepared by Pablo Mañueco Galindo, Partner of Analistas Financieros Internacionales (hereinafter, AFI). In drawing up this report, the author has made use of information provided by Gowex, and public information concerning the corresponding business sectors. AFI has not verified the accuracy of the information provided. Therefore, AFI shall not be held responsible for the accuracy of the figures used or the consequences of this report. The scope of our work does not include revising and assessing the company's fiscal, legal or labour situation, nor its accounting records. Thus the risks, were they to exist, arising from the aforesaid situations, have not been taken into account in our valuation exercise. The opinions and recommendations set out in this report cannot be considered to be an offer for the purchase or sale of shares. AFI does not accept any liability whatsoever arising from the content of this document.
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