DNB Markets - Freja eID Group: 2021 shaping up to be a good year
33 new service provider wins YTD and an accelerating pace of user intake (142k, showing 294% growth YOY) are early signs that Freja eID is starting to benefit from network effects, amplifying the value of its eID platform. We forecast a 76% sales CAGR to 2023e and see a potential boost to our user forecasts from its Covid-19 certificate, although we would need to become more comfortable with its ecosystem monetisation capabilities before we turn more positive. We have raised our fair value to SEK85–130 (75–125).
Strong Q1 metrics broadly in line with our estimates. Freja eID reported 142k users (up 294% YOY, 5% above our estimate), 285 services supporting the eID (up 60% YOY), 435k transactions (up 270% YOY), and revenues of SEK0.6m (up 117% YOY, 1% above our forecast), although we highlight that the base remains small. At the group level, sales of SEK6m (up 14% YOY) beat our forecast by 13%, although the EBIT loss of SEK11m was 28% below our forecast. This corresponds to an annual FCF burn rate of ~SEK35m. Should Freja eID want to become more opportunistic on international expansion and growth, given the recent ecosystem traction, we believe it could utilise the recent share price rally and expanded AGM mandate (25% of its shares versus 10% previously) to recapitalise. At end-Q1, it had a cash position of SEK17m plus a SEK24m unutilised credit facility.
Covid-19 digital green certificate in focus. We note the potential for accelerating user intake and service provider growth in the coming months in the travel, restaurant and event-booking industries, as Freja eID could act as a Covid-19 vaccination certificate, which would lower the bar for attracting new users. We expect 300k+ users by end-2021, with Freja eID sales of SEK18m growing to SEK65m in 2022e.
Fair value raised to SEK85–130, corresponding to a 2022e EV/sales of 5–8x. While the current valuation (2022e EV/sales of 6x) already bakes in a lot of expectations, we believe Freja eID can report sales growth of 30%+ for an extended period. Should we gain further proof-points that it can successfully monetise its growing eID ecosystem, we would expect a further re-rating.
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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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