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Original-Research: VOQUZ Labs AG - from NuWays AG
Classification of NuWays AG to VOQUZ Labs AG
Company Name: VOQUZ Labs AG
ISIN: DE000A3CSTW4
Reason for the research: Update
Recommendation: Kaufen
from: 22.03.2024
Target price: EUR 22.00
Target price on sight of: 12 Monaten
Last rating change:
Analyst: Philipp Sennewald
Huge potential from promising PwC partnership // chg.
On Wednesday, VOQUZ Labs announced a strategic partnership with PwC
Solutions Germany for the marketing of remQ, the company's business
transaction monitoring and auditing software for SAP customers. In detail:
PwC will offer its client base in Germany the establishment of a
digitalized internal control system (ICS) based on remQ. Mind you, remQ was
added to the product portfolio within the framework of the company's first
M&A deal in early 2023. The software monitors business-critical
transactions, i.e. procure- to-pay and order-to-cash processes, in
real-time, hence improving data and transaction control across all business
areas. Moreover, customers can upsell in order to add premium solutions
such as payroll- and sanctions compliance or an AI-based criminal watchlist
name-matching tool. The software is optimized for both SAP ERP and S/4HANA
environments. PwC will likely position remQ as a managed service solution.
In our view, this should be a well needed push for remQ after a flattish
sales development in 2023 (eNuW: EUR 150k).
Given PwC's market leading position with c. 13k auditing and consulting
customers in Germany, the partnership is seen to significantly facilitate
the go-to-market of remQ. As VOQUZ is typically targeting mid-sized
customers with 500-20,000 employees, we estimate the deal to have a total
potential of EUR 25-30m in annual revenues, based on an average annual
contract volume of EUR 35k (eNuW).
As VOQUZ also aims to intensify cross-promotion with its flagship software
samQ (SAP software asset management), top-line growth is seen to accelerate
from 2024e onwards. We hence conservatively expect remQ sales to triple to
EUR 450k in '24e before doubling again to EUR 900k in '25e.
visoryQ offering further upside. While the company's core product samQ
looks set to provide solid double-digit sales growth going forward (eNuW:
11.3% CAGR '23p26e) and setQ as a pure re-sell product likely remaining
flat, visoryQ is also seen to contribute with strong growth momentum going
forward. This should be, among others, driven by the ongoing S/4HANA
transition (mainstream maintenance for old ERP software ends in 2027).
To remind you, visoryQ is a tool that largely maps advisory services via
intelligent software and is designed to methodically help customers
determine the optimal ERP strategy. For example, visoryQ visualizes various
strategies to help decide whether on-premise, hyperscaler, RISE or
composable ERP is the best fit and is providing customers with cost
indications for all possible options considering the scope of service
needed for the respective organization. Thus, especially for SAP customers
who have not yet migrated to S/4HANA, visoryQ is a compelling offering in
order to optimize TCO, in our view.
After introducing the self-developed solution in Q4 '22, it already met
with brisk demand in 2023, accounting
for c. 10% of sales, e.g. EUR 0.5m (eNuW). Driven by an accelerating S/4HANA
transition, topline should continue to develop dynamically at a 65% CAGR
'23p-26e.
SAP cloud migration to fuel visoryQ and samQ
While the majority of SAP ERP customers has not yet migrated, SAP
introduced financial incentives at the start of the year to help
accelerating the transition to S/4HANA. Until the end of 2024, customers
opting for a cloud migration via the RISE or GROW with SAP program may
receive a one-time credit of 60% of their first year's fee if they
currently use on-premise S/4HANA, and a 45% credit if they currently use
SAP legacy software. Apparently, SAP actively offered these incentives to
users already in Q4'23 and received positive feedback. The CPO for cloud
ERP, Mr Jan Gilg, stated that it 'hit the right spot' and was 'able to
convince a lot of customers to move to Rise'.
While this should be clearly benefitting visoryQ, the ongoing cloud
migration is set to also have a positive effect on samQ, the company's SAP
software asset management tool. While cloud-based solutions offer a higher
degree of flexibility on the one hand, they also increase complexity on the
other, as they inherit an innumerable amount fo native and third-party
services. In order to be able to deal with such an increasing complexity,
there should be no way around an appropriate SAM tool like samQ, in our
view. Already today, the average SAP customers manages 3,500 users and 20
systems, i.e. has to classify 70,000 data points. As a result, roughly 30%
of SAP users are incorrectly licensed.
Overall, VOQUZ looks set to be well positioned to pick up the pace again
after a difficult H1Ž23 that was partially compensated by a solid H2 (click
here for update on FY '23 prelims). For FY24, we estimate 19% sales growth
(eNuW: EUR 6.2m), a double-digit EBITDA margin (eNuW: 15.5%) and postive FCF
(eNuW: EUR 0.5m).
Despite the promising share price performance YTD, valuation still looks
undemanding with the stock trading on a mere 1.2x EV/Sales and 7.8x
EV/EBITDA '24e (0.9x/4.4x based on FY25e) carried by the strong underlying
mid-term prospects as well as the scalability of the capital light business
model.
BUY with an unchanged PT of EUR 22.00 based on DCF.
You can download the research here:
http://www.more-ir.de/d/29219.pdf
For additional information visit our website
www.nuways-ag.com/research.
Contact for questions
Die Analyse oder weiterführende Informationen zu dieser können Sie hier downloaden: www.nuways-ag.com/research.
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
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The result of this research does not constitute investment advice
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