Key insights
- An individual investor shares their valuation of Topicus (TOI), a European software company, focusing on present value calculations of cash flows from current operations and future acquisitions. The analysis highlights potential earnings boosts from Asseco and Cipal acquisitions. While the analysis is detailed, its direct impact on US equities is limited.
Recently bought Topicus. Included my quick and dirty valuation below on which I based my purchase.
GAAP corrected earnings: EUR 420mln Net income = EUR ~380mln. Attributable to shareholders of Topicus = 380*0,6 = EUR 228mln
*did not include GAAP corrections and tax assumptions. Would make post long.
EV = EUR 4.800mln + debt ~600mln = 5.400mln.
Now that we got that out of the way, the following three questions should be answered:
<1>: What is the present value of future cashflows from current operations.
<2>: What is the present value of future cashflows from acquisitions in 2025.
<3>: What is the present value of future cashflows from acquisitions after 2025.
<1>: What is the present value of future cashflows from current operations.
I have to do more research to be able to come up with a multiple that is based on the companies that Topicus hold and their ability to grow/maintain revenue. But for now let’s assume a multiple of 15. This comes out to 228*15 = EUR 3.420.
<2>: What is the present value of future cashflows from acquisitions in 2025.
Acquisitions: Asseco, Cipal and "other".
Asseco is allready corrected in current earnings (calculation not included) but that correction was done based on earnings even though the stock moved more than 100% since the acquisition by Topicus. Releasing this stock movement as a manual adjustment for future earnings growth would be fair i guess which comes out to about EUR ~30mln per year.
Cipal was not included in the 2025 figures (i believe due to questions in the belgian parliment). Topicus paid arround 15 times GAAP corrected earnings based on the annual report of Topicus which shows the purchase price (~223mln) and the annual report of Cipal which shows the P&L. I used the P&L of 2024 as the 2025 one has negative earnings due to acquisitions costs i assume. Even though the multiple Topicus paid was relatively high I think this could be multi bagger due to the operating geography (only dutch part of Belgium right now) and the pricing power. Therfore a ROIC of 15% is not crazy which would lead to earnings of EUR ~33mln.
"other" acquisitions where arround ~150mln and are included in the earnings of 2025. All though some may only have been included for a couple months no corrections are made.
The acquisitions in 2025 therefore have a net impact of EUR ~63mln * 0,6 = 38mln * 15 (same multple as at 1) = EUR 567mln.
Total value of companies within Topicus per 31-12-2025 = 567 + 3420 = ~EUR 4000mln.
<3> What is the present value of future cashflows from acquisitions after 2025.
Total EV: 5.400mln.
Total <1> and <2>: EUR 4000mln.
Market valuation of future acquisitions: 5.800 - 4000 = EUR 1.4billion.
In earnings: 1.400/15 = EUR 95mln.
Capital needed to achieve this return bad case = 95/0,15 = EUR 633mln.
Capital needed to achieve this return good case = 95/0,2 = EUR 475mln.
This is equal to about 2-3 yearly cashflows.
Current conclusion:
After 2-3 years you get a company that compounds income at around 15% per annum.
If multiples were to normalise and the income would compound at 15% you have yourself a multi bagger.
Will post about the terminal value of the cashflows next. I don’t see a big risk in the terminal cashflows but need to understand the businesses within Topicus better and the revenue share of each segment. Will try to make a consolidation sheet based on statutory reporting requirements from different businesses within Topicus.