SHS VIVEON : Future-oriented platform switch – bracing for the wave in demand

SHS VIVEON AG

Germany | Technology | MCap EUR 12.0m

Future-oriented platform switch - bracing for the wave in demand

7 April 2022

What's it all about?

SHS Viveon is an established player with a track record of over 30 years in the growing governance, risk management and compliance (GRC) software market. This market is expected to grow at a CAGR 2021-2026 of 12.1%, driven by increasing regulatory requirements, such as supply chain compliance, which will force companies from 2023 to closely monitor their business relationships. Deep industry knowledge of the increasingly complex environment has helped SHS to build strong customer relationships with well-known clients. By adopting technological innovations like low code, SHS is future-proofing its Risk-to-Value platform. To seize attractive growth opportunities, SHS Viveon plans to raise funds by a capital increase. Most of the funds will be used for product development, with a smaller part earmarked for expanding sales on all channels. Combined with the underlying market growth, this should allow for a sales CAGR of 16% until 2026. After an investment period, a growing share of higher-margin products as well as improving cost structures offer EBITDA-margins >35% by 2026. Backed by a DCF-derived price target of EUR 15.50 we initiate coverage with a BUY recommendation and an upside potential of 177%.

IMPORTANT. Please refer to the last page of this report for "Important disclosures" and analyst(s) certifications.

This research is the product of AlsterResearch, which is registered with the BaFin in Germany.

alsterresearch.com

SHS VIVEON AG

Germany | Technology | MCap EUR 12.0m | EV EUR 9.5m

BUY (INITIATION)

Target price Current price Up/downside

EUR 15.50 (none)

EUR 5.55 179.3%

MAIN AUTHOR

Alexander [e-mail][phone]

Future oriented switch - bracing for the wave in demand

Established player with impressive customer base. SHS Viveon is an established player with over 30 years of experience in the governance, risk management and compliance (GRC) software market. In a market still characterized by many competitors lacking size and scope, SHS has built up a customer base with many prestigious clients like Vodafone, Bosch, Lidl, Klarna and UBS. These clients value SHS' comprehensive end-to-end solutions.

Increasingly complex regulatory environment drives market growth.The global GRC software market is estimated to reach USD 55.0bn by 2026, growing at a CAGR of 12.1% from 2021 to 2026. Main drivers are the continuously increasing regulatory requirements. For example, many national and supranational laws and initiatives, like the German "Lieferkettengesetz", the French "Loi de vigilance", the British "Modern Slavery Act" and the EU due diligence strategy, require closer monitoring of supply chains to prevent ESG violations.

Low code architecture transforming the platform. SHS Viveon is in the process of migrating its solutions from a proprietary architecture to an open low code platform (by Tibco Software Inc.). This will allow SHS to achieve shorter development and implementation times due to standardized components and features. Tibco's proven platform will help SHS to de-risk the transformation, while the technology will allow the company to unlock cost savings potential. In addition, it facilitates the further shift from a traditional license model to a SaaS-model (Software-as-a-Service)

Conclusion. Funds of up to EUR 5.9m from the capital increase (reflected in model) will allow SHS to unlock the potential of the GRC software market, leading to an expected top line growth of 16.2% CAGR 21-2026. A growing share of higher-margin products as well as improving cost structures should enable software-typical EBITDA-margins of >30% by 2026. Backed by a DCF-derived price target of EUR 15.50, we initiate coverage with a BUY recommendation and an upside potential of 177%.

SHS VIVEON AG	2019	2020	2021E	2022E	2023E	2024E
Sales	12.1	11.8	11.0	11.6	13.4	16.0
Growth yoy	0.8%	-2.8%	-7.1%	6.0%	15.0%	20.0%
EBITDA	1.5	1.7	0.7	-2.0	0.3	2.4
EBIT	1.1	1.5	0.4	-2.3	-0.1	2.1
Net profit	0.7	1.0	0.3	-1.6	-0.1	1.5
Net debt (net cash)	-4.2	-5.2	-3.3	-6.0	-5.9	-7.4
Net debt/EBITDA	-2.8x	-3.0x	-4.7x	3.0x	-21.2x	-3.0x
EPS reported	0.31	0.45	0.15	-0.49	-0.02	0.45
DPS	0.00	0.10	0.00	0.00	0.00	0.15
Dividend yield	0.0%	1.8%	0.0%	0.0%	0.0%	2.7%
Gross profit margin	92.6%	92.0%	95.6%	95.6%	95.8%	95.8%
EBITDA margin	12.5%	14.4%	6.3%	-17.1%	2.1%	15.1%
EBIT margin	9.0%	12.3%	4.1%	-19.4%	-0.7%	13.0%
ROCE	17.4%	17.6%	6.0%	-18.9%	-0.7%	14.7%
EV/EBITDA	5.8x	4.5x	13.7x	-3.4x	25.0x	2.4x
EV/EBIT	8.0x	5.3x	21.1x	-3.0x	-80.7x	2.8x
PER	17.9x	12.3x	38.2x	-11.3x	-294.3x	12.3x
FCF yield	9.3%	7.5%	-8.9%	-2.8%	0.7%	9.0%
Source: Company data, AlsterResearch

