Equity Research
Chile
Technology Services, Diversified
Company Note
25 February 2013
SONDA
Buying its upside; re-initiating coverage with a Buy
Rating
Re-initiating coverage of Sonda with a Buy rating
12m Price Target
CLP1,900.00/US$4.01
We are re-initiating coverage of Chile-based Sonda, Latin America’s leading provider
Price
CLP1,656.90/US$3.50
of IT services, with a Buy rating and target price of CLP1,900/share (ex-acquisitions),
RIC: SONDA.SA, BBG: SONDA CI
translating into upside of 14.7% and total return of 16.3% including an expected
dividend yield of 1.6%. Factoring in M&A deals, our target price would jump to
CLP2,262/share, offering upside of 37% if they comply with the proposed expansion.
US$500mn in M&A deals to substantially boost growth in coming years
As in previous years, we expect Sonda to continue to deliver stable and consistent
organic growth going forward (it expanded on average 11% per year organically in the
past 3 years). Including M&A deals, Sonda grew more than 20% per year in the past
3 years. It has a solid track record of buying and integrating companies in the region,
Buy
Trading Data and Return Forecasts
52-wk range
CLP1717.90-1279.72/US$3.63-2.53
Market cap.
CLP1,443bn/US$3,049m
Shares o/s (m)
771.1
Free float
53%
Avg. daily volume('000 Shares)
2,027
Avg. daily value (CLP m)
3,170.0
Forecast price appreciation
+14.7%
Forecast dividend yield
1.6%
Forecast stock return
+16.3%
and if it delivers on its plan to execute an extra US$500mn in M&A deals in the next
Stock Performance (CLP)
three years, it could continue to expand substantially.
2,000.0
Diversified and solid client base generates recurring revenues
1,800.0
Sonda has a diversified and solid client base (more than 5,000 clients) across LatAm
1,400.0
(mainly in Chile and Brazil), including some of the region’s most important names
1,000.0
(Sonda’s top 50 clients account for 40% of sales). And since these clients tend to be
600.0
loyal (changing IT providers can be disruptive), the bulk of the company’s revenues
200.0
150
1,600.0
120
1,200.0
90
800.0
60
400.0
30
Multiples may not be a bargain, but we think they are justified
Price Target (CLP)
Stock Price (CLP)
Rel. IPSA
Sonda is trading at 26.7x 2013E P/E, a premium to its global peers (trading at 13.2x)
and to Totvs (24.1x), though on an EV/EBITDA basis, it looks a bit cheaper (11.1x
2013E vs. Totvs at 15.6x). The name may not look like a bargain, we but believe its
valuations are justified by strong growth prospects (especially via M&A), a top-quality
management team, and the fact that most of its EBITDA comes from Chile, where
country risk is lower than Latin American peers.
Valuation
RoIC (EBIT) %
EV/EBITDA
P/E
Net dividend yield %
12/2011
22.9
11.4
24.5
5.3
12/2012
23.9
10.3
25.7
10.6
12/2013E
24.7
11.1
26.7
1.6
12/2014E
25.2
9.9
23.3
1.9
12/2015E
25.8
8.7
20.0
2.1
Financials (CLPmn)
Revenues
EBITDA
Net Income
EPS (CLP)
Net DPS (CLP)
Net (debt) / cash
12/2011
592,819
91,663
39,225
50.87
66.26
(89,553)
12/2012
681,192
117,348
45,590
59.13
160.80
(39,709)
12/2013E
774,334
132,597
54,138
62.15
26.17
(43,594)
12/2014E
882,526
150,388
62,054
71.24
31.08
(62,002)
12/2015E
1,009,833
172,428
72,138
82.82
35.62
(79,479)
Tomas Gonzalez
Chile - BTG Pactual
[email protected]
+562 2490 5034
Carlos Sequeira, CFA
Brazil – Banco BTG Pactual S.A.
[email protected]
+55 21 3262 9223
Bernardo Miranda
Brazil – Banco BTG Pactual S.A.
[email protected]
+55 21 3262 9338
Fabio Levy
Brazil – Banco BTG Pactual S.A.
[email protected]
+55 21 3262 9638
Source: Company reports, Bovespa, BTG Pactual S.A. estimates. / Valuations: based on the last share price
of the year; (E) based on a share price of CLP1,656.90, on 21 February 2013.
ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 25
Banco BTG Pactual S.A. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
25-Feb-13
25-Nov-12
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25-May-12
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are recurring.
SONDA
25 February 2013
Investment thesis: Top quality investment opportunity
We are re-initiating coverage of Chile-based Sonda, Latin America’s leading provider
of IT services, with a Buy rating and a target price of CLP1,900 per share (exacquisitions), translating into upside of 14.7% and a total return of 16.3% including an
expected dividend yield of 1.6%.
As in previous years, we expect Sonda to continue to deliver stable and consistent
organic growth going forward. According to IDC, IT services are expected to grow an
average of 11% per year in the next three years in Latin America, and we see no
reason for Sonda to underperform the market – in fact, we are modeling for Sonda’s
revenues to organically expand 14% per year in the next three years.
Sonda has a solid and diversified client base, with more than 5,000 clients spread
across the region, mainly in Chile and Brazil, including some of the most important
names in Latin America. While its top 50 clients account for 40% of sales, no single
contract represents more than 3% of sales. In addition, its clients tend to be loyal
(changing IT providers can be disruptive), making the bulk of its revenues recurring.
Sonda’s strong position in IT services in Latin America (a very competitive market,
especially in Brazil) is thanks to its unrivaled geographic reach, broad service offers,
and world-class credentials, as well as the fact that it is an independent service
provider with no ties to equipment or software vendors – a feature that gives its offers
more flexibility.
Though Sonda has grown respectably in the past by organic means (close to 11%
per year on average), sales have expanded at a far more robust 20% per year when
we factor in growth from M&A transactions. The company has a good track record of
buying and integrating companies in the region, and if it delivers on its plan to
execute an extra US$500mn in M&A deals in the next three years, it could grow
substantially (Sonda successfully raised US$300mn in equity as part of this M&A
strategy on December 4, 2012).
Sonda is trading at 26.7x 2013E P/E, a premium to its global peers (at 13.2x) and to
Totvs (trading at 24.1x), though on an EV/EBITDA basis it looks a bit cheaper, trading
at 11.1x 2013E compared to Totvs at 15.6x (global peers are much cheaper, at 7.3x).
The stock may not look like a bargain, but we believe its valuations are justified by
strong growth prospects (especially in light of potential M&A deals), a top-quality
management team with excellent execution over the past few years, and the fact that
it still derives most of its EBITDA from Chile, a country perceived to have relatively
low risk compared to its Latin American peers.
page 2
SONDA
25 February 2013
Plenty of room for growth organically and via M&A
Sonda has been growing rapidly. In the past three years, it expanded on average
22% per year on a combination of organic growth (approximately 11% per year on
average) and M&A. We believe this trend will continue in the next three years, as the
company looks set to grow 14% per year on average, excluding any acquisitions. We
believe M&A deals, if successful, could take growth above 20% per year.
