Autotech Seminar September 25, 2019
REDEYE AUTOTECH SEMINAR - 2019 1 AGENDA AUTOTECH SEMINAR 2019
09:30 Introduction Redeye, Viktor Westman, Analyst
09:35 Kungliga Tekniska Högskolan, Albin Engholm, Researcher
09:55 Veoneer, Tomas Jönsson, EVP Communications & IR
10:10 Smart Eye, Martin Krantz, CEO
10:25 Acconeer, Lars Lindell, CEO
10:40 Panel discussion: KTH, Veoneer, SmartEye, Acconeer
11:00 Opus Group, Per Rosén, President Europe
11:15 Diadrom, Henrik Fagrell, Chairman of the board
11:30 Zuragon, Joachim Fritzson, Founder
11:40 Annotell, TBA
11:50 Panel discussion: Opus, Diadrom, Zuragon, Annotell
12.10 -12.45 Lunch
REDEYE AUTOTECH SEMINAR - 2019 2 THE REDEYE TECHNOLOGY TEAM
Erik Kramming Client Manager & Head Of Technology
Erik has a Master of Science in finance from Stockholm University. His previous work has included a position at Handelsbanken Capital Markets. At Redeye, Erik works with Corporate Broking for the Technology team.
Greger Johansson Client Manager & Co-head Technology
Greger has a background from the telecom industry, both from large companies as well as from entrepreneurial companies in Sweden (Telia and Ericsson) and USA (Metricom). He also spent 15+ years in investment banking (Nordea and Redeye). Furthermore, at Redeye Greger advise growth companies within the technology sector on financing, equity storytelling and getting the right shareholders/investors (Corporate Broking). Coder for two published C64-games. M.Sc.EE and M.Sc.Econ.
Johan Ekström Client Manager
Johan has a Master of Science in finance from the Stockholm School of Economics, and has studied e-com- merce and marketing at the MBA Haas School of Business, University of California, Berkeley. Johan has worked as an equity portfolio manager at Alfa Bank and Gazprombank in Moscow, as a hedge fund manager at EME Partners, and as an analyst and portfolio manager at Swedbank Robur. At Redeye, Johan works in the Corporate Broking team with fundamental analysis and advisory in the tech sector.
Erik Rolander Client Manager
Erik has a Master’s degree in finance from Linköpings Universitet. He has previously worked as a tech analyst and product manager for Introduce.se which is owned and operated by Remium. At Redeye, Erik works with Corporate Broking for the Technology team.
Håkan Östling Head of Research & Sales
Håkan holds a Master of Science in Economics and Financial Economics at the Stockholm School of Economics. He has previously worked with equity research, corporate finance and management at Goldman Sachs, Danske Bank and Alfred Berg. At Redeye, Håkan works with management in both analysis and other corporate governance.
REDEYE AUTOTECH SEMINAR - 2019 3 THE REDEYE TECHNOLOGY TEAM
Havan Hanna Analyst
With a university background in both economics and computer technology, Havan has a an edge in the work as an analyst in Redeye’s technology team. What especially intrigues Havan every day is coming up with new investment ideas that will help him generate above market returns in the long run.
Henrik Alveskog Analyst
Henrik has an MBA from Stockholm University. He started his career in the industry in the mid-1990s. After working for a couple of investment banks he came to Redeye, where he has celebrated 10 years as an analyst.
Kristoffer Lindström Analyst
Kristoffer Lindström has both a BSc and an MSc in Finance. He has previously worked as a financial advisor, stockbroker and equity analyst at Swedbank. Kristoffer started to work for Redeye in early 2014, and today works as an equity analyst covering companies in the tech sector with a prime focus on Gaming and iGaming.
Viktor Westman Analyst
Viktor read a Master’s degree in Business and Economics, Finance, at Stockholm University, where he also sat his Master of Laws. Viktor previously worked at the Swedish Financial Supervisory Authority and as a writer at Redeye. He today works with equity research at Redeye and covers companies in IT, telecoms and technology.
Eddie Palmgren Analyst
Eddie Palmgren holds a BSc in Business and Economics, Finance, from Stockholm University and has also completed an additional year at Master’s Level in Taiwan. Eddie joined Redeye in 2014 and is an equity analyst in the Technology team as well as editor for Redeye’s Top Picks portfolio.
REDEYE AUTOTECH SEMINAR - 2019 4 THE REDEYE TECHNOLOGY TEAM
Tomas Otterbeck Analyst
Tomas Otterbeck gained a Master’s degree in Business and Economics at Stockholm University. He also studied Computing and Systems Science at the KTH Royal Institute of Technology. Tomas was previously responsible for Redeye’s website for six years, during which time he developed its blog and community and was editor of its digital stock exchange journal, Trends. Tomas also worked as a Business Intelligence consultant for over two years. Today, Tomas works as an analyst at Redeye and covers software companies.
Dennis Berggren Analyst
Dennis Berggren is an equity analyst within Redeye’s technology team, holding a Master’s degree in Economics of Innovation and Growth from KTH Royal Institute of Technology and a Bachelor’s degree in Economics from Stockholm University.
Jonas Amnesten Analyst
Jonas Amnesten is an equity analyst within Redeye’s technology team, with focus on the online gambling industry. He holds a Master’s degree in Finance from Stockholm University, School of Business. He has more than 6 years’ experience from the online gambling industry, working in both Sweden and Malta as Business Controller within the Cherry Group.
Fredrik Nilsson Analyst
Fredrik Nilsson is an equity analyst within Redeye’s technology team. He has an MSc in Finance from University of Gothenburg and has previously worked as a tech-focused equity analyst at Remium.
