FQT
✈️ Frequentis provides essential, mission-critical air traffic control communication software for airports, ensuring stable demand even during downturns like COVID.
🔒 The company benefits from a strong market position (30% share), high barriers to entry (reputation, government clients, R&D), significant switching costs for customers, and a debt-free balance sheet.
💰 With 55% recurring revenue, strong family ownership (70%), and a strategic shift towards higher-margin SaaS models, Frequentis presents an attractive opportunity, especially for retail investors due to its small size and low float, particularly following recent price dips.
@adriarivero:
“Frequentis is another small, unknown, but high-quality European company. It provides the software for air traffic control in airport towers. This is a critical service; airports cannot stop using this software, regardless of traffic volume, which is why its profits continued to rise even during COVID. It has a 30% market share, barriers to entry due to reputation (most clients are governmental), significant R&D investment, and high switching costs. Switching software would be costly for airports due to downtime and retraining staff, similar to switching from Microsoft Excel. The company has no debt, 90% of clients are governmental, and 55% of revenue is recurring. A family holds 70% of the shares (skin in the game). It’s ideal for individual investors because it’s very small (around €450 million market cap) with a low float (22% available for trading), meaning large funds struggle to invest, but individuals can. It has grown double digits for four consecutive years. The key is its margins. It has two segments: air traffic management and public safety communication (police, fire departments). In public safety, it doubled margins by transitioning from licenses to SaaS (5% to 10%). Now, it aims to do the same with its main air traffic segment, investing now (lowering current margins) to achieve higher recurring revenue and potentially double operating margins from 5% to 10% in the larger segment. This transition is a major catalyst and could make the company quite cheap. Recent results have been strong, with margins improving according to plan. Valuation suggests an attractive long-term return at the current price, although I am personally invested. The stock recently dipped to attractive levels around €32-33, offering potential entry points.”
Watch the exact part of the video where @adriarivero talks about Frequentis AG here:
Watch the video on YouTube
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