BTS: 2020 investments are starting to pay off - ABG

Exiting the pandemic in a stronger position
H1’21 EBITA already above 2019, guidance upgraded
‘21-’23e EBITA up 4-12%, trades at 25.4x ’22e EV/EBITA

BTS decided during the pandemic to not cut costs and protect profits, but to keep employees and invest in a transformation to digital and virtual delivery. The reason was to become a stronger company when the pandemic eases and take market share from more defensive competitors. This was clearly the right decision and investments have now started to pay off. According to BTS, the market is showing a strong tailwind from customers looking for help in transforming and creating stronger cultures post the pandemic. BTS also says that it is gaining market share, explaining sales and EBITA growth in H1’21 vs the record year of 2019. We find that impressive. Our analysis from Glassdoor data (employee satisfaction) shows that: 1) BTS still performs better than global management consulting peers in overall satisfaction, company culture and recommendation to friend measures, 2) CEO approval of 99% supports management’s capabilities and standing within the organisation, and 3) 81% of employees sees a positive business outlook (74% for peers).

We raise our 2021-23 sales estimates by 3% and EBITA by 4-12% post the Q2 beat, although we are careful not to extrapolate the margin beat too much. We argue that the almost pure virtual delivery is low cost and that a normalisation to a mix of physical and virtual deliveries should increase operating costs. BTS raised its 2021 guidance on EBITA to be “better than 2019” vs the previous “in line with 2019” and we estimate an 11% increase this year with upside potential to estimates in our view.

We find it encouraging that BTS is exiting the pandemic in a stronger position and that it has already reached a higher EBITA level than it achieved in 2019, which bodes well for continued earnings growth. The share trades on our new estimates at 25.4x 2022e EV/EBITA and we estimate a 9% EBITA CAGR, with the base year 2019, up until 2023.

Länk till analysen i sin helhet: https://www.introduce.se/foretag/bts-group/Equity-research/2021/8/bts-group---2020-investments-are-starting-to-pay-off/