Sonda has a clear strategy to deliver fast, profitable growth: i) continue its geographic
expansion, organically and via M&A, with a focus on Brazil, Colombia, and Mexico; ii)
improve its revenue mix toward higher-margin businesses (IT outsourcing, BPO,
cloud computing, and data centers); and iii) increase the share of recurring revenues.
Its goal is to transform all businesses into service-based businesses, making it
unattractive for clients to switch providers.
Relatively low penetration of IT services in LatAm: room for growth
IT spending in Latin America is still only a fraction of that spent in more developed
countries. While IT spending in the region is just 1.5-2.0% of GDP (in Brazil and
Chile, the figure is closer to 2.0%), in more developed countries, penetration ranges
from 3-5% (chart 1).
Chart 1: IT spending as a percentage of GDP
GDP per Capita (Thousands US$)
60.0
USA
50.0
Japan
40.0
30.0
20.0
Chile
Mexico
10.0
World
Brazil
China
Colombia
0.0
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
IT Spending / GDP (%)
Source: World Bank, IDC, PRB.
Sonda should not only benefit from more intense use of IT services by the region’s
companies – it may also gain from the fact that the region’s economies are expected
to grow faster than the world’s average (chart 2).
page 3
SONDA
25 February 2013
Chart 2: Real expected GDP growth in LatAm
Chart 3: Inflation forecasts
7.5%
6.5%
6.1%
5.5%
5.9%
6.0%
5.9%
4.0%
5.3%
3.9%
3.7%3.9%
4.3%
4.0% 4.3%
3.5%
2.7%
4.4%
3.2%
3.0%
5.4%
4.4% 3.8%
3.7%
2010
2011
Brazil
Chile
2012E
Colombia
2013E
2010
Mexico
Source: BTG Pactual.
According to IDC, IT services are expected to expand 11% per year on average in
the next three years in Latin America (and even more in Sonda’s main markets, Brazil
and Chile), compared to the world’s average of 5.2% (chart 5).
IDC forecasts that IT services in Brazil will grow 13.8% per year on average in the
next three years, followed by Chile (+12.6% p.a.), Mexico (+9.2% p.a.), and Colombia
(+8.3% p.a.).
Chart 4: Expected IT service growth in Latin America – 2015-2012 CAGR
14.8%
13.7%
11.7%
15.4%
11.4%
11.6% 11.9%
13.0%
11.3%
9.3%
8.7%
5.3%
Latin America
Brazil
IT Services
Chile
Platforms
2011
Brazil
Source: BTG Pactual.
11.6%
11.5%
11.1%
5.0%
4.0%
3.1%
3.5% 3.7%
3.3%
1.8%
1.5%
Source: IDC.
page 4
Colombia
Applications
Mexico
Chile
2012E
Colombia
2013E
Mexico
SONDA
25 February 2013
page 5
Chart 7: EBITDA breakdown by country (historical and forecast)
100%
400
Chart 5: IT spending growth around the world, 2012–2015 (CAGR)
16.6%
11.4%
6.2%
5.3%
Eastern Europe
Asia/Pacific
5.2%
India
Latin America
World
Source: IDC.
Sonda has been taking advantage of the expansion in Latin America’s IT services
industry and has been delivering outstanding growth, both in sales and EBITDA. We
expect this trend to continue (charts 6 and 7). By 2015, we are modeling for Sonda to
earn more than US$2bn (CLP1,010tn) in revenues and US$344mn (CLP172bn) in
EBITDA (assuming margins remain stable at the company’s long-term goal of 17%).
Chart 6: Revenue breakdown by country (historical and forecast)
100%
2,500
80%
2,000
80%
60%
1,500
60%
40%
1,000
40%
20%
500
20%
300
200
0%
2007
Chile
2009
Brazil
2011
Mexico
2013E
ROLA
0
2015E
Revenues (US$mn)
Source: Sonda, BTG Pactual.
100
0%
2007
Chile
Source: Sonda, BTG Pactual.
Pipeline of projects offers good visibility on revenue flow
Sonda’s pipeline of projects offers investors good visibility on what to expect in terms
of sales in the coming years. The company currently has approximately US$2bn of
projects in the pipeline and has been closing deals equivalent to 5-6% of its pipeline
per month (some US$100mn).
In 2011, it closed US$1.34bn in new contracts (contracts have an average lifetime of
3-6 years). In 2012, signed contracts dropped to US$1.27bn, mainly because the
2011 base was inflated by a massive US$180mn public transportation project sold in
Panama. Excluding the Panama deal, new contracts in 2012 would have jumped 9%
y/y. Almost 80% of all new contracts are closed in Brazil or Chile.
2009
Brazil
2011
Mexico
2013E
ROLA
2015E
Ebitda (US$mn)
SONDA
25 February 2013
Chart 8: Growth in new contracts by business (US$mn)
page 6
Chart 9: Growth in new contracts by country (US$mn)
100%
1,500
100%
1,500
67%
1,000
67%
1,000
33%
500
33%
500
0%
2006 2007 2008
Platforms
Applications
2009
2010 2011 2012
IT Services
New contracts (US$mn)
Source: Sonda, BTG Pactual.
0%
2006 2007 2008 2009
Chile
Mexico
New contracts (US$mn)
Source: Sonda, BTG Pactual.
Relatively well-diversified, high-profile client base
Sonda’s client base is relatively well diversified, with the top 10 clients comprising
25% of total sales (the top 50 represent 40% of sales). Its clients include some of the
most important corporations based in Latin America.
Chart 10: Well-diversified client base
47.9%
52.1%
39.9%
30.8%
25.0%
Top 10
Top 20
Top 50
Top 100
Others
Source: Company Reports.
Sonda is also relatively well diversified in terms of the businesses it serves, with
retail, finance, telecom, and manufacturing accounting for close to 70% of sales
(chart 11).
2010
2011
Brazil
ROLA
2012
SONDA
25 February 2013
Chart 11: Sonda’s businesses are spread across different industries
11%
25%
15%
11%
15%
14%
Retail
Manufacturing
Finance
Energy & Mining
7%
2%
Public Sector
Telecom & Media
Health
Others
Source: Company Reports.
3-year US$700mn investment plan (mainly M&A) to drive
extra growth
Since its IPO in 2006, Sonda has been proposing and executing 3-year business
plans aimed at accelerating organic growth and geographic expansion. In its first
business plan (2007-2009), Sonda invested US$350mn, half of which went toward
M&A deals, including the acquisitions of Procwork in Brazil and Red Colombia in
Colombia.
In its second plan, recently concluded (2010-2012), Sonda invested US$500mn. Of
that amount, US$280mn was used for M&A transactions, including the acquisitions of
Telsinc, Softeam, Kaizen, Pars, and Elucid in Brazil, Nextiraone in Mexico, Ceitech in
Argentina, and Quintec in Chile (table 1).
