Here are the key takeaways from our annual Paris conference in Paris (CEO attendance):
Data centre currently not for sale: In the past years, discussions intensified around the possible disposal of the company's data centre in Hamburg. The asset has a book value of € 15m (eNuW), implying significant hidden reserves given an estimated market value of € 40m, (at 70% utilization). Management's goal is to rent out the remaining computing power by YE26. With this, the market value should increase to € 60m (eNuW). Mr Rixen stated that it could be sensible to keep the asset, given the increased demand of German SMEs for domestic computing power due to data sovereignty discussions. In our view, this could pose as a strategic advantage for QBY going forward, which is seen to result in increased pricing power given the general supply constraints.
Besides this, capital allocation was in the centre of discussions, driven by the company's net cash position of € 40m (eNuW for FY25). Here, management provided a clear priority ranking:
M&A: Following the example set with the logineer transaction (via JV with Roehlig Logistics), the company aims to enter new verticals via acquiring industry expertise, handing them a competitive advantage over more generalist peers. To be more precise, QBY is seen to focus on the energy and healthcare sector. The CEO further underscored that targets should be in the € 10-20m sales range and 10% EBITDA margin ballpark. Multiples in the sector are currently compressing and are now seen to be in the range of 5-6x EV/EBITDA. Note that future M&A is not reflected in our model, which why any transaction would provide upside to our estimates. While we expect no deal to be announced during the remainder of FY25, H1'26e is likely to provide newsflow in this regard.
Share buy-backs: From FY26 onwards, management intends to launch a share buy-back program, capitalizing on the depressed valuation of the shares. While this should deliver solid EPS accretion for investors, it would also provide a possible M&A currency. On the other hand, we see the risk of further reducing liquidity, which could hinder the stock from realizing its fair value.
Dividends. Management currently prioritizes share buy-backs over dividends, given the more attractive return at the current valuation - a stance we consider sensible. While we would not rule out future payouts, we do not include them in our estimates for now.
Aside from this, current trading remains on track, with management confident regarding FY25 and mid-term outlook. H1'25 already showed encouraging progress: gross margin rose to 20% (Q2), consulting margins more than doubled to 15%, and EBITDA rose to € 2.7m in Q2, underlining the shift toward higher-margin business and the benefits of the transformation.
Going forward, margin expansion will be driven by AI integration (incl. the new "Private Enterprise AI" platform), expanded Security services (Cyber Defence Center Riga), increased near- and offshoring (already at 17%, with =20% FY25 target), and a focused industry-specific business model.
Reiterate BUY with an unchanged PT of € 1.30 based on DCF.
ISIN: DE0005137004
