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Research, Update 12 Jan 2023

UPDATE – 03.10.2022

The Company generated revenues of € 0.79 mln, from initial processing of NPL receivables (out-of-court recovery), up from€ 0.59 mln in 1H21A. Value of production, which includes grants and tax credits, amounted to € 1.13 mln. EBITDA amounted to -€ 0.52 mln, (-€ 0.16 mln at 1H21A), down due to higher costs incurred attributable to the increase in personnel employed in the analysis and management of NPL portfolios and in credit recovery. EBIT, after depreciation and amortization of € 0.65 mln, amounted to – € 1.17 mln. Net income was also negative, equal to – € 0.84 mln.  In the first half of the year, ISCC was successful in continuing and developing both its NPL portfolio purchase and enhancement activities through its organizational and operational model technologically assisted by the ISCC WEB management platform. the Group now holds more than 100,000 positions for a GBV of € 775.0 mln.

In light of the results published in the half-yearly report for 1H22A, we modify our previous estimates both for the current year and for the coming years. In particular, we estimate the FY22E value of production equal to € 5.50 million and EBITDA of € 2.00 million, (EBITDA margin of 36.4%). For subsequent years, we expect the value of production to increase up to € 35.00 million (CAGR FY21A – FY25E: 186.1%) in FY24E, with EBITDA of € 29.30 million (EBITDA margin of 83.7%). This high operating margin is largely consistent with the nature of the NPL market, which has IRRs on portfolios purchased very often well over 30.0%. In terms of the Balance Sheet, we estimate that the NFP can reach a cash positive value of € 26.48 million in FY24E. 

We have conducted the valuation of ISCC equity value based on the DCF methodology and Excess Return method. The DCF method (which in the calculation of the WACC includes for prudential purposes a specific risk of 2.5%) provides an equity value of € 135.4 million. The equity value of ISCC using Excess Return is equal to € 122.5 million. The result is an average equity value of € 129.0 million. The target price is  € 10.00 (prev. € 11.90), BUY rating and MEDIUM risk.

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