Table 1: Past M&A deals
Company
Country
Price (US$mn)
Sales (US$mn)
P/Sales
Jun-07
Feb-08
ProcWork
Red Colombia
Brazil
Colombia
118
12
152
27
0.8x
0.4x
Apr-10
Apr-10
Telsinc
Softeam
Brazil
Brazil
38
9
62
9
0.6x
1.0x
Jun-10
Kaizen
Brazil
7
15
0.5x
Sep-10
Nov-10
NextiraOne
Ceitech
Mexico
Argentina
27
7
30
15
0.9x
0.5x
Sep-11
Mar-12
Quintec
PARS
Chile
Brazil
117
55
184
77
0.6x
0.7x
May-12
Total
Elucid
Brazil
64
454
65
636
1.0x
0.7x
Source: Sonda, BTG Pactual.
The new expansion plan for 2013-2015 includes investments of US$700mn. Of that
amount, US$500mn is expected to be used for M&A (Sonda estimates that it may be
able to close US$70-75mn in deals in 2013, approximately US$150mn in 2014, and
the remaining US$275mn in 2015). The goal is to expand geographically, look for
page 7
SONDA
25 February 2013
page 8
specific business solutions, and improve Sonda’s presence in cloud computing and
other value-added services.
Sonda has mapped up to 40 potential acquisition targets across the region, adding up
to sales of approximately US$4bn. The prices of these new deals may be higher than
in the past, as private equity firms are shopping around. However, we believe Sonda
has an edge, as it offers the owner of the target firms an appealing opportunity for
continuity.
Over the past six years, Sonda has acquired 10 companies, spending US$450mn
and paying an average valuation of 0.7x sales – quite attractive given that Sonda is
trading at 1.9x sales. Even if average prices rise a bit, deals would likely remain
attractive.
We ran a sensitivity analysis assuming that Sonda fully executes the announced M&A
plan (margins of the acquired companies would be similar to Sonda’s margins in each
country). In this scenario, Sonda’s sales would grow 21% per year on average in the
next 3 years, and our target price would be CLP2,262 per share, 19% higher than our
official target.
Solid balance sheet to fund future M&A activity
After Sonda’s recent capitalization (it raised around US$300mn on December 4,
2012), its balance sheet substantially strengthened and is now ready to fund future
M&A deals. Its financial debt-to-Ebitda ratio is currently 0.56x, and its financial debtto-equity ratio is 0.27x. With such a strong balance sheet, raising new debt is unlikely
to be a problem.
Chart 12: Financial debt (net) / Ebitda
Chart 13: Financial debt (net) / Equity
2.00 x
0.80 x
0.40 x
0.00 x
1Q09
1Q10
1Q11
1Q12
0.00 x
1Q09
(2.00)x
1Q10
1Q11
1Q12
(0.40)x
Financial debt / Ebitda
Source: Sonda, BTG Pactual.
Financial net debt /Ebitda
Financial debt / Equity
Source: Sonda, BTG Pactual.
Approximately 20% of Sonda’s liabilities mature in 2013, but due to a very
conservative cash policy and its high cash flow generation, we believe Sonda can
easily meet all of its debt obligations.
Financial net debt / Equity
SONDA
25 February 2013
page 9
Chart 14: Debt maturities profile
120
100
80
60
40
20
0
2013
2014-15
2016-17
Financial debt (US$mn)
post 2018
Source: Sonda, BTG Pactual.
Stock performance reflects excellent execution
Sonda’s management team has executed its growth strategy superbly in the past few
years, and the company’s stock has consistently performed well.
Chart 15: Sonda’s stock performance since 2007
Chart 16: Sonda’s stock performance since 2012 vs. IPSA
1,900
1,700
4,800
1,100
1,500
4,400
300
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Source: Bloomberg.
Jan-12
Jan-13
1,300
Jan-12
4,000
Apr-12
Jul-12
SONDA
Source: Bloomberg.
Valuations are not a bargain but are justified, in our view
Sonda is trading at 26.7x 2013E P/E and 23.3x 2014E, a premium to its global peers
(at 13.2x and 11.6x, respectively) and to Totvs (at 24.1x and 21.2x, respectively). At
this point, Sonda is also trading at a premium to its 4-year historical average of 20.2x
(chart 17).
On an EV/EBITDA basis, it looks a bit cheaper, trading at 11.1x 2013E, compared to
Totvs at 15.6x (global peers are much cheaper, at 7.3x). However, Sonda’s current
EV/EBITDA multiple is also higher than its 4-year historical average of 9.3x (chart
18).
Our DCF-based target price of ChP1,900/share represents a target P/E of 30.6x and
target EV/EBITDA of 13.0x our 2013E forecasts.
Oct-12
Jan-13
IPSA
SONDA
25 February 2013
Chart 17: 12-month forward P/E (x)
page 10
Chart 18: 12-month forward EV/Ebitda (x)
28
13
20
9
12
5
2009
2010
2011
2012
2013
Source: BTG Pactual.
2009
2010
Source: BTG Pactual.
Though not a bargain, Sonda’s valuations are justified in our view by strong growth
prospects (especially when we consider potential M&A deals), a top-quality
management team boasting excellent execution in the past few years, and the fact
that it still derives the bulk of its EBITDA from Chile, a country perceived to have
relatively low risk compared to its Latin American peers.
Table 2: Global and regional comps
Companies
Wipro Ltd
Tata Consultancy Services Ltd
Satyam Computer Services Ltd
Infosys Ltd
NTT Data Corp
Itochu Techno-Solutions Corp
WNS Holdings Ltd
Accenture PLC
International Business Machines
Computer Sciences Corp
CGI Group Inc
AtoS
Cap Gemini SA
Mphasis Ltd
Indra Sistemas SA
HCL Technologies Ltd
Median
Totvs
Sonda
Ticker
WPRO IB
TCS IB
SCS IB
INFO IB
9613 JP
4739 JP
WNS UN
ACN US
Corp
IBM US
CSC US
GIB US
ATO FP
CAP FP
MPHL IN
IDR SM
HCLT IN
TOTS3 BZ
SONDA CI
Price
Local
405.70
1,448.10
117.85
2,806.75
273,900.00
3,805.00
14.43
75.00
199.31
47.90
27.42
55.81
36.55
371.05
9.08
720.20
42.90
1,656.90
Mkt. Cap
US$ mn
18,479
52,421
2,566
29,810
8,211
2,542
728
52,226
225,207
7,434
8,438
6,355
7,854
1,442
1,979
9,254
3,538
2,976
EV
US$ mn
16,766
50,576
2,007
25,660
11,242
1,900
726
47,033
247,471
n.a.
