DNB Markets – Freja eID Group: Unlocking new potential

| 11 augusti, 2022 | 0 kommentarer

After revisiting the Freja case following the Q2 report, we conclude: 1) Freja’s niche Org eID market should be its key short-term monetisation driver; 2) competitor Mobilt BankID still has a monopoly-like position for private users, but Freja eID should gain traction in niche use-cases; and 3) a recapitalisation in 2022 is still likely. Although we find Freja well-positioned to capitalise on its market opportunity, we have lowered our fair value to SEK7–11 (12–17), having cut our 2022–2023e net sales by an average ~16% to reflect our updated view of its growth prospects.

We expect Org eID to drive platform monetisation; our bottom-up analysis gives a TAM mid-point of ~SEK85m. To date, ~137 of the 290 Swedish municipalities accept Freja eID as a form of identification (47% penetration). Also, 29 have adopted the Org eID solution (10% penetration). We believe the niche Org eID segment represents a near-term opportunity within the eID market.

Competing against Mobilt BankID remains a key challenge, but we find Freja competitive in niche use-cases such as: 1) Org eID (which allows users to have a work eID separate from their personal eID); 2) physical eID (Freja eID, accepted at 7k+ locations); 3) the ’explore’ function; and 4) eID among the younger population where we believe it is gaining more traction than Mobilt BankID.

Funding outlook. Although we expect a 2021–2024 sales CAGR of 57% and EBITDA breakeven in 2023, cash available at end-Q2 was SEK16m with an LTM FCF burn rate of ~SEK50m. Thus, we expect a SEK30m recapitalisation in Q3, translating into a 21% dilution based on 22.9m new shares.

Fair value cut to SEK7–11, based on Freja group’s historical average EV/sales applied to 2022e, DCF and peer multiples valuations, baking in a peer multiples contraction and higher WACC. Our view remains that the long-term growth opportunity for Freja eID is substantial, but in a market increasingly focused on short-term profitability, investors would need to take a long-term view. We calculate the company’s total investment in its technology platform corresponds to ~SEK8–10/share.

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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:
[email protected] | www.dnb.no

Aurore Tigerschiöld | DNB Markets | Equity Research
DNB Bank ASA, Filial Sverige
Visiting address: Regeringsgatan 59, Stockholm
Postal address: 105 88 Stockholm
E-mail: [email protected]  | www.dnb.no
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