REDEYE AUTOTECH SEMINAR - 2019 5 Redeye Technology Transactions
REDEYE AUTOTECH SEMINAR - 2019 6 TECHNOLOGY – SELECTED TRANSACTIONS
RECENT
MAY 2019 MAY 2019 MAY 2019 Rights Issue Directed Issue +Rights Issue Rights Issue SEK 40m SEK 139m Co-Lead Manager SEK 135m
APRIL 2019 APRIL 2019 MARCH 2019 Dual Listing Rights Issue IPO SEK 10m SEK 102m SEK 80m
JANUARY 2019 NOVEMBER 2018 OCTOBER 2018 OCTOBER 2018 OCTOBER 2018 IPO Rights Issue Direced Issue Directed Issue Right Issue Joint Bookrunner SEK 25m SEK 43m SEK 21m SEK 39m NOK 120m 2017–2018
JUNE 2018 JUNE 2018 JUNE 2018 MAY 2018 APRIL 2018 Private Placement Rights Issue Private Placement IPO Private Placement SEK 108m Join Lead Manager SEK 50m SEK 30m SEK 20m SEK 127m
FEBRUARI 2018 NOVEMBER 2017 NOVEMBER 2017 NOVEMBER 2017 OCTOBER 2017 Private Placement IPO IPO Private Placement IPO SEK 20m SEK 60m SEK 180m EUR 9m SEK 22m
2016–2017
APRIL 2017 MARCH 2017 FEBRUARY 2017 DECEMBER 2016 DECEMBER 2016 IPO Rights Issue Private Placement Rights Issue Rights Issue SEK 60m SEK 26m EUR 7m SEK 107m SEK 24m
OCTOBER 2016 AUGUST 2016 JUNE 2015 JUNE 2015 APRIL 2016 Directed Issue Private Placement Directed Issue Rights Issue Directed Issue SEK 49m SEK 60m SEK 11m SEK 62m SEK 11m
REDEYE AUTOTECH SEMINAR - 2019 7 Autotech Seminar 2019
Table of content
Key drivers 9
Transactions in the sector 12
Valuation metrics 13
Share performance 15
Covered Companies 16 (Acconeer, Gapwave, Neonode, Opus Group, Smart Eye)
REDEYE AUTOTECH SEMINAR - 2019 8 KEY DRIVERS
The automotive market is currently in a tech revolution that has barely started. Most notably, the cars of the future will be electrified, autonomous, connected, smart and shared, as we will elaborate in the different sections below.
Environmentally friendly electric cars Smart connected cars All major car OEMs have an electric vehicle strategy and most Cars are becoming connected “computers on wheels” as they of them are looking to go fully electric. The installed base of get equipped with internet access/W-LAN, allowing cars to electric vehicles is expected to exceed 100 million vehicles communicate and share information with each other. This around 2029, as indicated in the graph below. also open up endless opportunities for personalization, IoT and driver-car-interaction. One example is controlling house- Expected installed base of electric vehicles (million vehicles) hold electronics from the car, e.g. closing windows; the fridge 125 can tell the car that it is out of milk and much, much more.
100 The global connected car market is expected to be worth 75 over USD 200 bn in 2025, as indicated in the graph below.
50 Global connected car market (USD bn) 25 250 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 200
Source: Statista, Business Insider, Redeye Research 150
100
50
0 2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: Redeye Research, various industry sources
REDEYE AUTOTECH SEMINAR - 2019 9 KEY DRIVERS
Sharing economy & ride-sharing Owning a car will be less common in the future. Instead cars will be shared and rented as a service. The market for so called ride hailing services (platforms connecting passengers with private drivers) is growing rapidly. One good illustration of this trend is the vertical takeoff in the number of Uber rides, which was mentioned in Uber’s IPO prospectus (see image below). Uber reached 10 billion trips one year ago. At the time of its IPO in May 2019, over 17 million Uber rides were made each day.
Uber: Number of trips (billion)
Source: Uber
REDEYE AUTOTECH SEMINAR - 2019 10 KEY DRIVERS
(Semi)-autonomous cars & driver assistance of moving towards autonomous cars due to e.g. higher All car OEMs are investing in autonomous car technologies, safety and lower transportation costs. As for the safety although the 100% autonomous cars will arrive later than implications, safety standard organizations worldwide are OEMs previously expected. The investments are related to continuously mandating more technology in order to de- many different areas. Various sensors are needed in order for crease the 1.2 million road fatalities and 50 million traffic the car to detect what is going in its surroundings. Artificial injuries that occur every year. About 94 percent of these car Intelligence (AI) then helps the cars to understand this infor- crashes are related to human error, which drives the need for mation and make adequate maneuvers. Advanced Driver-Assistance Systems (ADAS), i.e. techno- logy that helps the driver in the driving process. Similar to Some of the OEMs are moving directly to level 4 (high auto- self-driving cars, ADAS also require an increasing number of mation) where the car drives by itself almost all of the time. sensors and AI. Others believe it is important to first develop semi-autono- mous level 2+ or level 3 (conditional automation) cars where NVIDIA estimates that there will be an addressable market of the driver is expected to intervene from time to time. Regard- 35 million level 2+ cars (incl. autopilot) in 2025 together with less which one of these approaches the car OEMs prefer, the 5 million level 3/4 cars, but only 1 million Robotaxis (see the whole car industry has agreed on the long-term importance graph below).
Addressable market of semi-autonomous vehicles by 2025 (million vehicles)
40
35
30
25
20
15
10
5
0 L2+ (incl. Autopilot) L3/L4 Robotaxis
Source: NVIDIA
REDEYE AUTOTECH SEMINAR - 2019 11 TRANSACTIONS IN THE SECTOR
Transactions in the sector About 100 M&A transactions were completed in 2018 and USD 7.4 billion and Uber’s acquisition of Magnus Olsson’s the deal flow has continued in 2019, albeit with a bit smaller Careem. Careem had 30 million users and 1 million drivers in transactions, on average. The largest acquisitions of 2019 14 Middle Eastern countries by the time of the deal. thus far are ZF’s purchase of Haldex’s competitor Wabco for
Major M&A deals 2016-2019 Target Acquirer Price (bn USD) Multiples Mobileye Intel 15.3 EV/Sales 39x Harman Samsung 8.0 EV/Sales 1x Wabco ZF 7.4 EV/Sales 2x Careem Uber 3.1 BCA Marketplace BBD Bidco 2.4 EV/Sales 1x Fleetmatics Verizon 2.4 EV/Sales 6x Yinlong Gree 1.9 SAFT Total 1.1 EV/Sales 1x 99 Taxis DiDi 1.0 NEVS Evergrande 0.9 EV/Sales 34x Telogis Verizon 0.9 EV/Sales 7x Xevo Lear 0.3 EV/Sales 1x Source: Redeye Research, various industry sources
REDEYE AUTOTECH SEMINAR - 2019 12 VALUATION METRICS
Valuations of the listed autotech companies In the tables below, we have summarized the valuations of Car OEMs are expected to grow sales on average 1% during car OEMs, tier-1s and autotech-related tier-2/3 players. 2018-2021 according to Bloomberg consensus, while the forecast for the corresponding period for the tier-1s is 4%, as indicated in the following table. This leads to on average 26% higher P/E ratios and 36% higher EV/S multiples for the tier-1s.