11,385
6,263
7,961
960
2,899
9,239
3,471
3,448
PE
2013E
15.1x
20.4x
11.3x
17.2x
19.8x
13.6x
14.3x
17.5x
11.9x
16.9x
13.9x
11.7x
12.3x
9.7x
9.4x
13.8x
13.8x
23.5x
26.7x
2014E
14.0x
18.4x
10.3x
15.8x
16.7x
12.5x
12.7x
15.9x
10.8x
13.6x
11.4x
10.8x
11.0x
9.2x
8.3x
12.7x
12.6x
20.7x
23.3x
EV/EBITDA
2013E
2014E
10.6x
9.7x
15.0x
13.4x
6.7x
6.4x
11.7x
10.6x
4.4x
4.3x
5.1x
4.7x
10.2x
8.5x
9.9x
9.3x
8.7x
8.3x
4.1x
3.9x
8.3x
7.4x
4.7x
4.4x
5.8x
5.4x
4.8x
4.5x
7.1x
6.5x
9.1x
8.5x
7.7x
7.0x
15.2x
12.9x
11.1x
9.9x
Source: Bloomberg, BTG Pactual.
Sonda’s stock liquidity has sharply improved since the follow-on in December 2012.
After the US$300mn offering, the 6-month ADTV has jumped to US$4-6mn per day
(vs. US$1.5-2.5mn per day previously).
2011
2012
2013
SONDA
25 February 2013
Chart 19: Liquidity has sharply improved since the follow-on
6,000
4,000
2,000
May-07
May-08
May-09
May-10
May-11
May-12
Source: Economatica.
Brazilian depositary receipts (BDRs) are a possibility
Sonda may want to list its stocks on the São Paulo Stock Exchange (Bovespa) in the
future via the Brazilian depositary receipt mechanism. We believe such a move could
make the Brazilian business more transparent, adding value to the stock, though
likely not in the short term.
page 11
SONDA
25 February 2013
page 12
12-month DCF-derived target price of CLP1,900/share
Our 12-month DCF-derived target price of ChP1,900/share uses a country-weighted
nominal WACC of 9.92%, based on an equity risk premium of 5.2% and beta of
0.894. We estimate perpetuity growth of 2.5% and a pre-tax cost of debt of 7.3%.
Dividends are likely to rise in coming years. Sonda has a 50% payout policy, and
based on our expectations of increased earnings, we are modeling for the dividend
yield to reach 1.6% in 2013.
Chart 20: Discounted cash flow calculation (ChPbn)
NPV (2014 - 2023)
Terminal value (+2023)
Chart 21: Construction of cost of capital
658
1,120
Total NPV (operating value)
1,778
Net debt + minority
123
Equity value
1,655
2.5
9.9
Growth rate in perpetuity (%)
WACC (% )
Shares outstanding (mn)
871.1
12-month target price (ChP/share)
1,900
Current price (ChP/share)
1,657
Expected return (% )
Dividend yield (% )
14.7
1.6
Total return (% )
16.3
Source: BTG Pactual.
Chile
Brasil
Mexico +
ROLA
Risk-free rate (% )
Equity risk premium (% )
5.60
5.20
8.85
5.20
8.00
5.20
Beta
0.89
0.89
0.89
Cost of equity (% )
10.25
13.50
12.65
Marginal tax rate (% )
20.0
35.0
35.0
After-tax cost of debt (% )
5.84
4.75
4.75
Target debt/equity
WACC (%)
30.0
8.93
30.0
10.87
10.0
11.86
Ebitda contribution (% )
Combined WACC (%)
57.9
9.92
24.4
17.7
Source: BTG Pactual.
Chart 22: NPV per share: sensitivity
Perpetuity growth (%)
WACC (%)
1.0
2.0
2.5
3.0
3.5
8.92
1,960
2,162
2,287
2,434
2,607
9.42
1,805
1,975
2,079
2,199
2,339
9.92
1,668
1,813
1,900
2,000
2,115
10.42
1,547
1,670
1,744
1,828
1,923
10.92
1,438
1,545
1,607
1,678
1,758
Source: BTG Pactual.
SONDA
25 February 2013
page 13
Sonda’s operations
Present in 10 countries in the region – but with the bulk of its business in Chile (45%
of sales), Brazil (34%) and Mexico (9%) – Sonda offers a complete array of IT
solutions to medium and large corporate clients. With sales of US$1.44bn in 2012,
Chile-based Sonda is the leading Latin American provider of IT services in the region.
The company is the 4th largest IT player in Latin America after global players IBM,
HP-EDS, and Accenture.
Its offers include IT services – Sonda’s main business (53% of sales, with services
ranging from IT outsourcing, technical support, help desk, systems integration,
network maintenance, etc.) – equipment sales (servers, storage equipment, PCs,
printers, etc., all accounting for 39% of sales), and its applications business (basically
software solutions, representing 8% of sales).
Chart 23: Sales by business
Chart 24: Sales by country
Applications
8.2%
Brazil
33.7%
IT Services
52.8%
Chile
44.9%
Mexico
8.9%
Platforms
39.0%
Source: Sonda, BTG Pactual.
ROLA
12.4%
Source: Sonda, BTG Pactual.
Chile: Still the best EBITDA margin
We expect Chile to provide ~45% of Sonda’s total revenues in 2013-2015. By
business line, we expect a ~47% contribution from IT services, ~49% from platforms,
and ~4% from applications.
Chart 25: Revenue breakdown by business line (historical and forecast)
Chart 26: Ebitda growth (historical and forecast)
500,000
100,000
28%
400,000
80,000
26%
300,000
60,000
24%
200,000
40,000
22%
100,000
20,000
20%
0
0
2006
2008
Platforms
Source: Sonda, BTG Pactual.
2010
It Services
2012
2014E
18%
2006
2008
Applications
EBITDA
Source: Sonda, BTG Pactual.
2010
2012
2014E
EBITDA Margin
SONDA
25 February 2013
page 14
We expect Chile to provide ~54% of Sonda’s total Ebitda in 2013, dropping to ~52%
in 2015. Margins in Chile, far above the sectors’ average, have been coming down
lately, and we think the trend is likely to continue, with margins eventually stabilizing
at around 20% LT (vs. 24% in 2010). In Chile, Sonda is a leading player in the IT
services market, with a ~25% market share.
Brazil: Growing the fastest
We expect the Brazilian operations to provide ~34% of Sonda’s total revenues in
2013-2015 and expect consolidation of the recent acquisitions (Pars and Elucid in
2012) to be the main driver of revenue growth post-2013. Organic growth and future
M&A deals may also help.
The most important business line in Brazil is IT Services, which represents ~60% of
total sales, followed by Applications (~26%). We expect Brazil to contribute ~30% of
Sonda’s total Ebitda in 2013-2015. Ebitda margin for the Brazilian operation is
expected to widen to 14-15% over 2013–2015. The fierce competitive environment
combined with rising labor costs (70% of cash costs, which have been rising in real
terms) make it difficult to see margins increasing above 15%.
Chart 27: Revenue breakdown by business line (historical and forecast)
400,000
Chart 28: Ebitda growth (historical and forecast)
60,000
300,000
16%
40,000
200,000
12%
20,000
100,000
0
0
2006
2008
Platforms
2010
It Services
2012
2014E
8%
2006
2008
Applications
Source: Sonda, BTG Pactual.
