15. February 2021 | 11:12 CET
SAP, Revez, IBM: Where digitization creates value
Anyone looking to invest in digitization today rarely finds great growth opportunities on the stock market. Many innovative companies are only open to venture capitalists and develop their groundbreaking products away from the major trading centers. If the companies are successful, large multinationals are ready and make a takeover bid. It is not uncommon for revolutionary technology to be absorbed into billion-dollar corporations and go under a little. We explain where IT investments are still worthwhile today and where investors should be cautious, using the examples of SAP, REVEZ and IBM.
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ISIN: SGXE83751573 , DE0007164600 , US4592001014
SAP: Cloud as a beacon of hope
If Germans want to invest in software, SAP's stock is not far behind. The Company is valued at more than EUR 120 billion and is, therefore, a big ship. Anyone expecting growth here should think in terms of ranges that are normal for the industry. These are growth rates of between 8% and 12%. Most recently, SAP's figures for the first nine months of the fiscal year managed sales growth of only 1.5%.
Nevertheless, the bottom line was a profit of EUR 3.3 billion. SAP makes just under 60% of its sales with its software, which is standard in many companies. In addition, there is a cloud business (approx. 25%) and consulting around digitization and SAP products (approx. 16%). The most significant growth for SAP is expected to come from around the cloud in the next few years. The Company has already been pushing remote solutions in the wake of the pandemic.
For the year as a whole, SAP expects lower sales but increasing cash flow. The Company should invest these funds sensibly. However, the twelve-month share price shows that the market does not trust the Company with real innovations. The share price is currently down by around 12% and struggling to get free, but the big break is not expected for the time being. SAP is solid and even offers a dividend - but nothing more.
Revez: Digitization for renowned customers in Asia
The stark opposite of SAP is Revez from Singapore. With a market capitalization of only around EUR 20 million, the technology service provider and innovation driver's shares are a flawless small-cap. Revez offers customers solutions around virtual worlds and multimedia, such as virtual meeting rooms, artificial intelligence and machine learning, cybersecurity, digital media offerings, and automation solutions in the industry. Based in Singapore, Revez serves clients throughout Asia, primarily in Abu Dhabi, China, Malaysia, India, Hong Kong, Indonesia, South Korea, Thailand and Vietnam. According to Revez, there is excellent potential for digitalization and automation in Southeast Asia in particular.
Founded in 2010, the Company is debt-free and currently has around SGD 6 million in cash. Revez cites a gross margin range of between 45% and 65%, and sales are also expected to grow between 10% and 15% in the coming months. Revez currently maintains more than one hundred customer relationships, including names such as Fitness First, Pepsi, Subway and Johnny Walker.
Singaporean government institutions also rely on Revez, including the Prime Minister's administration. The share has only been traded in Germany for a few weeks and has been extremely dynamic during this time. Investors who want to invest in a high-growth digital company in one of the few emerging regions of the world are guided by the price on the home stock exchange in Singapore and consistently limit securities orders.
IBM thrives on the past
One Company that has been the quintessential digital solutions provider for decades is IBM. Important business areas are currently cloud and software (30%), management consulting (about 20%) and technology services (about 35%). Above all, the business with software and cloud solutions is developing well - even if the growth only comprises around 5%. However, other areas are languishing and struggling with high costs. IBM is planning job cuts to get a grip on costs. Parts of the business are also to be spun off, making IBM fit for the future.
IBM has a great name and is undoubtedly still innovative in many areas. The Company is currently pushing ahead with a project to digitize the German healthcare system - German investors can check out the results for themselves once the measures have been completed. For investors, the stock is of little interest despite a dividend yield of around 5%. Instead of betting on heavyweights like IBM or SAP, smaller stocks, which should be carefully mixed into a portfolio, could bring more significant growth opportunities.