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Original-Research: USU Software AG - from NuWays AG

25.10.2024 / 09:01 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of EQS
Group AG.
The issuer is solely responsible for the content of this research. The
result of this research does not constitute investment advice or an
invitation to conclude certain stock exchange transactions.

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Classification of NuWays AG to USU Software AG

Company Name: USU Software AG
ISIN: DE000A0BVU28

Reason for the research: Update
Recommendation: Buy
from: 25.10.2024
Target price: EUR 30.00
Target price on sight of: 12 months
Last rating change:
Analyst: Philipp Sennewald

Revisiting USU: An appealing special situation

Half a year ago we put out our last piece on USU, advising investors to sell
the shares at the delisting offer price of EUR 18.50, in order to avoid having
a highly illiquid asset in the portfolio. Meanwhile, the shares have been
delisted from the Frankfurt Stock exchange as well as most regional
exchanges with the exception of the Hamburg Stock Exchange.

Yet, things took a turn a couple of weeks ago, when the company announced
that Thoma Bravo (US-based private equity firm) would take over a majority
stake in USU's product business. According to people familiar with the
matter, USU will keep a minority share of c. 25% after the deal, which
values the product business at about EUR 200-300m.

Mind you, the delisting offer price of EUR 18.50 per share valued the whole
company, including the service business (32% of sales, 14.1% EBIT margin in
FY '23; 20.9% in Q1 '24), at an EV of EUR 188m. Also, keep in mind that the
depressed valuation at the time of the delisting offer was mainly due to a
weak development of licensing sales, which caused the EBIT margin of the
product business to drop to 4.4% (vs. 11.8% in FY '22). In Q1, product
business EBIT margin however recovered to 7.4%.

Following the news, shares surged at the Hamburg Stock Exchange, reaching
levels of around EUR 22 per share. However, taking the lower end of the
valuation of the Thoma Bravo deal as a basis of our valuation, this is not
at all reflecting the intrinsic value of the company, as it values the
service business at only EUR 20m, or 3x EBIT, which is undeniably cheap for a
growing business with recurring revenues. Taking into account the mid-point
of the valuation, the service business is valued at a negative EV (see
graphic on p. 2).

According to our peer group valuation however, we derive at an average
EV/EBIT of 14x, which would translate into a fair EV for the service
business of EUR 98m for FY '24e (eNuW: EUR 7.0m EBIT).

Against this backdrop, we update our rating to BUY with a new PT of EUR 30
based on our SOTP valuation, which is also in line with our recommendation
prior to the delisting offer. In our view, this is currently one of the most
appealing special situation cases in the DACH region. Notably, this takes
into account the lower end of the supposed deal range, thus being very
conservative.

You can download the research here: http://www.more-ir.de/d/31115.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
++++++++++
Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss
bestimmter Börsengeschäfte.
Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben
analysierten Unternehmen befinden sich in der vollständigen Analyse.
++++++++++

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2015885 25.10.2024 CET/CEST

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