EBITDA
Source: Sonda, BTG Pactual.
Mexico: Increasing sales contribution
We expect the Mexican operations to provide ~9% of Sonda’s total revenues in 20132015. IT services (~53% of sales) is the most important business line, followed by
Platforms (~46%). We expect Mexico to provide ~8% of Sonda’s total Ebitda by 2015,
and future acquisitions could improve this contribution. We anticipate the Ebitda
margin in Mexico averaging ~15% in the coming years.
2010
2012
2014E
EBITDA Margin
SONDA
25 February 2013
Chart 29: Revenue breakdown by business line (historical and forecast)
100,000
page 15
Chart 30: Ebitda growth (historical and forecast)
15,000
18%
10,000
14%
5,000
10%
80,000
60,000
40,000
20,000
0
0
2006
2008
Platforms
2010
It Services
2012
2014E
6%
2006
2008
Applications
2010
EBITDA
Source: Sonda, BTG Pactual.
2012
2014E
EBITDA Margin
Source: Sonda, BTG Pactual.
ROLA (Rest of Latin America): important participation from Colombia
Sonda also has businesses in Colombia, Argentina, Panama, Costa Rica, Ecuador,
Peru, and Uruguay. The largest revenue contribution comes from Colombia and
Argentina. We expect operations in these countries as a whole to provide ~12% of
Sonda’s total revenues in 2013–2015, with ~51% of this coming from IT services and
~41% from Platforms. EBITDA contribution may reach some 10% of total Ebitda
through 2015. We expect the Ebitda margin to widen to an average of ~13% over the
next few years.
Chart 31: Revenue breakdown by business line (historical and forecast)
Chart 32: Ebitda growth (historical and forecast)
160,000
20,000
16%
120,000
15,000
14%
80,000
10,000
12%
40,000
5,000
10%
0
0
2006
2008
Platforms
Source: Sonda, BTG Pactual.
2010
It Services
2012
2014E
8%
2006
Applications
2010
EBITDA
Source: Sonda, BTG Pactual.
The competitive environment: tough, especially in Brazil
The IT services business is very competitive in Latin America. Competitors range
from global suppliers like IBM, HP/EDS and Accenture to small local providers of
niche solutions.
Across the region, Sonda’s main competitors are global players IBM and HP/EDS,
which offer a complete array of services (like Sonda), target medium and large
corporations, have a history of providing services in the region, and operate in most
markets.
2008
2012
2014E
EBITDA Margin
SONDA
25 February 2013
The competitive environment is especially tough in Brazil, where Sonda not only
competes against global players, but also against relatively large local players like
Tivit (an important rival), CPM, Stefanini and very small niche players with aggressive
practices when it comes to labor legislation. In Chile, competition is relatively mild,
with Sonda being a top player.
The competitive environment in the region pressures margins. Aiming to keep
margins stable at current levels, Sonda has been: i) consolidating its geographic
expansion, organically and via M&A; ii) working to improve its revenue mix towards
higher-margin businesses (more IT outsourcing, BPO, value-added platforms, data
centers, cloud computing, etc.); iii) increasing the percentage of recurring revenues;
and iv) actively managing its labor costs by promoting younger, cheaper employees
from within the company’s ranks.
page 16
SONDA
25 February 2013
Risks of investing in Sonda
In our view, the main concerns associated with investing in Sonda are: i) execution of
the expansion plan; ii) deterioration in the global macro-economic environment; iii)
currency variations; iv) termination of existing contracts; and v) tax contingencies.
Below, we discuss some of them in more detail.
Executing the proposed expansion plan
The greatest uncertainty is associated with executing the proposed expansion plan.
The company is looking to spend US$500mn on M&A through 2015 – a challenging
figure given the size of past deals. If the company is not able to execute the plan, the
stock may suffer.
Currency changes could add volatility to reported earnings
Sonda reports results in Chilean pesos. As it grows outside Chile, mainly in Brazil
(which already accounts for around 40% of sales), currency fluctuations may play a
key role in the company’s results. Today, changes to the Brazilian real related to the
Chilean peso can have a considerable impact on Sonda’s reported earnings.
Tax contingencies
In the past, Sonda was forced to provision for tax contingencies related mainly to past
acquisitions. For all future M&A deals, Sonda is setting up escrow accounts to face
potential new liabilities from the acquired companies. Although the company is more
cautious now, we cannot completely rule out future tax liabilities.
page 17
SONDA
25 February 2013
Appendix I: Company overview
After the capital increase on December 4, 2012, the Navarro family holds 46.96% of
Sonda. The remaining 53.04% of the shares is the float; approximately 13.8% is held
by Chilean pension funds (long-term investors). Outstanding shares total 871.06mn.
Chart 33: Ownership, February 2013
Pension funds
13.8%
Navarro family
47.0%
Others
39.3%
Source: Sonda, BTG Pactual.
Sonda was founded in 1974 by Andres Navarro Haeussler and Copec, a principal
client. Since then it has spread information technology to a wide variety of companies
in Latin America. In the 1970s, it became the Chilean representative of Digital
Equipment Corporation (DEC), which provided it with cutting edge technology and the
knowhow to develop software applications and IT services. Through its alliance with
DEC, Sonda started to design and produce proprietary software for clients including
pension funds and the banking sector.
It expanded gradually in LatAm, opening its first international subsidiary in 1984. It
now has a presence in Argentina, Ecuador, Brazil, Uruguay, Colombia, Costa Rica,
Peru and Mexico. In addition to its expansion in LatAm, it has improved and
expanded the IT services and software provided to clients. It now provides a broad
array of IT services and software covering a wide range of sectors, including industry,
commerce, banking, finance, public utilities, social security, state administration,
mining, transportation, forestry, education and health.
There were several changes of ownership in the 1990s and early 2000s. First, DEC
purchased Copec’s 55% share. Several years later, Compaq acquired DEC, and with
it, DEC’s interest in Sonda. In 1999, CTC purchased Compaq’s interest, plus an extra
5% from the Navarro family, increasing its ownership of the firm to 60%. Finally, in
2002, the Navarro family bought back CTC’s 60% interest and sold 12.6% to Intel
Capital and the IFC (International Finance Corporation) – both of which are now no
longer stockholders.
page 18
SONDA
25 February 2013
Appendix II: Market overview
The following is an excerpt from our Initial Opinion of Sonda released on April 14,
2009; it gives an overview of Sonda’s three main operations.
IT Services
This is a broad range of services led by technical support, consultancy, and IT
outsourcing. These services have the largest growth potential in the IT industry and
have become of significant importance to clients, since they add value to their
business operations. Sonda’s competition in this segment comprises international
players, such as IBM Global Services and HP-EDS, and local players such as CPM
in Brazil, Hildebrando and KIO in Mexico, and Entel, Quintec and Adexus in Chile
(where Sonda has a 31% market share).
In IT outsourcing, Sonda provides operational and commercial continuity
through an operating IT platform, enabling clients to focus on running their
business. This can involve data center services, data storage, ASP services,
BPO services, PC and basic software rental, and/or full-service outsourcing.
