Business 12 September 2019, 11:20am

Small Hungarian firm earns surprisingly detailed analysis

Portfolio

Germany's Kalliwoda Research has tabled a hefty research note (18 pages or 23 pages if you include the disclaimer) about Cyber, the owner and developer of the KAJAHU franchise and the technological platform. The corporation has been listed on the Budapest Stock Exchange (BSE) Xtend market since October 2018, and it has been traded since 1 January 2019. The impact was an immediate 10% jump in Cyberg's share price in a breathtaking turnover of HUF 20,000 (yes, that is twenty thousand forints or slightly more than 60 euros. Please don't laugh!

Kalliwoda Research called Cyberg "a promising disruptive franchise in the food & tech field," adding that "KAJAHU is an innovative and pioneering gastronomic concept with high potential to revolutionize therestaurant industry and set the role model for a new digital sales strategy."

The daily average turnover with the shares of Cyberg, a company with market capitalisation of HUF 5.4 billion, was HUF 1.6 million this year. Yet, the German researcher published a most detailed analyis on the company and what could await it.

The starting point for the research is basically the guidance presnted by the management of Cyberg, namely that the company will have 8 restaurants by 2021, 41 units by 2023 and 108 by 2025..

Cyberg's total revenues are seen soaring from EUR 0.64 mn in 2019 to EUR 39.31 million by 2025. Its EBITDA is expected to go up to EUR 21.23 mn from a loss of EUR 0.52 mn this year, and its after-tax loss of EUR 0.1 mn should turn into a profit of EUR 18.62 mn by 2025. Kalliwoda projects Cyberg to incur losses this year, in 2020 and also in 2021.

Using the Discounted Cash Flow (DCF) method, Kalliwoda projects a 6% long-term growth rate for Cyberg.

The most conservative discount rate for a listed gastronomic company with such wide expansion targets and consequently, very capital-intensive, is 15%.

Taking into consideration the weaknesses and threats mentioned in the SWOT analysis, the researcher has added a reduction of 15% to its estimations to compensate the risk of the business. The terminal value indicates the present value of the project based on its future cash flows with a fixed long-term growth of 6% and a WACC of 15%. The terminal value is calculated according to a stream of forecasted future free cash flows discounted by the cost of capital (15%).

To determine the NPV of KAJAHU, Kalliwoda applied the 15% reduction to the terminal value for the risk of business and for the reason mentioned before. It estimates the value for KAJAHU, based on the DCF model to EUR 57.783 million, cc. HUF 19.2 billion. The rating is 'Buy'.

Cyberg rose 9.9% on the BSE today, while it has gained 5.3% since the start of the year.