UBS on tomtom
TomTom - Call with Head of Automotive and bid speculation
Key points from conference call with head of TomTom Automotive
We hosted a call with TomTom's VP of Automotive with the following key takeaways:
1) the company is confident on market share gain vs Nokia HERE going forward and believes it has c25% share in mapping and sees the market as a duopoly.
2) TomTom expects the take-rates of embedded navigation systems (currently 30%) to significantly increase (towards 100%) as we move to advanced driver assistance systems (ADAS) and highly automated driving (HAD).
3) ADAS/HAD components that we believe could bring incremental value to the maps longer term.
4) The company expects to provide a key component to these systems in the form of mapping/navigation but that it will be down to OEMs/Tier 1 suppliers to build the overall systems. The call supported our view that TomTom is well placed to benefit from the move to ADAS but is full valued.
Where does TomTom differentiate from Nokia HERE?
One of the key focus areas of the call was on differentiation vs competition. While the market is a duopoly, TomTom is building what it sees as three differentiators: 1) Its new mapping platform with continuous instead of batch updates of the maps. 2) High quality maps which incorporate much more detail of the road environment for highly automated driving. 3) A modular product strategy that can enable customers to take selected pieces of the TomTom offer to work within their overall solution.
Press speculation that autos OEM consortium looking at TomTom
Press speculation on Saturday (Sueddeutsche Zeitung reported by Bloomberg) said that management from autos OEMs (Daimler, BMW, Audi) had met for due diligence talks with TomTom representatives. The same autos OEMs had previously been speculated as working towards a bid for Nokia's HERE maps business and we maintain our view that it would make sense for a consortium of OEMs to acquire a mapping asset.
Valuation: €10.30 DCF-based price target
We maintain our Neutral rating at a price target of €10.30. TomTom trades on c24x PE 2016E vs peers on 14.4x and 1.8x EV/Sales vs peers 1.5x. We believe TomTom is well positioned with current focus on Automotive/ licensing and Telematics but valuation looks full at this point