In IT support & management, Sonda provides a broad range of support services
focusing on increasing users’ productivity and satisfaction levels. The most
common service is IT support, which includes the installation, operation,
updating and maintenance of hardware and software platforms. Sonda also
provides trouble-shooting from a 24/7 helpdesk.
Overall IT professional services include systems integration.
Hardware
This business area provides clients with hardware, basic software, hardware tools,
networks and communication platforms: purchased, or leased, or operated in an
outsourcing format. The importance of this business has decreased in Sonda’s sales
mix as the industry has become more commoditized, but it is still strategically
important, as it provides a link with the main technology providers in the industry and
is also a base from which to offer clients other services.
This business area offers:
Hardware: Application and data servers, storage and backup devices, PCs,
PDAs, printers, projectors, switching and routing systems, wireless internet
systems, data capture systems, Wi-Fi infrastructure, labeling systems and UPC
reading systems.
Basic
software:
Operating
systems,
data
backup
software,
database
management software, application servers, e-mail, antivirus and firewalls.
Communications: Communication systems, Internet and security.
page 19
SONDA
25 February 2013
Software applications
Sonda
designs,
administrative
analyzes,
and
and
operational
develops
processes.
software
It
applications
produces
to
individual
support
software
components, customized software, missing pieces of software, and integrated
software – and also implements third-party software, such as SAP.
It offers: (1) generally applicable business applications (e.g. its own ERP FIN700); (2)
industry-specific applications (e.g. for pension funds, hospital information systems,
and banking); and (3) tailor-made software solutions.
Among the multiple software applications designed by Sonda, the most important are:
ERP FIN700: Used by more than 1,000 Chilean SMEs in several industries,
ERP FIN700 is one of the leading enterprise resource planning softwares in the
Chilean market. Designed and produced entirely by Sonda, it generates,
integrates and consolidates an organization’s accounting, finance, operational
and administrative information.
Solutions for pension funds (AFP’s): Since the inception of the Chilean Pension
Fund system in 1980, Sonda has been the AFP’s leading provider of IT. These
solutions include consulting services for AFP’s, development, adaptation and
integration of the applications, data migration and outsourcing. Having proved to
be successful, these solutions have been implemented in Latin American
countries, including Argentina, Brazil, Mexico and Peru, and also exported to
Nigeria.
Solutions
for
the
healthcare
industry:
These
include applications
for
management of private and public healthcare providers, insurance companies
and service networks. Sonda has implemented these in Chile, Colombia and
Argentina.
page 20
SONDA
25 February 2013
Appendix III: Past acquisitions
Telsinc (April 24, 2010)
On April 24, 2010, Sonda S.A. acquired full ownership of the Brazilian company
Telsinc, founded in 1994, a leader in integration of communications, virtualization and
security solutions, which focuses on offering integrating solutions and services in the
areas of cloud computing, communication, virtualization, datacenter, security and
telepresence, among others. Telsinc has business agreements with leading supplier
companies in the market such as Cisco and VMware. Telsinc is one of Cisco’s main
allies in Brazil; it has Cisco Gold Partner certification and the largest number of
certifications and specializations in the country. The acquisition of Telsinc entailed an
investment of R$66mn, approximately US$38mn, for Sonda. Telsinc’s revenue in
2009 amounted to R$108mn, equivalent to approximately US$62mn. The acquisition
of Telsinc has enabled extending and upgrading Sonda’s offer in the area of
communications, virtualization and security solutions in Brazil and Latin America,
making it the regional leader in providing such solutions.
Softeam (April 29, 2010)
On April 29, 2010, Sonda acquired full ownership of the Brazilian company Softeam,
one of the leading providers of software and outsourcing services in Brazil ("BPO" –
Business Process Outsourcing) for global tax compliance services in large
companies. Softeam offers software and services oriented mainly to solutions for the
tax and accounting Public Digital Recording System (SPED), electronic invoicing and
BPO services for tax and accounting processes. Its products and services are used
by more than 200 top-ranking client companies in Brazil, and its solutions can be
integrated with different ERPs such as SAP, Oracle and Microsoft. The acquisition of
Softeam and its technology entailed an investment of R$15mn for Sonda, equivalent
to approximately US$8mn. Softeam’s revenue in 2009 was R$16mn, equivalent to
approximately US$9mn. This acquisition enabled Sonda to broaden its offer of valueadded solutions and boost and extend its existing offer in the sphere of software
solutions for the growing needs of clients related to the tax obligations of their
companies. It makes Sonda the undisputed leader in Brazil in this solutions segment
as well.
NextiraOne (June 17, 2010)
On June 17, 2010, Sonda, through its subsidiary Sonda México S.A. de C. V., signed
a purchase contract for 100% of the shares of the Mexican company
NextiraOneMexico S.A. de C.V., one of the biggest companies offering virtualization,
communications and security integration services in Mexico. The operation for
purchasing and acquiring 100% of the shares of the Mexican company Mexicana
NextiraOne was concluded on September 2, 2010, after approval by the Mexican
Federal Competition Commission. The purchase price was US$29mn, for transfer of
shares following the Commission’s approval. The transaction will increase Sonda’s
annual sales volume from operations in Mexico to around US$100mn. This
investment falls within the framework of the investment plan announced by the
Company in 2009.
page 21
SONDA
25 February 2013
Kaizen (June 24, 2010)
On this date, Sonda’s Brazilian subsidiary signed a contract for the purchase of full
ownership of the Brazilian company Kaizen, one of the leading companies in
integration of virtualization solutions. The acquisition entailed investment of R$12mn
for Sonda, equivalent to approximately US$6.7mn. This could increase by up to
37.5%, depending on the results the company obtains in 2010. Kaizen’s revenue in
2009 was R$27mn, equivalent to approximately US$15mn; its revenue in the fourth
quarter of the year was R$10mn, equivalent to US$5.6mn. Founded in 1995, Kaizen
is one of the most important and innovative companies in Brazil in the field of IT
services and solutions integration in the virtualization, cloud computing, storage and
security areas. It has a portfolio of more than 150 top-ranking client companies. It is
EMC’s main partner in Latin America, and the company with the largest number of
EMC certifications outside the United States. It has business agreements with other
worldwide leaders in the industry, such as VMware and SAP.
Ceitech (November 4, 2010)
On November 4, 2010, Sonda acquired full ownership of the Argentine company
Ceitech, leader in IT services rendering in Argentina. Ceitech is well known for its
many years of experience serving large companies in various sectors of the
economy, with services covering 2,000 points, attending to more than 90,000 users in
Argentina. The acquisition of Ceitech entails investment of A$25mn for Sonda,
equivalent to approximately US$6.3mn. This was to increase by up to 20%
depending on whether targets were met by December 31, 2010. Ceitech’s annual
revenue is US$15mn, which, added to the revenue of Sonda’s current operations in
Argentina, would raise the volume of business in that country to more than US$30mn
per year. Note that 30% of Ceitech’s revenue is recurring revenue from service
contracts. Domestic demand in Argentina has been brisk for several years. The
country ranks third in IT expenditure in Latin America, with US$4.3bn in 2009, and a
10% per year growth rate estimated for 2009–2011.