Valuations of Listed Autotech Companies: OEMs & Tier-1s Company Mkt P/E EV/EBITDA EV/Sales C AG R Sales cap sales (SEKbn) OEMs (SEKbn) 19E 20E 21E 19E 20E 21E 19E 20E 21E 18-21E 2018 GM 529 6 6 6 3 3 3 0.4 0.4 0.4 0% 1279 Ford 358 7 6 6 2 2 2 0.2 0.2 0.2 -3% 1395 FCA 208 5 5 5 1 1 1 0.2 0.2 0.2 2% 1133 Volkwsagen 858 6 6 5 3 3 2 0.4 0.4 0.4 3% 2420 BMW 450 8 7 7 8 7 7 1.0 1.0 0.9 1% 1000 Daimler 547 9 7 6 3 2 2 0.2 0.2 0.2 2% 1717 Toyota 2157 10 9 9 11 12 11 1.3 1.3 1.3 2% 2212 Honda 469 7 8 7 8 8 8 0.7 0.7 0.7 1% 1157 Nissan 270 8 18 9 3 4 4 0.2 0.2 0.2 -2% 900 Suzuki 190 10 12 11 4 5 5 0.6 0.6 0.6 1% 283 Hyundai 223 9 8 7 10 9 9 0.8 0.8 0.8 5% 765 Renault 179 6 5 5 3 3 2 0.3 0.3 0.3 1% 589 PSA 232 6 6 6 2 2 2 0.2 0.2 0.2 2% 759 Average 513 7.5 7.9 6.8 4.7 4.8 4.5 0.5 0.5 0.5 1.0% 1201 Median 358 7.1 7.0 6.5 2.9 3.0 3.2 0.4 0.4 0.4 1.5% 1133
Tesla 423 -72 69 27 26 17 12 2.2 1.8 1.5 20% 187
Tier-1s (SEKbn) 19E 20E 21E 19E 20E 21E 19E 20E 21E 18-21E 2018 Continental 265 11 10 9 5 4 4 0.6 0.6 0.6 2% 456 Magna 162 11 10 9 5 5 5 0.5 0.5 0.5 1% 355 Veoneer 18 -3 -5 -7 -4 -8 -25 0.7 0.6 0.5 5% 19 Hyundai Mobis 190 10 9 8 5 5 4 0.4 0.4 0.4 6% 278 Aptiv 222 17 16 14 12 11 10 1.9 1.8 1.7 5% 126 Denso 343 13 13 12 5 5 5 0.7 0.7 0.6 3% 385 Valeo 78 16 11 8 5 4 4 0.6 0.5 0.5 4% 196 Visteon 21 25 15 10 10 8 7 0.8 0.8 0.7 7% 26 Alps Alpine 41 16 13 11 5 5 5 0.6 0.5 0.5 0% 65 Faurecia 67 9 8 7 4 4 3 0.5 0.5 0.4 5% 180 Aisin Seiki 94 9 12 10 4 4 4 0.4 0.4 0.4 1% 294 Average 136 12.1 10.1 8.3 5.1 4.3 2.4 0.7 0.7 0.6 3.8% 216 Median 94 11.4 10.8 9.2 4.8 4.6 4.3 0.6 0.5 0.5 4.2% 196 Source: Bloomberg, Redeye Research
REDEYE AUTOTECH SEMINAR - 2019 13 VALUATION METRICS
In general, upstream seems like a better place to be than businesses are more diversified and while automotive is downstream in the auto value chain. As indicated in the important and strategic for these players they are in general following table below, the major tier-2/3 players (group 1) not pure play auto). Looking at the multiples, the tier-2/3 have a higher expected growth of about 6% compared to group has over 100% higher P/E ratios and almost 5x higher OEMs and tier-s (albeit it should be noted that these EV/S multiples compared to the tier-1s.
