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TXT reported H118 revenue growth of 6% y-o-y; investments in R&D and sales and marketing ahead of this growth rate resulted in margin pressure in H118. TXT has completed the acquisition of a majority stake in Cheleo and we have factored this into our forecasts from 1 August. The combination of slightly lower growth forecasts for TXT Next, a one-off tax credit and the higher margin growth of Cheleo results in normalised EPS upgrades of 16% in FY18e and 24% in FY19e. After paying for Cheleo, we estimate the company has funds of more than €70m to invest in accretive acquisitions in the transportation and fintech markets.

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