Quintec (September 12, 2011)
Quintec is a direct competitor of SONDA in Chile. It is an IT company with operations
in Chile, Colombia, Brazil, Argentina and Peru. In 2010 it reported consolidated
revenues of US$173mn, and for 2011 reported revenues of ~US$185mn, led by Chile
(75% of the total), followed by Colombia (~15%), and other countries (~10%). Ebitda
has been decreasing since 2008, affecting the Ebitda margin, which is not in line with
sales growth.
Pars (March 9, 2012)
Founded in 1981, Pars provides software solutions for engineering, architecture, 2D
and 3D design, and geographic information systems and is the largest operation of
the American company Autodesk in Latin America, one of its most important allies in
the world. Pars has offices in Rio de Janeiro and Sao Paulo (around 100 personnel),
a sales channel covering its operations in Brazil, and business agreements with other
leading companies in the software industry.
page 22
SONDA
25 February 2013
Autodesk is a worldwide leader in software products for engineering, architecture,
design, entertainment, and geographic information systems. With the addition of
Pars, Sonda became the main business partner of Autodesk in Latin America.
For Sonda, the acquisition represented an investment of R$94.7mn, (~US$55mn),
with no debt and little cash to sustain operations. The acquisition is small, indeed
marginal, relative to Sonda’s revenues (~US$1.0bn in 2011), but the firm will use its
sales channel to offer integral solutions to its customers. This amount could increase
depending on the company’s financial performance in 2012 and 2013, under a clause
to motivate the current owners to maintain the company’s high past revenue growth
rates.
Elucid (May 7, 2012)
Founded in 1991, Elucid is a leader in providing software solutions and services to
distribution, transmission and generation companies for electricity and other utilities,
including water and gas. The company is headquartered in Sao Paulo, Brazil, and its
customer base includes 25% of the electricity distributors, covering more than 35% of
the country. Its portfolio includes software for customer management, billing, mobile
solutions and technical services, implementation, support, maintenance and
outsourcing. Its 60 customers include the largest power utilities in Brazil, which
together have sales of around R$50bn per year (~US$26mn) – clients like Eletrobrás,
Network Power, Elektro, CPFL, Copel and Celesc. The acquisition represents an
investment of R$140mn (~US$74mn) for Sonda, an amount that could increase
depending on the company’s financial performance in 2012 and 2013, under a clause
to motivate the current owners to maintain the company’s high past revenue growth
rates. The acquisition is small, indeed marginal relative to Sonda’s revenues
(~US$1.0bn in 2011), though it should further consolidate the company’s position as
a regional leader in IT services in addition to reinforcing its operation in Brazil, the
largest market in the region. The purchase should also expand its offering as the
largest regional provider of solutions for the public sector. Elucid’s revenues in 2011
totaled R$123mn (~US$65mn).
page 23
SONDA
25 February 2013
SONDA
page 24
SOND A
Income Statement (CLPmn)
Revenue
Operating expenses (ex depn)
EBITDA (BTG Pactual)
Depreciation
Operating income (EBIT, BTG Pactual)
Other income & associates
Net Interest
Abnormal items (pre-tax)
Profit before tax
Tax
Profit after tax
Abnormal items (post-tax)
Minorities / pref dividends
Net Income (local GAAP)
Net Income (BTG Pactual)
Tax rate (%)
Per Share
EPS (local GAAP)
EPS (BTG Pactual)
Net DPS
BVPS
Cash Flow (CLPmn)
Net Income
Depreciation
Net change in working capital
Other (operating)
Net cash from operations
Cash from investing activities
Cash from financing activities
Bal sheet chge in cash & equivalents
Balance Sheet (CLPmn)
Cash and equivalents
Other current assets
Total current assets
Net tangible fixed assets
Net intangible fixed assets
Investments / other assets
Total assets
Trade payables & other ST liabilities
Short term debt
Total current liabilities
Long term debt
Other long term liabilities
Total liabilities
Equity & minority interests
Total liabilities & equities
12/2008
413,639
(342,517)
71,121
(21,516)
49,605
(19,490)
1,920
0
32,036
(7,066)
24,970
0
(1,657)
23,313
23,263
22
12/2008
30.29
30.22
30.90
361.61
12/2008
23,263
21,516
(23,050)
(2,643)
19,086
(25,512)
4,847
(17,336)
12/2008
43,260
140,195
183,456
61,632
89,374
45,890
380,351
56,382
9,320
65,701
24,904
7,489
98,094
282,257
380,351
Company Profile:
Financial ratios
EBITDA margin
Operating margin
Net margin
RoE
RoIC
EBITDA / net interest
Net debt / EBITDA
Total debt / EBITDA
Net debt / (net debt + equity)
Chile-based Sonda is the leading Latin American provider of IT
services in the region. The company is the 4th largest IT player
in Latin America after global players IBM, HP-EDS, and
Accenture. Is present in 10 countries in the region, but with the
bulk of its businesses generated in Chile (45% of sales), Brazil
(34%) and Mexico (9%), Sonda offers a complete array of IT
solutions to medium and large corporate clients. Its offerings
include IT services (53% of sales, with services ranging from IT
outsourcing, technical support, help desk, systems integration,
network maintenance, etc.), platforms/equipments (servers,
storage equipment, PCs, printers, etc. accounting for 39% of
sales), and applications (basically software solutions that are
8% of sales).
