Mensch & Maschine Software — FY21 outlook confirmed

Mensch & Maschine Software (DB: MUM)

Last close As at 27/03/2024

56.60

−1.20 (−2.08%)

Market capitalisation

971m

More on this equity

Research: TMT

Mensch & Maschine Software — FY21 outlook confirmed

After returning to growth in Q221, Mensch und Maschine (M+M) reported 15.3% y-o-y revenue growth and 10.6% EBIT growth for Q321. Management maintains its outlook for FY21 revenue growth of 6–10% and EPS growth of 12–21% and expects to report a record performance for the year in both sales and earnings.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Mensch und Maschine

FY21 outlook confirmed

Software

Deutsches Eigenkapitalforum 2021

2 November 2021

Price

€64.7

Market cap

€1,093m

Share price graph

Share details

Code

MUM

Shares in issue

16.9m

Net cash at end Q321, excluding lease liabilities

5.4

Business description

Mensch und Maschine Software (M+M) sells proprietary and Autodesk CAD/CAM software. It reports across two business lines: M+M Software (FY20: 31% of revenues, 62% of EBIT) and VAR (FY20: 69% of revenues, 38% of EBIT). The company has operations in Europe, the United States and Asia-Pacific.

Bull

Largest European Autodesk value-added reseller.

High-margin, internally developed software.

Loyal workforce.

Bear

Reliant on Autodesk’s technology development and channel strategy.

Management owns more than 50% of the company.

Large exposure to DACH economies.

Analyst

Katherine Thompson

+44 (0)20 3077 5730

After returning to growth in Q221, Mensch und Maschine (M+M) reported 15.3% y-o-y revenue growth and 10.6% EBIT growth for Q321. Management maintains its outlook for FY21 revenue growth of 6–10% and EPS growth of 12–21% and expects to report a record performance for the year in both sales and earnings.

Q3 sees revenue and EBIT growth

Group revenue growth was -8.0% in Q121, 23.1% in Q221 and 15.3% in Q321, resulting in 9M21 revenue growth of 7.4% y-o-y to €194m. Compared to 9M19, revenue was 11.3% higher. M+M reported the highest ever Q3/9M revenue and operating profit. Operating profit of €5.6m for Q321 was 10.6% higher year-on-year and for 9M21 was 10.7% higher year-on-year. The Q321 operating margin of 9.6% was 0.4pp lower than in Q320 and the 9M21 margin of 12.4% was 0.3pp higher year-on-year.

Both businesses performing well

The Software business had already returned to year-on-year revenue growth in Q420, and this accelerated to 7.6% in Q121, 17.5% in Q221 and 7.8% in Q321. In Q221, the VAR business reported revenue growth for the first time since Q120, with revenue up 26.0% y-o-y in Q221 and 19.2% in Q321. The 9M21 operating margin of 24.9% for the Software business was flat versus 9M20; the VAR 9M21 operating margin of 6.7% was 0.3pp higher year-on-year. Management reconfirmed its outlook for FY21, guiding to revenue growth of 6–10% (which implies Q421 y-o-y revenue growth of 2.0–17.4%), EBIT growth of 12–21% (range €35.5–37.5m), EPS of €1.25–1.35 and DPS of €1.15–1.20.

Valuation: Range-bound

Consensus forecasts have been upgraded since we last wrote in July but are still within management’s guidance, albeit closer to the upper end of the range. The share price has been relatively range-bound year-to-date; in our view, further upgrades are required to break out of this trend. The stock trades at a discount to peers on EV-based valuation metrics and substantially in line on a P/E basis, reflecting the fact that its operating margins are at the lower end of its peer group, in our view. The stock is supported by a dividend yield of c 2%, which is at the top end of its peer group.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/19

245.9

26.3

0.99

0.85

65.4

1.3

12/20

244.0

29.8

1.12

1.00

58.0

1.5

12/21e

265.5

35.8

1.32

1.20

49.0

1.9

12/22e

294.8

42.2

1.56

1.38

41.5

2.1

Source: Mensch und Maschine investor relations pages.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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