By Douglas Busvine
BERLIN (Reuters) – SAP hailed the U.S. stock market listing of its Qualtrics unit, urging investors to take it as a cue to reconsider whether its own share price fairly reflected the value of its cloud assets.
Shares of Qualtrics jumped nearly 40% on Thursday in their Nasdaq debut, valuing the firm at nearly $21 billion, against the backdrop of a capital market frenzy that has seen investors flock to technology stocks.
Applying the same sales multiple to SAP’s software and platform service revenue of $5.5 billion would account for its entire market capitalisation of $133 billion – without even considering the rest of the business, Chief Financial Officer Luka Mucic said.
“I do think there is an opportunity here to reconsider the valuation of SAP,” Mucic told journalists on a conference call as SAP reported fourth-quarter results in line with preliminary figures released on Jan. 14.
Shares in the German business software group suffered their biggest one-day drop in a quarter of a century last October after Chief Executive Officer Christian Klein announced that he would go all-in on shifting its customer base to the cloud.
That pivot spells short-term margin pain and, Klein hopes, long-term gain as SAP reduces its reliance on lumpy software licence payments and shifts its 400,000 clients increasingly to more predictable subscriptions.
Mucic said that, of total proceeds from the Qualtrics IPO of $2.4 billion, the unit would itself receive $500 million in liquidity and SAP would use the rest for general corporate purposes, including debt reduction and an ‘enhanced’ dividend.
He declined to specify what annual dividend management would propose to the SAP board, but said its policy was to link the payout to earnings per share that rose by 56% last year.
SAP confirmed its 2021 outlook and mid-term goals after reporting a 3% increase in fourth-quarter operating profit, at constant currency.
(Reporting by Douglas Busvine; Editing by Thomas Seythal and Sherry Jacob-Phillips)