Valuations of Listed Autotech-related Companies: Tier-2/3 Company Mkt P/E EV/EBITDA EV/Sales CAGR Sales cap sales (SEKbn) Group 1 (SEKbn) 19E 20E 21E 19E 20E 21E 19E 20E 21E 18-21E 2018 Xilinx 257 27 26 24 23 23 19 8.0 7.2 6.4 16% 21 Infineon 243 20 19 17 9 8 7 2.5 2.3 2.2 7% 77 NXP 291 14 12 11 12 11 10 4.1 3.9 3.6 2% 82 Renesas 101 50 18 15 12 9 9 2.5 2.3 2.3 3% 60 ST 177 17 14 11 8 7 6 1.8 1.6 1.5 4% 84 Intel 2223 12 12 11 7 7 7 3.5 3.4 3.3 1% 616 Melexis 31 45 31 24 24 19 15 6.0 5.3 4.7 3% 6 Synopsys 199 30 27 24 22 20 16 6.0 5.5 5.1 8% 27 Nvidia 1063 27 33 25 24 30 22 8.7 9.4 7.9 10% 82 Average 510 27.0 21.3 18.0 15.8 14.9 12.5 4.8 4.6 4.1 5.9% 117 Median 243 26.8 18.8 16.7 11.9 10.6 9.7 4.1 3.9 3.6 3.7% 77
Group 2 (SEKm) 19E 20E 21E 19E 20E 21E 19E 20E 21E 18-21E 2018 SEKm Seeing Machines 1651 -289 -368 -450 -6 -8 -11 7.8 5.0 3.7 26% 198 Acconeer 423 -6 -6 -8 -5 -5 -8 50.2 17.7 6.0 274% 1 Neonode 209 -5 -7 9 -8 -8 5 2.1 1.8 1.0 26% 74 Opus 1565 14 8 6 5 5 5 1.3 1.2 1.1 6% 2497 Diadrom 97 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 58 Terranet 79 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 0 Gapwaves 756 -21 -27 -41 -24 -33 -55 47.8 22.4 10.4 240% 2 Smart Eye 1400 -16 -22 26 -16 -27 15 18.4 9.2 4.0 80% 51 Average 773 -53.8 -70.3 -76.4 -9.0 -12.8 -8.3 21.3 9.6 4.4 108.7% 360 Median 590 -10.9 -14.3 -0.9 -6.8 -8.2 -1.7 13.1 7.1 3.8 53.1% 54 Source: Bloomberg, Redeye Research
In group 2 in the table above, we have included the Swedish, digit EV/sales multiples. However, they are not profitable yet, smaller, pure-play companies (and in some cases their which we believe is related to the immature autotech market. competitors). As one would expect, these players have a From 2021 and beyond we expect the autotech winners to significantly faster expected sales growth and higher, double begin turning profitable and enjoy high margins.
REDEYE AUTOTECH SEMINAR - 2019 14 SHARE PERFORMANCE
Looking at the one-year stock performance (see the graph below), tier-2/3 players have performed better than OEMs and tier-1s.
One year share price performance (%)
15% 10%
5% 0%
-5%
-10% -15%
-20% Tier-1s -25% OEMs Tier-s Large tier-2/3s Small tier-2/3s
Source: Bloomberg
REDEYE AUTOTECH SEMINAR - 2019 15 Covered Companies
REDEYE AUTOTECH SEMINAR - 2019 16 REDEYE AUTOTECH SEMINAR - 2019 17 170030750k
ACCON Company page Acconeer https://www.redeye.se/company/acconeer
Redeye Rating
COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL
Last price Impact Timeframe 21.2 Major Long Moderate Mid Minor Short 3 2 2 Bear Base Bull People Business Financials 18.0 33.0 60.0 Turn page for catalyst specifics
Snapshot Financials
Acconeer Redeye Estimates OMXS30
27.5 2017 2018 2019E 2020E 2021E 1600 25 Revenue, MSEK 0 1 6 17 50 22.5 1500 Growth >100% >100% >100% >100% >100% 20 1400 17.5 EBITDA -21 -31 -55 -56 -38 15 1300 EBITDA margin Neg Neg Neg Neg Neg
Volume EBIT -23 -35 -67 -68 -51 500k 250k EBIT margin Neg Neg Neg Neg Neg 0 Nov Jan Mar May Jul Sep Pre-tax earnings -23 -35 -67 -68 -51 Net earnings -23 -35 -67 -68 -51
Marketplace First North Stockholm Net margin Neg Neg Neg Neg Neg
CEO Lars Lindell Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Bengt Adolfsson EPS adj. -1.22 -1.84 -3.48 -3.55 -2.64
Share information P/E adj. -24.2 -13.1 -6.4 -6.2 -8.4 Share price (SEK) 21.2 EV/S 11,220.3 320.1 60.3 25.8 10.0
Number of shares (M) 19.2 EV/EBITDA -17.6 -10.6 -6.4 -7.9 -13.0 Market cap (MSEK) 425 Last updated: 2019-09-20 Net debt (MSEK) -71
Owner Equity Votes Analyst Bengt Adolfsson 14.1% 14.1% Winplantan AB 11.6% 11.6% Viktor Westman [email protected] Avanza Pension 6.0% 6.0% Uniquest Corporation 3.1% 3.1% Dreamtech Co Ltd 3.1% 3.1% Conflict of interests Nordnet Pensionsförsäkring 3.1% 3.1% Viktor Westman owns shares in Acconeer: Yes Mikael Egard 3.0% 3.0% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Mats Ingvar Ärlelid 3.0% 3.0% Lars-Erik Wernersson AB 2.9% 2.9% ALMI 2.0% 2.0%
REDEYE AUTOTECH SEMINAR - 2019 18 since it is being mandated by Euro NCAP from 2022, meaning all vehicles sold Company description in Europe must have CPD. We believe Acconeer has a strong competitive advantage in CPD as Acconeer's radar can detect a sleeping baby from its Acconeer is a semiconductor company in Lund, Sweden, who went public in pulse or breathing, meaning, i our opinion, that radar will be the go-to December 2017. It develops and sells radar sensors, with a fabless business technology for CPD. model, to manufacturers of electronics. The manufacturing partners are some of the World's largst (Global Foundries & Amkor). Acconeer has developed a radar with a minimal footprint (5x5x1 mm) that is 10 times smaller and comes at a 10 times lower cost, compared to competing radars. Its real claim to fame Large design wins to drive the share price though is that the power consumption is 50 times lower than competition. As We value Acconeer to SEK 33 per share in our base case while our bear and for competitive disadvantages, radar technology is complex in general and bull case amount to SEK 18 and 60 respectively. The key differences in our requires a lot of education of the customer but at the same time Acconeer is scenarios are related to automotive and smartphones. While news of orders company of minor size that competes with giants. Acconeer needs to start gradually will de-risk the case we assume certain deals are key catalysts. They building revenue sources in order to be seen as a reliable supplier for larger are more worth than others and have the potential to substantially move the companies. The growth strategy is based on a few important pillars such as shares; especially larger deals within automotive. selling on Digi-Key, World's largest online distributor (450 000 customers) and via Uniquest, South Korea's largest eletronics supplier. Acconeer has other, local, niche distributors across the World as well. The company's current focus Main bear point: areas is robotic lawn mowers/vaccum cleaners, parking sensors, level
measurement (incl.waste management) and automotive. • Acconeer’s minor size is a disadvantage that likely explains why major players like Google want to go with Infineon. Acconeer needs to start building revenue sources in order to become reliable as a long-term Investment case supplier for large customers.
