Orion Securities Conclusion

Fara is a market leader in the Nordics with a strong position to expand to CEE countries. The majority of the investments have already been made and the company is expected to achieve positive EBITDA in 2010. A number of triggers expected in H1 2010 should serve as reprising catalyst. Thus we believe that Fara is an attractive case and recommend Buying the stock with a target price of NOK 1,40 per share.

Leader in ticketing solutions in the Nordics

• We initiate coverage of Fara – a developer of IT solutions for public transport companies. The company was established in 2005 and undertakes its main activities in the Nordics. In addition, Fara is now well prepared for the expansion to other European countries as well.
• Following the expansion through acquisitions, Fara went through a heavy investment phase necessary to consolidate acquired platforms. That period is expected to end in H1 2010 leading to the first year with positive EBITDA in the company’s history.
• There are a number of triggers ahead, as we expect to see breakthrough tender wins in H1 2010 in CEE (Central Eastern Europe) in addition to the new contracts in the domestic markets.
• Valuation is attractive as our DCF based fair value indicates an upside of 102% with peer multiples showing an upside, although somewhat more modest. Combined valuation points to a 6-month target price of NOK 1,40 per share. Hence, we issue Buy recommendation.

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