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III - Information Services Group


ValueSlant
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  • 3 years later...

There's and old thread , but  lot has changed since then.

 

This presentation give you an idea of what they do http://noble.mediasite.com/mediasite/Play/c5f2e1724866407781dc8271fdbc8fd21d?catalog=4c6a20e5-5fc7-46ee-917e-3aa3a03fba23

 

They are the middle man between IT providers and companies , they help clients to save money,once the contract is signed they supervise the whole  project during its life ( recurring revenues), they also provide market analytics . It is a good business

 

key points:

 

-they have reduced leverage to 1x EBITDA

-they are growing revenues at 7%-10%--> EBITDA grows at 2x revenues due to operating leverage

-They are repurchasing shares  and they issued an special dividend in January

-The CEO ows a 10% stake.

-They are growing recurring revenues, they target them to be 50% of total revenues by 2017

- this year they are going to do around 27M-30M  EBITDA and, and  17M-20M FCF

 

Valuation ( III:nasdaq - 4,85$)

 

- They trade at 6x EV/EBITDA, but comps trade 10x-13x EV/EBITDA

- P/FCF is 9x for 2015, comsp trade for 15x-20x ( huron, fti, hacket...)

      EBITDA 2015 = 28M  ( 4m Capex, 2M interest, 5m tax )= 17M FCF

-IF they hit their targets of 40M EBITDA by 2017 at 9x with buybacks, this is a 12$-10$ stock

-Analysts are coming, they started coverage in  the last weeks with PT between 6$ and 8$

- For example Hackett has the same size, ROIC and same trends and trades for 11x-12x EV/EBITDA...

 

Negatives:

 

-currency headwinds for 2015, but once they report in 2016 it will pass. Excellent Q1 results went unnoticed by the market due to currency effects...

-they did poorly in 2008 , but there was a different management team and less recurring revenue. III was set up like an SPAC vehicle they had problems integrating things. Under the new ceo they haven't make new acquisitions in the last 3 years, they are open to it but no like in the past...

-As any other consulting firm results are volatile Q over Q, FCF generation is also volatile due to working capital effects

 

Thank you

 

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