• Strong unique product offering & scalability from unmatched cost Catalyst types • Automotive has the largest potential • Large design wins to drive the share price Larger deals to drive the share price • Main bear point Today's valuation has discounted a bunch of deals for Acconeer but since lead times are long we assume the deals will start to gradually come in H2'19. Smaller customers are moving faster. While news of orders gradually will Strong unique product offering & scalability derisk the case we assume certain larger deals are key catalysts. They are from unmatched cost more worth than others and have the potential to substantially move the Acconeer’s radar of 5x5x1 mm is the tiniest radar on the market, which means shares; especially big deals within automotive. unmatched cost. Other radars are more than three times larger, suggesting that they have at least three times higher cost. The real claim to fame though, and the truly disruptive element in Acconeer’s offering, is the power consumption, which is more than 10 times lower than competing radars. Combining these characteristics and its fabless business model with the largest manufacturing partners in the World (Amkor & Global Foundries), Acconeer is poised to scale rapidly with high gross margins (about 70 %) as soon as sales kick in. Acconeer is ready to ride the structural growth in large market segments within especially IoT (increased sensor penetration), automotive and robotics respectively. We believe automotive will be the company's most important market. The other application areas with the best value proposition and largest volume potential in the company’s focus markets are, according to us, large volume markets such as robotic lawn mowers/vacuum cleaners and IoT applications like measuring levels in tanks and garbage bins.
since it is being mandated by Euro NCAP from 2022, meaning all vehicles sold Company description in EuropeAutomotive must have has CPD. the We largestbelieve Acconeer potential has a strong competitive advantage in CPD as Acconeer's radar can detect a sleeping baby from its Acconeer is a semiconductor company in Lund, Sweden, who went public in Acconeer is working on ten use cases in automotive with its tier-1 partner Alps pulse or breathing, meaning, i our opinion, that radar will be the go-to December 2017. It develops and sells radar sensors, with a fabless business Alpine. It has already received three design wins for an entry system with a kick technology for CPD. model, to manufacturers of electronics. The manufacturing partners are some sensor. The most exiciting area, however, is child presence detection (CPD) of the World's largst (Global Foundries & Amkor). Acconeer has developed a since it is being mandated by Euro NCAP from 2022, meaning all vehicles sold radarCompany with a minimal descriptionfootprint (5x5x1 mm) that is 10 times smaller and comes in Europe must have CPD. We believe Acconeer has a strong competitive at a 10 times lower cost, compared to competing radars. Its real claim to fame Largeadvantage design in CPDwins as toAcconeer's drive the radar share can detect price a sleeping baby from its Acconeer is a semiconductor company in Lund, Sweden, who went public in though is that the power consumption is 50 times lower than competition. As pulse or breathing, meaning, i our opinion, that radar will be the go-to December 2017. It develops and sells radar sensors, with a fabless business We value Acconeer to SEK 33 per share in our base case while our bear and for competitive disadvantages, radar technology is complex in general and technology for CPD. model, to manufacturers of electronics. The manufacturing partners are some bull case amount to SEK 18 and 60 respectively. The key differences in our requires a lot of education of the customer but at the same time Acconeer is of the World's largst (Global Foundries & Amkor). Acconeer has developed a scenarios are related to automotive and smartphones. While news of orders company of minor size that competes with giants. Acconeer needs to start radar with a minimal footprint (5x5x1 mm) that is 10 times smaller and comes gradually will de-risk the case we assume certain deals are key catalysts. They building revenue sources in order to be seen as a reliable supplier for larger at a 10 times lower cost, compared to competing radars. Its real claim to fame are Largemore worth design than otherswins and to drive have the the potential share to price substantially move the companies. The growth strategy is based on a few important pillars such as shares; especially larger deals within automotive. though is that the power consumption is 50 times lower than competition. As We value Acconeer to SEK 33 per share in our base case while our bear and selling on Digi-Key, World's largest online distributor (450 000 customers) and for competitive disadvantages, radar technology is complex in general and bull case amount to SEK 18 and 60 respectively. The key differences in our via Uniquest, South Korea's largest eletronics supplier. Acconeer has other, requires a lot of education of the customer but at the same time Acconeer is scenarios are related to automotive and smartphones. While news of orders local, niche distributors across the World as well. The company's current focus company of minor size that competes with giants. Acconeer needs to start Maingradually bear willpoint: de-risk the case we assume certain deals are key catalysts. They areas is robotic lawn mowers/vaccum cleaners, parking sensors, level building revenue sources in order to be seen as a reliable supplier for larger are more worth than others and have the potential to substantially move the measurement (incl.waste management) and automotive. • Acconeer’s minor size is a disadvantage that likely explains why major companies. The growth strategy is based on a few important pillars such as shares; especially larger deals within automotive. selling on Digi-Key, World's largest online distributor (450 000 customers) and players like Google want to go with Infineon. Acconeer needs to start via Uniquest, South Korea's largest eletronics supplier. Acconeer has other, building revenue sources in order to become reliable as a long-term supplier for large customers. Investmentlocal, niche distributors case across the World as well. The company's current focus Main bear point: areas is robotic lawn mowers/vaccum cleaners, parking sensors, level measurement (incl.waste management) and automotive. • Strong unique product offering & scalability from unmatched cost Catalyst• Acconeer’s types minor size is a disadvantage that likely explains why major • Automotive has the largest potential players like Google want to go with Infineon. Acconeer needs to start • Large design wins to drive the share price Larger buildingdeals to revenuedrive the sources share price in order to become reliable as a long-term • MainInvestment bear point case Today'ssupplier valuation for has large discounted