Recently, Infracom announced the acquisition of Connect and Datatal. Connect is a full-service provider of IT services within the SME segment, with preliminary revenues of SEK406m during the broken fiscal year 2021/2022 with an EBITDA of SEK21.6m. The company employs approximately 160 employees and has four business areas: IT, Telephony, Documents and Meeting Technologies. Datatal is a software and application development company within business communication that had revenues of SEK6m during the shortened fiscal year 2022 (9 months), with an EBITDA of SEK0.1m.

According to management, Infracom will become a full-service provider with a national reach due to the acquisitions, aiming to reach SEK1b in revenues while looking towards a listing on Nasdaq Small Cap. We state the acquisition of Connect as transformative, being by far Infracom’s largest acquisition since its listing in 2018. As such, it substantially increases the sales based on pro forma figures while it will dilute the group’s margins. Accordingly, Infracom’s board do not expect its profitability target of an EBIT margin of 15-20% to be fully achieved in 2023 and expects to revise it based on the new conditions.

Consequently, including the two acquisitions in our model yields substantial forecast changes. The pro forma figures significantly raise our sales forecast with a clear impact on Infracom’s overall margins, making us decrease our future margin assumptions. Overall, the forecast changes give rise to a new Base Case of SEK38 (34), with new Bear and Bull Cases of SEK23 (19) and SEK50 (46), respectively.