123fahrschule SE

Promising acquisition & strong start into the year

Philipp Sennewald17 May 2024 05:45

123fahrschule announced an agreement to acquire Foerst GmbH, a manufacturer of driving simulators for cars, trucks, and buses, which are primarily used for driver


. The acquisition price, a mid-six-figure amount (eNuW: € 500k; c. 0.5x act. EV/sales), will be paid fully or partially in shares at the discretion of 123fahrschule. The payment is to be made in several tranches by the end of 2026. The shares will be issued at a price close to the stock exchange price. The transaction is intended to be closed on July 1st.

The acquisition appears sensible, in our view, as the use of driving simulators in driver training is expected to become increasingly important in the future. In fact, the market is seen to triple in the coming years especially as simulators are set to become part of the driving license category B197 in the context of the current amendment of the learner driver training regulations. According to the amendment, it should then be permitted to complete the mandatory manual driving lessons (10) on a simulator. This would be of particular importance, as the availability of manual driving school cars is already very limited today, but novice drivers often have to resort to manual vehicles initially due to limited financial resources. Moreover this is set to at least partly eliminate capacity constraints for 123f. In yesterday’s CC, CEO Polenske stated that the company intends to equip its driving schools with a total of 90 simulators once the amendment has been passed, which is seen to happen in 2025. While the acquisition looks set to significantly reduce CapEx for the roll-out of driving simulators across its own branches, it also opens up a further source of revenue. In fact, 123f intends to expand the product portfolio of Foerst with its own software elements to offer an improved product to other driving schools. However, as there is still limited visibility while the amendment has not been passed, we do not yet include this in our model.

Besides this, management also provided an update on current trading, stating an EBITDA of > € 0.5m for the first four months of the year as well as the expectation of positive cash flow thanks to an improved cash-collection cycle. While this underpins continuous operational improvements, boding well for managements outlook of positive EBITDA for FY ‘24, we continue to conservatively estimate a neutral EBITDA due to the seasonally weak Q4, where we observed a general reluctance of customers to take driving lessons during Christmas season in the past.

The stock remains a BUY, unchanged PT of € 7.20 based on DCF.

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