Net Sales came in at SEK199m, 87% y/y, but below our estimated SEK 221m (deviation -10%). The sales increase is primarily due to the Connect acquisition, consolidated in Q2 2023. The deviation is due to a tougher macro environment and InfraCom’s customers taking longer to make investment decisions. While this does not impact InfraCom’s core subscription business, it has negatively affected its more transaction-heavy businesses that were recently acquired. This also resulted in a SEK12m revaluation gain from the Connect earn-out, as Connect is progressing below earn-out targets. A stronger gross margin led to EBITDA being in line with RRe.

InfraCom has made three acquisitions thus far that will consolidate during 2024 with a combined sales volume of SEK114.6m (SEK11.0m will be eliminated on consolidation). In the Q1 2024 report, InfraCom states acquisitions are becoming more attractive, suggesting more acquisitions are on the card for the year. InfraCom has a Net debt/LTM EBITDA of 0.9x. The balance sheet supports a higher acquisition cadence with debt covenants of net debt/EBITDA below 2.5x, 30% equity ratio, and ICR above 5x. Based on the more cautious outlook for InfraCom’s transactional-based business, we have reduced our sales estimates, which has resulted in a slower EBITDA margin recovery.

Based on our revised estimates, we reduced our fair value range from SEK22-45 (base case SEK37) to SEK20-42 (base case SEK34). Our estimates suggest an EV/EBITDA of 9.5x for 2024e. This compares to InfraCom’s historical weighted average acquisition multiple of 7.0x and is slightly below its 5-year average EV/EBITDA multiple of 10.4x. Given InfraCom’s increased mix of transactional business with the Connect acquisition, we believe a somewhat lower multiple is justified. Acquisitions and earnings are catalysts for the share, while the c1.7% dividend yield provides support.