customers. a bunch of deals for Acconeer but since lead times are long we assume the deals will start to gradually come in H2'19. Smaller customers are moving faster. While news of orders gradually will • Strong unique product offering & scalability from unmatched cost Strong unique product offering & scalability deriskCatalyst the case we types assume certain larger deals are key catalysts. They are • Automotive has the largest potential from unmatched cost more worth than others and have the potential to substantially move the • Large design wins to drive the share price Larger deals to drive the share price Acconeer’s radar of 5x5x1 mm is the tiniest radar on the market, which means shares; especially big deals within automotive. • Main bear point Today's valuation has discounted a bunch of deals for Acconeer but since unmatched cost. Other radars are more than three times larger, suggesting that lead times are long we assume the deals will start to gradually come in H2'19. they have at least three times higher cost. The real claim to fame though, and Smaller customers are moving faster. While news of orders gradually will the truly disruptive element in Acconeer’s offering, is the power consumption, Strong unique product offering & scalability derisk the case we assume certain larger deals are key catalysts. They are which is more than 10 times lower than competing radars. Combining these from unmatched cost more worth than others and have the potential to substantially move the characteristics and its fabless business model with the largest manufacturing Acconeer’s radar of 5x5x1 mm is the tiniest radar on the market, which means shares; especially big deals within automotive. partners in the World (Amkor & Global Foundries), Acconeer is poised to scale unmatched cost. Other radars are more than three times larger, suggesting that rapidly with high gross margins (about 70 %) as soon as sales kick in. Acconeer they have at least three times higher cost. The real claim to fame though, and is ready to ride the structural growth in large market segments within especially the truly disruptive element in Acconeer’s offering, is the power consumption, IoT (increased sensor penetration), automotive and robotics respectively. We which is more than 10 times lower than competing radars. Combining these believe automotive will be the company's most important market. The other characteristics and its fabless business model with the largest manufacturing application areas with the best value proposition and largest volume potential partners in the World (Amkor & Global Foundries), Acconeer is poised to scale in the company’s focus markets are, according to us, large volume markets rapidly with high gross margins (about 70 %) as soon as sales kick in. Acconeer such as robotic lawn mowers/vacuum cleaners and IoT applications like is ready to ride the structural growth in large market segments within especially measuring levels in tanks and garbage bins. IoT (increased sensor penetration), automotive and robotics respectively. We believe automotive will be the company's most important market. The other application areas with the best value proposition and largest volume potential Automotivein the company’s has focusthe largest markets potentialare, according to us, large volume markets Acconeersuch as is roboticworking lawn on ten mowers/vacuum use cases in automotive cleaners and with IoT its applications tier-1 partner like Alps Alpine.measuring It has already levels inreceiv tanksed and three garbage design bins. wins for an entry system with a kick sensor. The most exiciting area, however, is child presence detection (CPD)
Automotive has the largest potential Acconeer is working on ten use cases in automotive with its tier-1 partner Alps Alpine. It has already received three design wins for an entry system with a kick sensor. The most exiciting area, however, is child presence detection (CPD) REDEYE AUTOTECH SEMINAR - 2019 19 1700402M
GAPW B Company page Gapwaves https://www.redeye.se/company/gapwaves
Redeye Rating
COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL
Last price Impact Timeframe 30.6 Major Long Moderate Mid Minor Short 3 3 2 Bear Base Bull People Business Financials 7.0 24.0 52.0 Turn page for catalyst specifics
Snapshot Financials
Gapwaves Redeye Estimates OMXS30
35 2017 2018 2019E 2020E 2021E 1600 30 Revenue, MSEK 1 2 15 32 69 25 1500 Growth -43.4% >100% >100% >100% >100% 20 1400 15 EBITDA -24 -35 -30 -22 -13 10 1300 EBITDA margin Neg Neg Neg Neg Neg
Volume EBIT -27 -44 -35 -28 -18
1M EBIT margin Neg Neg Neg Neg Neg 0 Nov Jan Mar May Jul Sep Pre-tax earnings -27 -44 -35 -28 -18 Net earnings -27 -44 -35 -28 -18
Marketplace First North Stockholm Net margin Neg Neg Neg Neg Neg
CEO Lars-Inge Sjöqvist Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Jonas Ehinger EPS adj. -1.53 -1.80 -1.44 -1.15 -0.75
Share information P/E adj. -26.3 -9.8 -20.5 -25.7 -39.2 Share price (SEK) 30.6 EV/S 805.9 159.8 45.7 22.6 10.9
Number of shares (M) 24.4 EV/EBITDA -29.5 -10.3 -23.3 -32.5 -56.9 Market cap (MSEK) 745 Last updated: 2019-08-19 Net debt (MSEK) -27
Owner Equity Votes Analyst Cécile Schilliger 24.6% 56.6% Avanza Pension 4.5% 1.1% Dennis Berggren [email protected] Lars-Inge Sjöqvist 4.3% 8.7% Leif Hagne 3.3% 0.8% Nordnet Pensionsförsäkring 2.7% 0.7% Conflict of interests Jian Yang 2.5% 6.1% Dennis Berggren owns shares in Gapwaves: No Bright Peter Leo Ebenezer 1.9% 0.5% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. BNP Paribas Sec Serv Luxembourg 1.9% 0.5% Alfred Berg Fonder 1.9% 0.5% Familjerna Ljungberg & Holmström 1.3% 0.3%
REDEYE AUTOTECH SEMINAR - 2019 20 prospective telco customers. The case, at least in the short-term, has shifted Company description towards the automotive opportunities following the two recent promising Gapwaves offers wireless communication solutions based on the GAP contractsprospective with automotive telco customers. radar suppliers The case, of at Tier-1 least size.in the The short-term, deals open has up shifted for waveguideCompany technology, description which stems from the research of the late founder largetowards revenues the over automotive long periods. opportunities As an example, following we the believe two recent that the promising royalty agreement with Veoneer could generate about SEK 10m in revenues beyond Per-SimonGapwaves Kildal. offers The wireless company’s communication great potential solutions is found based in the onmillimeter the GAP contracts with automotive radar suppliers of Tier-1 size. The deals open up for 2022 while an agreement with a “tier 1” could generate up towards SEK 200m wavewaveguide antennas technology,that can be whichapplied stems in expansions from the researchof current of radio the latelink founder large revenues over long periods. As an example, we believe that the royalty in product sales p.a. networks,Per-Simon automotive Kildal. The radars company’s and eventually great potential 5G deployments. is found in the