Venture: Europe Tech
Undervalued Italian Technology
Issue 26;
Undervalued Italian Technology
Digital Value (DGV Italy)
“Digital Value is an Italian-owned Group operating in the ICT Infrastructure segment serving major public and private customers with the aim of driving sustainable technological innovation for the development of the country’s enterprises. With more than 600 certifications and more than 50 technology partnerships, Digital Value represents a valuable experience serving a comprehensive offering. A dynamic, constantly evolving Group with a team of professionals able to ensure customer proximity and “time to market” focused on different industrial verticals and with high technological expertise in specific areas.”
The investment case is a good company that is debt-free and growing while trading at a low valuation. Five brokers are all buyers, implying a 61% upside. The shares have started to rally.
Digital Value was founded in 2018 following a joint venture between ITD Solutions and Italware and was listed in Milan. They work across different sectors such as telecoms and media, banks and insurance, manufacturing, energy, utilities and transport, and have government contracts in defence and operations. The business is highly diversified.
DGV has enjoyed top-line growth of over 20%, and that is expected to remain mid-teen for the foreseeable future. Earnings growth has kept up, and like many growth companies, it suffered after the 2021 liquidity-fuelled tech bubble. Today, the PE is 13.5x. Better yet is the high return on invested capital, which was an impressive 22% last year. This is a cheap growth stock.
DGV Growing Profits
In a note published by Intesa Sanpaolo earlier today, GDV trades at a 40% discount to peers despite an above-average growth profile. They also highlight how the pipeline is strong and the business model is resilient.
They also said that the potential acceleration of the group's M&A strategy could be a further catalyst for the stock, as demonstrated by the recently announced acquisition of Infordata. Additional good news for the company included a notable contract win with €180 million in revenues over four years.
The half-year results didn’t go down too well last September as there were accounting effects which spooked the market. Yet fears were overdone, and the company is back on the front foot. The analysts’ forecasts and the improvement in the technical situation suggest a retest of the all-time high is achievable.
Digital Value Price
Risk
The shares are reasonably liquid, with around €500k traded on an average day. The price volatility is 30%, which is the five-year average. The business is diversified, has a strong balance sheet, and an attractive valuation. I deem this to be medium to high risk.
Venture Update
Last week’s JD was booked at $30.80, the opening price, in contrast to the $29.30 at the time of publication. It jumped 11.5% on Thursday, but I doubt that was caused by ByteTree Venture.
Please let me know your thoughts by emailing me at charlie.morris@bytetree.com or tweeting me @AtlasPulse.
Many thanks,
Charlie Morris
Editor, Venture
Venture is issued by ByteTree Asset Management Ltd, an appointed representative of Strata Global which is authorised and regulated by the Financial Conduct Authority. ByteTree Asset Management is a wholly owned subsidiary of CryptoComposite Ltd.
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