Source: Company data, AlsterResearch

High/low 52 weeks Price/Book Ratio

Ticker / Symbols ISIN

WKN Bloomberg

Changes in estimates

16.60 / 5.05 2.2x

DE000A0XFWK2

A0XFWK SHWK:GR

Sales	EBIT	EPS
2021	old ∆	00.0 -	00.0 -	00.0 -

2023

old ∆

00.0 -

00.0 -

00.0 -

00.0
-
Key share data
Number of shares: (in m pcs)	2.16
Book value per share: (in EUR)	2.53
Ø trading volume: (12 months)	38,000
Major shareholders
Supervisory Board	5.1%
Employees	5.0%
Ralph Schuler (CEO)	3.6%
Free Float	79.3%
Company description

2022

old ∆

00.0

-

00.0

-

SHS Viveon AG is a German provider of software and IT consultancy services focused on credit, risk and compliance management. The company's installed base comprises of ca. 120 customers, from different industries. SHS Viveon's solutions are deployed in 35 countries.

Investment case in six charts

Software portfolio Revenue split in % Product business 73% Project-based 27% Excellent customer base Potential customers for supply chain solution in GERUse of funds from capital increase Major shareholder

Products and Innovation (65%)Go-To-Market sales internationalization (35%) Development of new products Development of direct sales • Supply Chain Compliance Strengthening of the sales partners network • Sustainability and ESG Compliance • Data connectivity/Connect • Marketplace Amplification of marketing (brand awareness, lead generation) Migration of existing products -> Focus on investments into staff and marketing measures New and open platform- technology Free Float; 79.3% -> Focus on investments into staff (internal and external) Supervisory Board; 5.1%Employees; 5.0% Ralph Schuler(CEO); 3.6% Discover Capital; 3.5% Lupus Alpha; 2.9% PEH Wertpapier AG; 0.6%

Source: Company data; AlsterResearch

Table of content

Investment case in six charts 3

Table of content 4

Company background 5

Quality 9

SWOT analysis 13

Growth 14

Theme 19

Valuation 20

Financials in six charts 22

Financials 23

Conflicts of interest 27

Important disclosures 28

Contacts 29

Company background

Products & services

Founded in 1991, SHS Viveon is a German provider of software and IT consultancy services focused on credit, risk and compliance management, known as GRC (Governance, Risk Management, Compliance). The company has been publicly listed since 1999. Since 2009, SHS has been listed in the m:access segment of the Munich Stock Exchange. Currently, SHS Viveon has 85 employees, and an additional 30 subcontracted freelancers. The company is headquartered in Munich. In addition, SHS has locations in Düsseldorf, Stuttgart, Burghausen, as well as in Vienna (Austria) and in Zug (Switzerland).

The current setup of the company goes back to a strategy shift in 2017, when the company executed an organizational and personnel shift. With the divestment of its professional services unit and the appointment of Ralph Schuler as new CEO, the company has adjusted its business model and focus. SHS Viveon offers a modular platform for the automation of risk, credit and compliance processes.

The current software portfolio consists of five modules, which are offered either standalone or in combination:

• • Trade

• • Riskpilot

• • Compliance

• • Connect

• • Insights

The core products are Trade and Riskpilot. Both are an evolution of the original applications DebiTex and RiskSuite.

Riskpilot is a customizable software to simulate and automate risk management of business processes, such as credit application decisions or the calculation of payment probabilities for accounts receivable.

Trade is the end-to-end solution for international credit management. Optimization and monitoring of B2B credit relations enable companies to assess, manage, and reduce risks arising from customer relationships, i.e. hedging from fraud or payment defaults.

Connect is a smart data platform for managing and processing data, for example from credit agencies, trade credit insurance companies (TIC), fintechs and various other sources like social media and the internet. Added value is created by the possibility to integrate the significant amount of independent data sources into the customer's ERP or CRM systems.

Insight is a comprehensive analytics and simulation application, which is tailored for CFOs. They can monitor company KPIs in relation to risk exposures regarding customers and business partners.

Compliance offers a 360° analysis of customers and business partners based on KYC (Know your customer). Users identify and check new and existing customers on the basis of the money laundering regulatory framework. Furthermore, it identifies key people in companies, credit ratings and checks for politically exposed persons - an important aspect in dealing with foreign business partners as currently seen in the Russian invasion of the Ukraine.