millimeter agreement with Veoneer could generate about SEK 10m in revenues beyond wave antennas that can be applied in expansions of current radio link Fair2022 value while of SEK an 24agreement per share with in base a “tier case. 1” could We argue generate that upthe towards two recent SEK 200m Investmentnetworks, automotive case radars and eventually 5G deployments. contractsin product signal sales an increased p.a. likelihood for additional deals within the segment,Fair value and weof SEK expect 24 perthe sharecompany in base to attract case. newWe argueautomotive that the customers two recent • TechnologyInvestment improving case power efficiency: Gapwaves potential is found in overcontracts time. The signal recent an agreements increased likelihoodhave had afor significant additional dealspositive within effect the on the its waveguide technology that opens up for antennas that are 4-10 times sharesegment, price, which and we now expect is up the66% company over the tolast attract 1.5 months new automotive and is now customers trading as• power Technology efficient improving as alternative power efficiency:technology. Gapwaves potential is found in betweenover time.our base The andrecent bull agreements cases. have had a significant positive effect on the • 5G bringsits waveguide significant technology opportunities: that opens We believeup for antennasthat the greatest that are financial4-10 times We yetshare cannot price, see which if there now is is a up demand 66% over from the the last telecom 1.5 months customers. and is nowIf the trading potentialas power arises efficient with upcoming as alternative 5G deployments, technology. which will require companybetween would our succeedbase and in bull delivering cases. an active antenna solution solving millions of efficient antennas. • 5G brings significant opportunities: We believe that the greatest financial genuineWe yet needs, cannot we seewould if there be convinced is a demand that from it implies the telecom a solid opportunitycustomers. If- the • Technology moves rapidly: the company has to illustrate that there truly potential arises with upcoming 5G deployments, which will require reflectedcompany by our would bull succeedcase (SEK in 52delivering per share) an .active Until weantenna see a solutiondeal with solving a key is a commercial interest for its solution and show that the company's millions of efficient antennas. vendor,genuine it is difficultneeds, we to assesswould be whether convinced the productthat it implies really shoulda solid beopportunity regarded - active antenna solution will solve genuine needs that alternative • Technology moves rapidly: the company has to illustrate that there truly as areflected 5G enabler. by our bull case (SEK 52 per share). Until we see a deal with a key technologies does not solve. is a commercial interest for its solution and show that the company's We remainvendor, fullyit is difficultfocused to on assess following whether the progression the product in really turning should development be regarded active antenna solution will solve genuine needs that alternative projectsas a 5Ginto enabler. volume contracts and the advances in attracting new Technologytechnologies improving does power not solve.efficiency. Gapwaves has a first-mover developmentWe remain projects, fully focused which on we following believe to the be progression the most important in turning share development price advantage in its antennas that are 4-10x more power efficient in an active driversprojects going into forward. volume contracts and the advances in attracting new settingTechnology than other improving existing technologypower efficiency (depending. Gapwaves on configuration has a first-mover and setup). Risksdevelopment projects, which we believe to be the most important share price Theadvantage antenna is inexpected its antennas to incur that substantial are 4-10x moreadvantages power efficientin communication in an active drivers going forward. and settingautomotive than radarother applicationsexisting technology by improving (depending power on efficiency configuration anda and setup). Targeting markets that are tough to penetrate. The company targets markets possibilityThe antenna to produce is expected at a lower to incur cost. substantial advantages in communication thatRisks offer enormous opportunities, implying that there will be more than one actor trying to reap from the arising opportunities. Another tough challenge for Supportiveand automotive analysis: radar The efficiency applications of bythe improving company’s power solution efficiency is shown and ina Targeting markets that are tough to penetrate. The company targets markets the company is that potential customers within telecom develop alternative casepossibility study where to produce Gapwaves at a antenna lower cost. is compared to current state-of-the-art that offer enormous opportunities, implying that there will be more than one solutionsactor tryingin-house. to reap These from actors the arising have established opportunities. research Another organizations tough challenge and for technology.Supportive The analysis: simulations The showefficiency that Gapwaves of the company’s solution incurssolution higher is shown output in a the capitalthe company needed is to that pursue potential R&D customersactivity and within could telecom thereby developreduce their alternative powercase of studythe transmitter, where Gapwaves due to better antenna cooling, is compared and higher to current antenna state-of-the-art directivity dependencysolutions on in-house. external These component actors suppliers. have established research organizations and (thetechnology. concentrated The radiation simulations in a single show direction)that Gapwaves while solutionreducing incurs the power higher output the capital needed to pursue R&D activity and could thereby reduce their losses.power These of the three transmitter, factors finally due to result better in cooling, a higher and equivalent higher antenna isotropic directivity Uncertainties regarding next-gen networks. There are yet uncertainties dependency on external component suppliers. radiated(the concentratedpower (EIRP), radiation a measure in aundertaken single direction) to compare while thereducing concentrated the power regarding specifications of next-gen networks and what equipment that will be signallosses. output These power, three than factors the state-of-the-art finally result insolution. a higher The equivalent theoretical isotropic used.Uncertainties This may impose regarding that clientsnext-gen are networks. more reluctant There toare invest yet uncertainties in new implicationradiated of power this is (EIRP), that the a measure alternative undertaken solution must to compare increase the power concentrated technologyregarding and specifications equipment. The of uncertaintiesnext-gen networks are, onand the what other equipment hand, nothing that will be consumptionsignal