DNB Markets - Freja eID: Mostly pluses, but some minuses
We are encouraged by early indicators of the growing value of the Freja eID ecosystem, with 200k+ users and 600k+ quarterly transactions showing 300%+ YOY growth in Q2. We still forecast a 75%+ revenue CAGR to 2023e, despite lowering our 2021–2022e sales by 15% as we await further signs that management can execute on platform monetisation. Following the 3:1 share split and SEK70m rights issue, we have lowered our fair value to SEK25–40 (85–130), which corresponds to a 2022e EV/sales of 6–9x.
Q2 Freja eID user metrics above our expectations, but revenues trail. Freja eID showed a re-acceleration of ecosystem activity in Q2, reporting 209k users (up 345% YOY and up 47% QOQ, and 9% above our forecast). This reflected growing network effects in combination with successful marketing efforts, while it now has 325 services connected to the eID, amplifying the value for users (up 7% YOY). That said, Freja eID revenues were SEK0.8m (up 176% YOY, albeit from a low base), 46% below our forecast, underscoring our concerns about platform monetisation. Group sales of SEK5.4m (-13% YOY) missed our forecast by 24%, while the EBIT loss of SEK10.4m and FCF burn of SEK13m signal a cash runway of one more year, if operating leverage does not improve, based on its end-Q2 cash position of SEK59m.
Our focus points for H2. We expect 350k+ users by end-2021, with Freja eID sales of ~SEK8m rising to SEK57m in 2022e based on solid traction for physical IDs among young adults. We also forecast a SEK50m+ market for the public sector Organisation eID and tailwinds from potentially becoming accepted as Sweden’s national eID within eIDAS (together with BankID), and note ambitions to accelerate transaction volumes among existing users.
Fair value lowered to SEK25-40 (85–130). A 2021–2022e EV/sales of 12–5x already factors in high expectations of monetising its user base. We forecast a 75%+ revenue CAGR to 2023e at 95%+ gross margins for Freja eID, and expect operating leverage to demonstrate its scalability.
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Best regards
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Joachim Gunell | DNB Markets | Equity Research
DNB Bank ASA, Filial Sverige
Visiting address: Regeringsgatan 59, Stockholm
Postal address: 105 88 Stockholm
E-mail: joachim.gunell@dnb.se | www.dnb.no
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