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TMT Online ObServer：Reassessing the potential value of Linx to TOTVS
2024-08-15 03:01

Investment Rating - The investment rating for TOTVS is Neutral, with a price target of R33.50,implyinga 24xmultipleto2025Eearnings[16].CoreInsights−TheacquisitionofLinxbyTOTVSisseenasstrategicallypositive,asitcomplementsTOTVS′portfolioandcouldunlocknewgrowthavenues,particularlyintheTechFinvertical[4][7].−Linx′scurrentmonetizationisonly0.333.50, implying a ~24x multiple to 2025E earnings [16]. Core Insights - The acquisition of Linx by TOTVS is seen as strategically positive, as it complements TOTVS' portfolio and could unlock new growth avenues, particularly in the TechFin vertical [4][7]. - Linx's current monetization is only 0.3% of its estimated R350 billion GMV, indicating significant room for expansion [3]. - The integration of Linx's software solutions into TOTVS' offerings will require adaptation for small and medium-sized businesses (SMBs), which may necessitate further investments [3][4]. Summary by Sections TOTVS and Linx Acquisition - The CEO of TOTVS stated that acquiring Linx remains strategic, as Linx's capabilities complement TOTVS' offerings [1]. - Linx was acquired by Stone in 2020 for R6.8billion,andtheintegrationhasbeenongoingsincethen[1][2].MarketPositionandClientBase−Linxservesapproximately70,000mid−largeretailerswithaGMVofR6.8 billion, and the integration has been ongoing since then [1][2]. Market Position and Client Base - Linx serves approximately 70,000 mid-large retailers with a GMV of R300 billion, providing a new client base for TOTVS [1]. - Most of Linx's clients are larger enterprises, with only 11% being SMBs, which presents a challenge for scaling Linx's solutions to TOTVS' typical client base [3][4]. Financial Metrics and Growth Potential - The average monthly ticket for clients using Linx's ERP/POS software is R$160, supporting the potential for increased cross-selling opportunities [2]. - The report highlights that 50% of Linx's sub-acquiring clients have migrated to Stone, indicating successful integration efforts [2]. Valuation and Market Outlook - The valuation for Stone is based on a 2025E PE target multiple of 11x, reflecting the broader economic environment and regulatory changes impacting the Brazilian financial sector [8]. - The report suggests that TOTVS could benefit from future cross-selling of Business Performance solutions to Linx's customer base [4].