In anticipation of the 1H13 results and after the recent share price weakness we increase our rating form Accumulate to BUY while maintaining our € 58 (64,24 USD, -1,92%) Price.
As a reminder, EVS 1Q13 revenues amounted to € 32.8m (+9.2%). Sports sales (82.8% of total) increased by 19.3% to € 27.2m thanks to new OB and SportsCenter projects. ENM (Entertainment, News and Media) 1Q13 sales (17.2% of total) decreased 22.5% to € 5.6m. EVS order intake in ENM however more than doubled in 1Q13 (+€ 7.0m), on the back of significant orders (new wins and upgrades). EVS experiences strong momentum in APAC, partly offset by weaker America’s and stable EMEA. The order book (to be invoiced in 2013) at 10 May 2013 amounted to € 32.8m.
For 2Q13 we are banking on € 29.1m sales (consensus is at € 29.7m) and a 22.6m gross profit (77.5% gross profit margin). We bank on € 10.1m 2Q13E EBIT (34.6% EBIT-margin). Consensus is aiming for respectively 22.9m gross profit (77.0% margin) and € 10.5m EBIT (35.3%). We (and consensus) are aiming at € 7.2m net profit. We expect an order book of € 37.0m to be invoiced in the current year (consensus is at € 34.7m) and a nice € 17.7m orders for 2014 and beyond. This € 17.7m included the contract relating to the FIFA World Cup in Brazil in 2014. The deal covers equipment for the live and near-live production infrastructure of the event including video production servers, live replays, slow-mo and on-the-fly editing solutions, central media archive, advanced content management and media sharing workflowsystems. The rental value of this contract is around € 5m. Around 10% of the value of the contract relates to an event hosted in Brazil in June 2013 (Confederation Cup) and being used as a test-event. The remainder will be booked in 2Q14.
In the 2Q13 results, we will look for evidence that (while sport is still a significant part) less cyclical segments (i.e. Entertainment, News and Media) are promised to grow more rapidly. Recall that EVS’ order intake in ENM already more than doubled in 1Q13 (+€ 7.0m), on the back of significant orders. We are confident that EVS’ “Speed to Air” strategy is an answer to TV stations’ desire to move to new and more efficient production workflows, benefiting from the flexibility of tapeless server technologies.
Our positive stance on EVS is based on the expected investments in TV stations: the transition from standard definition (SD) to HD, the remote production, more TV demand in emerging markets, the look for catching audiences on “second screens”, and an increased focus of broadcasters/IPTV and advertisers on large popular sport broadcasts to gain new viewers.
2H13 should be better than 1H13 as it shall start benefiting from the traction of big sporting events in 2014 as well as the first impacts of the new strategy.
We increase our rating to BUY (from Accumulate) and maintain our € 58 TP.