06 May 2019

Why we've increased our investment in this industry leader

Cerved was founded in 1974 as a data processing centre, and has evolved and grown over the years by innovating its products and developing new businesses. The company has been in operation over forty years and has created a large database of proprietary information of commercial, accounting, economic, financial and legal data. This data is gathered from approximately 15 million companies and 20 million people. Due to several acquisitions over time, the company has strategically leveraged its vast database and focused on the credit information business segment.   

This strategic decision has resulted in Cerved becoming the market leader in Italy in providing credit and financial profiles to its customers.  Cerved provides the most complete suite of information for corporations, financial institutions, insurance firms, and individuals. Every year, over 30 thousand customers rely on Cerved’s services to assess credit worthiness and to monitor and manage credit risk.  The financial information and rating profile provided by Cerved is essential for organizations to assess financial worthiness, evaluate loans, and assess policies. Over the years, Cerved has continued to grow and evolve through a series of partnerships and synergies.  It has been able to successfully leverage its core business of credit information to roll out successful verticals such as Marketing Solutions and Credit Management to the existing and new customers, thus creating new lines of revenue.

We have followed Cerved since its initial public offering (IPO).  We recently increased the size of our investment for the following reasons:

  1. Valuation: The Company is valued at less than 13x cash earnings, that valuation is obscured by purchase price amortization.
  2. Competitive advantage: The Italian credit information market has an oligopolistic structure and high entry barriers. Cerved’s key asset is that it is the largest and most comprehensive database of corporate credit information in Italy with very few competitors. As a result, Cerved can provide a higher level of data accuracy, analytics, and depth of information than any of its competitors
  3. Growth: The Company has generated mid-single digit revenue growth and is continuing this trend. 

This stock is currently held by our Pengana Global Small Companies Fund.

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