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== Valuation: Gradually closing discount to peer group == At the recent 45.5p price, SPA trades at 1.9x FY22e revenue, a 66% discount to its software peers (see Exhibit 13). Much of SPA’s discount could reflect its relatively lower projected growth (5% in FY22e versus peers at 13%, see Exhibit 9). Furthermore, its margins are below its peers (15% EBITDA FY22e versus 23% for peers, see Exhibit 9). As displayed in Exhibit 14, SPA trades at 12.4x FY22e EV/EBITDA, a 56% discount to peers such as IQGeo and Hexagon. Closing the revenue multiple could take time, although our forecast for growth in FY23e (6% versus 11.9% consensus for peers) may bode well for SPA’s efforts to begin reducing the disparity in growth. Furthermore, achieving our expected margin improvements in FY23e should provide confidence that margins can move closer to its peers. Achieving a sector average price/revenue multiple of 5.7x would imply a share price of 133p, a 193% premium to the current price. Reaching a peer EV/EBITDA multiple of 27.7x suggests a share price of 99p, a 117% premium to the current price. If US sales can ramp up faster than we project due to the recent infrastructure bill and the UK’s Net Zero Strategy and NUAR programmes generate more business, then a further re-rating is possible.
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