12/2009
374,135
(305,731)
68,405
(20,493)
47,912
(4,061)
(419)
0
43,432
(9,566)
33,866
0
(2,395)
31,471
31,471
22
12/2009
40.82
40.82
25.24
367.64
12/2009
31,471
20,493
25,021
38,104
115,088
(30,664)
21,167
83,742
12/2009
127,002
125,733
252,735
50,841
112,843
36,864
453,282
66,940
10,928
77,868
70,795
17,631
166,294
286,988
453,282
12/2010
445,481
(368,504)
76,976
(18,859)
58,118
(11,592)
(2,717)
0
43,808
(8,270)
35,539
0
(1,993)
33,546
33,546
19
12/2010
43.51
43.51
24.69
377.83
12/2010
33,546
18,859
(4,874)
(1,975)
45,555
(69,197)
(20,445)
(40,347)
12/2010
86,655
174,541
261,196
59,137
153,077
33,579
506,989
110,873
12,610
123,483
74,360
14,251
212,094
294,895
506,989
12/2011
592,819
(501,156)
91,663
(22,694)
68,968
(12,199)
(3,511)
0
53,258
(12,599)
40,659
0
(1,433)
39,225
39,225
24
12/2011
50.87
50.87
66.26
395.84
12/2011
39,225
22,694
(39,965)
(23,273)
(1,318)
(73,277)
11,582
(52,317)
12/2011
34,338
236,197
270,536
76,950
172,323
56,968
576,776
132,565
36,696
169,261
87,196
10,999
267,455
309,321
576,776
12/2012
681,192
(563,844)
117,348
(31,792)
85,556
(9,563)
(7,605)
0
68,388
(19,448)
48,940
0
(3,350)
45,590
45,590
28
12/2012
59.13
59.13
160.80
510.69
12/2012
45,590
31,792
12,315
4,206
93,904
(69,887)
24,600
31,476
12/2012
65,814
239,750
305,564
89,113
237,093
63,336
695,106
148,432
21,709
170,142
83,814
42,642
296,597
398,508
695,106
12/2013E
774,334
(641,737)
132,597
(36,294)
96,303
(5,843)
(9,487)
0
80,973
(23,027)
57,946
0
(3,808)
54,138
54,138
28
12/2013E
62.15
62.15
26.17
488.04
12/2013E
54,138
36,294
(12,650)
7,386
85,168
(66,257)
(22,795)
(3,884)
12/2013E
61,930
273,144
335,074
113,760
242,409
70,815
762,058
169,177
21,709
190,886
83,814
53,699
328,399
433,659
762,058
12/2014E
882,526
(732,139)
150,388
(41,507)
108,881
(6,566)
(9,537)
0
92,777
(26,384)
66,393
0
(4,339)
62,054
62,054
28
12/2014E
71.24
71.24
31.08
528.21
12/2014E
62,054
41,507
(19,004)
7,917
92,474
(83,813)
(27,069)
(18,409)
12/2014E
43,521
311,886
355,407
151,414
247,061
78,295
832,177
188,915
21,709
210,624
83,814
64,756
359,194
472,983
832,177
12/2015E
1,009,833
(837,405)
172,428
(47,556)
124,872
(7,432)
(9,697)
0
107,743
(30,640)
77,103
0
(4,965)
72,138
72,138
28
12/2015E
82.82
82.82
35.62
575.40
12/2015E
72,138
47,556
(17,582)
8,543
110,655
(97,105)
(31,027)
(17,477)
12/2015E
26,044
357,378
383,422
196,892
251,132
85,774
917,220
216,824
21,709
238,533
83,814
75,814
398,161
519,059
917,220
12/2011
15.5%
11.6%
6.6%
13.2%
22.9%
26.1x
1.0x
1.4x
22.5%
12/2012
17.2%
12.6%
6.7%
13.0%
23.9%
15.4x
0.3x
0.9x
9.1%
12/2013E
17.1%
12.4%
7.0%
13.2%
24.7%
14.0x
0.3x
0.8x
9.1%
12/2014E
17.0%
12.3%
7.0%
14.0%
25.2%
15.8x
0.4x
0.7x
11.6%
12/2015E
17.1%
12.4%
7.1%
15.0%
25.8%
17.8x
0.5x
0.6x
13.3%
Source: Company reports and BTG Pactual estimates. Valuations: based on the last share price of that year(E)
based on share price as of 21 February 2013
SONDA
25 February 2013
page 25
Required Disclosures
This report has been prepared by Banco BTG Pactual S.A..
The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results.
BTG Pactual
Rating
Buy
Neutral
Sell
Definition
Coverage *1
IB Services *2
Expected total return 10% above the company’s sector
average.
Expected total return between +10% and -10% the
company’s sector average.
Expected total return 10% below the company’s sector
average.
49%
56%
46%
50%
5%
33%
1: Percentage of companies under coverage globally within the 12-month rating category.
2: Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within the past 12 months.
Absolute return requirements
Besides the abovementioned relative return requirements, the listed absolute return requirements must be followed:
a) a Buy rated stock must have an expected total return above 15%
b) a Neutral rated stock can not have an expected total return below -5%
c) a stock with expected total return above 50% must be rated Buy
Analyst Certification
Each research analyst primarily responsible for the content of this investment research report, in whole or in part, certifies that:
(i) all of the views expressed accurately reflect his or her personal views about those securities or issuers, and such recommendations were elaborated independently, including in relation to Banco
BTG Pactual S.A., Celfin Capital S.A. Corredores de Bolsa. and/or its affiliates, as the case may be;
(ii) no part of his or her compensation was, is, or will be, directly or indirectly, related to any specific recommendations or views contained herein or linked to the price of any of the securities
discussed herein.
Research analysts contributing to this report who are employed by a non-US Broker dealer are not registered/qualified as research analysts with FINRA and therefore are not subject to the
restrictions contained in the FINRA rules on communications with a subject company, public appearances, and trading securities held by a research analyst account.
Part of the analyst compensation comes from the profits of Banco BTG Pactual S.A. or Celfin Capital S.A. Corredores de Bolsa as a whole and/or its affiliates and, consequently, revenues arisen
from transactions held by Banco BTG Pactual S.A., Celfin Capital S.A. Corredores de Bolsa and/or its affiliates.
Statement of Risk
Defensive player, concerns mainly macro
In our view, the main concerns for investment in Sonda would be the following possibilities: (1) delay in the expansion plan; (2) deterioration of the global macro environment; (3) FX variations; (4)
termination of significant recurrent contracts; (5) aggressive competition from large global players, limiting expansion; and (6) tax contingencies – risks for any international company – though we
believe recurring revenues make Sonda a defensive play.
Company Disclosures
Company Name
SONDA 18, 19, 20, 21, 22
Reuters
SONDA.SA
12-mo rating
Buy
Price
CLP1,656.90
Price date
21-2-2013
18. As of the end of the month immediately preceding the date of publication of this report, neither Celfin Capital S.A. Corredores de Bolsa nor its affiliates or subsidiaries beneficially own 1% or
more of any class of common equity securities
19. Neither Celfin Capital S.A. Corredores de Bolsa nor its affiliates or subsidiaries have managed or co-managed a public offering of securities for the company within the past 12 months.
20. Neither Celfin Capital S.A. Corredores de Bolsa nor its affiliates or subsidiaries engaged in market making activities in the subject company's securities at the time this research report was
published.
21. Celfin Capital S.A. Corredores de Bolsa or its affiliates or subsidiaries have not received compensation for investment banking services from the companies in the past 12 months.
22. Celfin Capital S.A. Corredores de Bolsa. or its affiliates or subsidiaries do not expect to receive or intends to seek compensation for investment banking services from the companies within the
next 3 months.
SONDA
25 February 2013
SONDA
Stock Price (CLP)
Price Target (CLP)
2000.0
1800.0
1600.0
1400.0
1200.0
1000.0
800.0
600.0
400.0
Buy
Neutral
Sell
No Rating
Source: BTG Pactual and Economatica. Prices as of 21 February 2013
25-Feb-13
25-Nov-12
25-Aug-12
25-May-12
25-Feb-12
25-Nov-11
25-Aug-11
25-May-11
25-Feb-11
25-Nov-10
25-Aug-10
25-Feb-10
0.0
25-May-10
200.0
page 26
SONDA
25 February 2013
page 27
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