^ Original-Research: USU Software AG - from NuWays AG

25.10.2024 / 09:01 CET/CEST Dissemination of a Research, transmitted by EQS News - a service of EQS Group AG. The issuer is solely responsible for the content of this research. The result of this research does not constitute investment advice or an invitation to conclude certain stock exchange transactions.

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Classification of NuWays AG to USU Software AG

Company Name: USU Software AG ISIN: DE000A0BVU28

Reason for the research: Update Recommendation: Buy from: 25.10.2024 Target price: EUR 30.00 Target price on sight of: 12 months Last rating change: Analyst: Philipp Sennewald

Revisiting USU: An appealing special situation

Half a year ago we put out our last piece on USU, advising investors to sell the shares at the delisting offer price of EUR 18.50, in order to avoid having a highly illiquid asset in the portfolio. Meanwhile, the shares have been delisted from the Frankfurt Stock exchange as well as most regional exchanges with the exception of the Hamburg Stock Exchange.

Yet, things took a turn a couple of weeks ago, when the company announced that Thoma Bravo (US-based private equity firm) would take over a majority stake in USU's product business. According to people familiar with the matter, USU will keep a minority share of c. 25% after the deal, which values the product business at about EUR 200-300m.

Mind you, the delisting offer price of EUR 18.50 per share valued the whole company, including the service business (32% of sales, 14.1% EBIT margin in FY '23; 20.9% in Q1 '24), at an EV of EUR 188m. Also, keep in mind that the depressed valuation at the time of the delisting offer was mainly due to a weak development of licensing sales, which caused the EBIT margin of the product business to drop to 4.4% (vs. 11.8% in FY '22). In Q1, product business EBIT margin however recovered to 7.4%.

Following the news, shares surged at the Hamburg Stock Exchange, reaching levels of around EUR 22 per share. However, taking the lower end of the valuation of the Thoma Bravo deal as a basis of our valuation, this is not at all reflecting the intrinsic value of the company, as it values the service business at only EUR 20m, or 3x EBIT, which is undeniably cheap for a growing business with recurring revenues. Taking into account the mid-point of the valuation, the service business is valued at a negative EV (see graphic on p. 2).

According to our peer group valuation however, we derive at an average EV/EBIT of 14x, which would translate into a fair EV for the service business of EUR 98m for FY '24e (eNuW: EUR 7.0m EBIT).

Against this backdrop, we update our rating to BUY with a new PT of EUR 30 based on our SOTP valuation, which is also in line with our recommendation prior to the delisting offer. In our view, this is currently one of the most appealing special situation cases in the DACH region. Notably, this takes into account the lower end of the supposed deal range, thus being very conservative.

You can download the research here: http://www.more-ir.de/d/31115.pdf For additional information visit our website: www.nuways-ag.com/research

Contact for questions: NuWays AG - Equity Research Web: www.nuways-ag.com Email: research@nuways-ag.com LinkedIn: https://www.linkedin.com/company/nuwaysag Adresse: Mittelweg 16-17, 20148 Hamburg, Germany ++++++++++ Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss bestimmter Börsengeschäfte. Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse. ++++++++++

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2015885 25.10.2024 CET/CEST

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Quelle: dpa-Afx