DNB Markets - Freja eID: Set for acceleration of monetisation
Freja eID's strong commercial momentum through 2021 laid a promising foundation to fuel its financial profile as well. We are encouraged by the improved granularity on the SaaS-like revenue streams that should provide better earnings resilience. That said, it is likely to ramp up slightly more slowly than we had previously expected. Thus, we have lowered our 2022–2023e sales by ~8% and as we expect Freja eID to undertake a ~SEK50m recapitalisation in 2022, we have cut our fair value to SEK17–25 (20–35).
Some pluses and some minuses. We are surprised by the commercial traction Freja eID has showed through 2021, with growth rates significantly above our forecast with user growth of 376% YOY (currently at 500k+), ~400 relying parties' showing 55%+ YOY growth, while the eID ecosystem conducted 3.5m+ transactions in 2021. Group Q4 sales were SEK6m (-3% YOY) and the EBIT loss of SEK12m was 44% YOY worse than our forecast. This set up a FCF burn of SEK14m (~SEK54m annualised), which we estimate means Freja eID has a cash runway of ~6 months (or ~12 months including its SEK25m credit facility).
2022–2023e sales cut by ~8% and we forecast a SEK50m recapitalisation. We believe Freja eID now has more tools to accelerate financial aspects of the growing commercial momentum in its eID ecosystem as it: 1) has reached a critical mass in users and services; 2) the use-cases are rising in absolute numbers, but also in relevance, as shown by Organisations eID, Physical eID, Engage-offering, as well as recent partnerships with PostNord, Apoteket, KMPG, etc.; and 3) we are more comfortable that it has found the best revenue model for its platform through SaaS, reducing the cost of adopting the technology. That said, we expect SaaS revenues to ramp up slightly more slowly (but with a higher medium-term resilience and profitability), leading us to lower our 2022–2023e sales by ~8%, which means that we now forecast a SEK50m recapitalisation and diluted share count.
Fair value cut to SEK17–25 based on 2022–2023e SOTP, DCF and peer multiples. We believe moving the valuation needle hinges on accelerating eID sales growth.
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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