DNB Markets - Freja eID: Planting the seeds for sales growth
Freja eID has built a strong platform and we are encouraged by early uptake metrics such as a 100k users expanding by 285% YOY and 252 relying parties showing 61% YOY growth. We also recognise that it still has a lot of work to do to demonstrate monetisation of the ecosystem, but Freja eID appears to have the right balance of user simplicity and capabilities. We forecast a 76% sales CAGR to 2023e and have lifted our fair value to SEK75–125 (50–100).
Q4 takeaways. Sales of SEK6m (flat YOY) beat our forecast of SEK5m, mainly related to secure fulfilment services, with Freja eID enjoying SEK0.4m in revenues. The EBIT loss of SEK10m was 44% larger than we expected, leading to a FCF burn of SEK10m, corresponding to an annual burn rate of SEK30m–40m. The recent SEK25m capital raise financially de-risks Freja eID, providing a SEK46m runway to ramp-up the eID ecosystem and business model monetisation, we believe.
Early KPIs demonstrate traction. We view as encouraging Freja eID’s granular disclosure of key KPIs such as users (100k, increasing by 285% YOY), the number of services supporting the eID (252, up 61% YOY), transactions (319k, up 609% YOY), and revenues (SEK0.4m, up 284%), all tracking well above our forecasts. While the basis remains small, we will closely monitor uptake throughout 2021 to gauge the path to success that looks to be some quarters out.
Seeds for 76% sales CAGR to 2023e being planted. We acknowledge that it is still early days, but we are optimistic, forecasting Freja eID revenues of SEK18m for 2021, SEK65m for 2022, and SEK112m for 2023, and EBIT break-even in 2022.
We have arrived at a new SEK75–125 fair value, corresponding to a 2022e EV/sales of 4–8x. We believe Freja eID has the potential to become a success as the no.2 to penetrate the Swedish SEK1bn+ eID market. The vision is big, with a fair potential long-term, should the company build credentials as a rapid-growth eID-focused name with 30%+ EBIT margins. Still, there would need to be signs of execution and sales growth being at an inflection point before we believe the market would reflect this potential.
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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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