13 April 2015
TomTom
Netherlands/Software & Computer Services
Analyser
SOFTWARE & COMPUTER SERVICES
TomTom (Buy) Nokia’s sale of map business shows TT is
Buy
Nokia’s sale of map business shows TT is undervalued
Recommendation unchanged
8.18
Share price: EUR
closing price as of 10/04/2015
Target price: EUR
9.00
Target Price unchanged
Reuters/Bloomberg
TOM2.AS/TOM2 NA
Market capitalisation (EURm)
Current N° of shares (m)
Free float
1,820
223
53%
Daily avg. no. trad. sh. 12 mth
Daily avg. trad. vol. 12 mth (m)
Price high 12 mth (EUR)
Price low 12 mth (EUR)
Abs. perf. 1 mth
Abs. perf. 3 mth
Abs. perf. 12 mth
5,186,578
40,107
8.18
4.53
9.17%
40.17%
67.20%
Key financials (EUR)
Sales (m)
EBITDA (m)
EBITDA margin
EBIT (m)
EBIT margin
Net Profit (adj.)(m)
ROCE
Net debt/(cash) (m)
Net Debt/Equity
Debt/EBITDA
Int. cover(EBITDA/Fin. int)
EV/Sales
EV/EBITDA
EV/EBITDA (adj.)
EV/EBIT
P/E (adj.)
P/BV
OpFCF yield
Dividend yield
EPS (adj.)
BVPS
DPS
12/14
949
136
14.3%
21
2.2%
60
3.1%
(104)
-0.1
-0.8
43.2
1.2
8.4
8.4
53.9
20.4
1.4
2.4%
0.0%
0.27
4.04
0.00
12/15e
1,019
149
14.6%
31
3.1%
63
2.6%
(217)
-0.2
-1.5
74.4
1.6
10.9
10.9
51.5
28.8
1.9
6.2%
0.0%
0.28
4.20
0.00
12/16e
1,035
185
17.9%
70
6.7%
99
6.0%
(323)
-0.3
-1.7
(154.0)
1.5
8.2
8.2
21.7
18.5
1.9
7.5%
1.7%
0.44
4.37
0.14
vvdsvdv sdy
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
Mar 14
Apr 14
May 14
Ju n 14
Ju l 14
Aug 1 4
Sep 1 4
Oct 14
Nov 1 4
Dec 14
Ja n 15
Feb 15
Source: Factset
TOMTOM
EuroNext (Rebased)
Shareholders: P.Geelen 12%; P.F. Pauwels 12%;
C.Goddijn 12%; H.Goddijn 12%;
Analyst(s):
Martijn den Drijver, SNS Securities
Mar 15
Apr 15
The facts: Last Friday afternoon, Bloomberg reported that Nokia intends to sell its
map business Nokia Here and that potential bidders include both strategic buyers
as well as buy-out firms. According to BB, the company values the map business
at EUR 2bn. Nokia has not reacted at all. But since the rumours surfaced on BB,
TomTom’s shares have jumped significantly, ending up 11.5% on the day at a 52
week high.
Our analysis: As we already wrote in an email on Friday, the EUR 2bn valuation
is what is causing the TomTom share to react so positively because it implies a
FY14 EV/EBITDA multiple of 25x and an FY14 EV/Sales multiple of 2.1. If we
were to simply use those multiples on the FY14 results of TomTom, the implied
enterprise value of TomTom would be EUR 3.4bn (EV/EBITDA) and EUR 1.9bn
(EV/Sales). The enterprise value of TomTom before the rumours surfaced about
Nokia’s intention to sell the maps business was EUR 1.6bn….
There are major differences between Nokia Here and TomTom. Nokia Here
mainly sells its maps to the Automotive segment, which represents over 75% of
the business, we assume. The remainder of the sales comes from the contract
with Garmin (Nokia is the exclusive supplier of Garmin), some GIS and some LBS
contracts. TomTom has a much more diversified business. It is also active in
Automotive and Consumer (PND and Sports) but also has a thriving and high
margin Fleet management solution business (the Telematics division) that Nokia
does not have.
If we were to really compare TomTom and Nokia Here, we would have to take out
the Telematics business, value that separately using Fleetmatics of the US (the
closest peer), and then use the Nokia multiples on the remainder of the business.
In FY15, the Telematics unit is expected to generate sales of EUR 146m and an
EBITDA of EUR 64m. Fleetmatics is currently valued at an FY15 EV/EBITDA of
16.7 giving Telematics an implied valuation of EUR 1.07bn. Let’s deduct 15%
because of the difference between US and EU multiples, which gives TomTom
Telematics an implied enterprise value of EUR 0.9bn.
Having taken out Telematics leaves TomTom with an FY15 EBITDA of EUR 85m.
We then use the implied EV/EBITDA multiple from Nokia to calculate the value of
the remaining business, which gives it an enterprise value of EUR 2.23bn (25x
EUR 85m). We realize we are using an FY14 multiple on a FY15 forecast EBITDA
but we do not have estimates for Nokia Here EBITDA available. The total
enterprise value would then be EUR 3.13bn or an equity value (TomTom is net
cash EUR 103m) of EUR 3.23bn. This translates into EUR 14.4 per share.
This is an imperfect calculation, we realize that. We are putting assumption on
assumption, using high multiples from Fleetmatics. But it does show that TomTom
remains undervalued.
Who would be interested in buying Nokia Here? Given that cash flows are weak,
we do not assume that a financial buyer will come out on top. Bloomberg names
Microsoft, Yahoo, Apple and Uber as well as car manufacturers and Tier1s. We
assume that the car manufacturers and the Tier1 suppliers have the best papers
although Uber with its deep pockets cannot be ruled out either.
martijn.dendrijver@snssecurities.nl
+312 0 5508636
Conclusion & Action: The sale of Nokia Here will show what the value of a map
business is and we expect it to come out higher than many have expected. The
implied EUR 2bn valuation mentioned by Bloomberg already shows that TomTom
is undervalued, especially as it has a thriving and high margin Telematics
business that Nokia does not have.