KEYWARE : FY21 will continue to be challenging, while we expect mid-term profitability growth

The company continues to face challenges which weigh on the results, but both the change of acquiring partner and COVID-19-related issues are expected to be beneficial in the mid/long term. Keyware expects the total migration from its previous partner to the new one to take up to the middle of 2021 (depending on new lockdown restrictions), while it is already creating greater value translating into a higher margin. The COVID-19 pandemic has led to growing electronic and contactless payments. Furthermore, with its transition, from hardware provider to fintech specialist, the group should return to profitability growth in mid-term.

Our FY19 and FY20 EPS have been pushed down by the integration of the annual results. We have also slightly lowered our FY21 EPS for different reasons: 1) the transition from a hardware provider to a software developer continues to weigh negatively on profitability, 2) the restrictions across Europe will continue to impact Payment Terminals and Payment Authorisations divisions, and 3) the change in the Authorisation’s partner results in a drop in the results in the short term, but should lead to higher margins in the coming years.

Our DCF has been downgraded due to the deteriorated earnings estimates for FY21 because of the reasons mentioned above.