美股-商业服务业-商业服务业CB展望2019：看好FICO与TRU

Equity Research 30 November 2018 CORE Barclays Capital Inc. and/or one of its affiliates 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. This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA. PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 31. BIPS of Information CB 2019 Outlook: Prefer FICO (Upgrade to OW) & TRU over EFX, DNB Following the recent pullback in shares & looking into 2019, we upgrade FICO to OW; we remain believers in TRU’s ability to grow through the cycle and stay on the sidelines on EFX until we get more comfortable with its technology-led turnaround plans. Many reasons to upgrade FICO to OW, $225 PT: Our constructive view on FICO comes on the back of the recent pullback, but more importantly reflects our appreciation of its evolution as a Software name & hence our new SOTP valuation: a) $135 for “Scores” (25x CY20e EPS), which we view as reasonable for a highly profitable (80%+ margins) +HSD/LDD organic top-line grower. And we would call out its new re-pricing initiatives in B2B and momentum in B2C that provide recession resiliency. + b) $90 for “Software” (based on an arguably conservative 4x Revenue or 13x EBITDA on CY23e; discounted back to today). We move 5 years out to account for its ongoing cloud transition, which is currently ~1/3rd of Revenues growing 20%+; and more importantly supports higher recurring sales & improved margins over time. Note: We will be hosting a fireside chat with FICO CEO Will Lansing at our TMT Conference next week in SF (12/5). Remain OW on TRU: We understand the ‘closet cyclical’ concerns around TRU, especially with CEO Jim Peck announcing his retirement recently, and current leverage (4.5x) at the high end of comfort levels post-M&A. However, we back TRU to show the power of its tech-led transformation through the cycle – i.e., only 1/4th exposed to U.S. consumer credit; D2C (~20% of mix), Collections and Rental Screening are countercyclical; Healthcare (~7% of mix) and Insurance are acyclical; and secular growth opportunities in EM (~10%; including India at 4%). While the timing of losing a CEO like Jim Peck is never easy, we think Chris Cartwright will do well, and given the strategic soundness of recent M&A, we are not overly concerned with leverage. Waiting it out with EFX (at EW): Yes, CEO Mark Begor and team are taking the right steps, but our argument remains around the duration of recovery post-breach – where 3Q earnings were clearly a reality check. We expect a noisy next 12 months as tech-led turnarounds often come with unexpected bumps in the road, and post-breach recoveries