output by a power, factor thanof 10 the to state-of-the-artachieve the same solution. EIRP. The The practical theoretical meaning thatused. hinders This clients may imposefrom testing that clientsnew equipment. are more reluctant to invest in new is thatimplication Gapwaves of antennasthis is that could the alternative be used in solutionlonger distances, must increase which power will be a technology and equipment. The uncertainties are, on the other hand, nothing veryconsumption important factor by a infactor upcoming of 10 to5G achieve networks the operating same EIR onP. Thehigher practical meaning that hinders clients from testing new equipment. frequencies.is that Gapwaves The antenna antennas has further could becharacteristics used in longer that distances, make it possiblewhich will to be a Catalyst types producevery importantat a lower factorcost, which in upcoming is another 5G criticalnetworks factor. operating on higher Nre agreement frequencies. The antenna has further characteristics that make it possible to Both 5G and automotive bring significant opportunities. There is no lack of An NRE-agreementCatalyst types (where clients’ bear one-time costs related to R&D project) opportunitiesproduce at as a lowerthe company cost, which is targeting is another sizeable critical markets factor. with a technology signedNre with agreement a telco would indicate that there truly is a commercial interest for shown to be more efficient than alternative solutions. Operators have started to Both 5G and automotive bring significant opportunities. There is no lack of GapwavesAn NRE-agreement technology for (where 5G applications. clients’ bear one-time costs related to R&D project) deploy 5G networks, but the greatest infrastructure investments are expected opportunities as the company is targeting sizeable markets with a technology signed with a telco would indicate that there truly is a commercial interest for in 2022 and beyond. The communications market is further highly shown to be more efficient than alternative solutions. Operators have started to Gapwaves technology for 5G applications. concentrated,deploy 5G implyingnetworks, that but an the agreement greatest infrastructure with one key investmentsvendor would are gener expectedate signiinficant 2022 revenuesand beyond. for TheGapwaves. communications It is, therefore, market of theis further highest highly importance to exploitconcentrated, the company’s implying first-mover that an agreementadvantage withby becoming one key thevendor antenna would provider generate in telcos’significant 5G deployments. revenues for Gapwaves. It is, therefore, of the highest importance to Whileexploit we believe the company’s that the greatest first-mover potential advantage arises bywith becoming the upcoming the antenna 5G provider roll-out,in telcos’ the company 5G deployments. has yet not demonstrated a commercial interest from While we believe that the greatest potential arises with the upcoming 5G roll-out, the company has yet not demonstrated a commercial interest from
REDEYE AUTOTECH SEMINAR - 2019 21 1700
Company page Neonode Inc https://www.redeye.se/company/neonode-inc
Redeye Rating
COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL
No share price data Impact Timeframe due to company listed in the US. Major Long Moderate Mid Minor Short 3 3 2 Bear Base Bull People Business Financials 3.0 6.0 12.0 Turn page for catalyst specifics
Snapshot Financials
Redeye Estimates
2017 2018 2019E 2020E 2021E
Revenue, MSUD 10 9 8 9 17
Growth 0.3% -16.6% -9.5% 17.7% 86.3%
EBITDA -5 -3 -2 -2 3
EBITDA margin Neg Neg Neg Neg 18.8%
EBIT -5 -4 -4 -3 2
EBIT margin Neg Neg Neg Neg 14.3%
Pre-tax earnings -5 -4 -4 -3 2
Net earnings -6 -4 -4 -3 2
Marketplace N/A Net margin Neg Neg Neg Neg 14.3%
CEO Håkan Persson Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Ulf Rosberg EPS adj. -0.10 -0.67 -0.50 -0.35 0.28
Share information P/E adj. -11.5 -2.5 -6.0 -8.4 10.8 EV/S 4.9 0.5 3.1 2.9 1.4 Share price (SEK) 2.3 Number of shares (M) 8.8 EV/EBITDA -11.1 -1.5 -9.6 -13.7 7.6 Market cap (M) 0 Last updated: 2019-08-14 Net debt (MSEK) -4
Owner Equity Votes Analyst Ulf Rosberg 18.2% 18.2% Peter Lindell 17.5% 17.5% Viktor Westman [email protected] Per Bystedt 3.6% 3.6% Thomas Eriksson 2.5% 2.5% Vanguard Group 1.6% 1.6% Conflict of interests Andreas Bunge 1.2% 1.2% Viktor Westman owns shares in Neonode Inc: Yes Blackrock Inc 1.1% 1.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Håkan Persson 0.4% 0.4% FMR LLC 0.2% 0.2% Lars Lindqvist 0.1% 0.1%
REDEYE AUTOTECH SEMINAR - 2019 22 Company description LimitedLimited downside downside from from underlying underlying values values Company description Limited downside from underlying values thatLimitedthat could could downside be beunlocked unlocked from underlying values FirstCompanyFirst and and foremost, foremost, description Neonode, Neonode, in a in broader a broader perspective, perspective, not notonly only works works with with that could be unlocked First and foremost, Neonode, in a broader perspective, not only works with Neonode's market valuation is close to a bankruptcy valuation, especially in First and foremost, Neonode, in a broader perspective, not only works with Neonode'sthat could market be unlocked valuation is close to a bankruptcy valuation, especially in technologytechnology for touchfor touch displays displays but butwith with human human interaction interaction in numerous in numerous ways. ways. Neonode's market valuation is close to a bankruptcy valuation, especially in Firsttechnology and foremost, for touch Neonode, displays inbut a broaderwith human perspective, interaction not in only numerous works with ways. relation to the recurring license revenue base of about USD 8m per year. The technology for touch displays but with human interaction in numerous ways. relationNeonode's to themarket recurring valuation license is close revenue to a base bankruptcy of about valuation, USD 8m especiallyper year. The in It isIt therefore is therefore important important not notto pigeonhole to pigeonhole Neonode Neonode into into solely solely touch touch display display relation to the recurring license revenue base of about USD 8m per year. The Ittechnology is therefore for important touch displays not to but pigeonhole with human Neonode interaction into solely in numerous touch display ways. burn rate is about USD 1m per quarter, meaning there should be a plan B in It is therefore important not to pigeonhole Neonode into solely touch display relationburn rate to is the about recurring USD 1m license per quarter, revenue meaning base of thereabout should USD 8m be per a plan year. B Thein applications.applications. Neonode Neonode pursues pursues a multimodal a multimodal approach approach and and will willintegrate integrate burn rate is about USD 1m per quarter, meaning there should be a plan B in applications.It is therefore Neonodeimportant pursues not to pigeonhole a multimodal Neonode approach into and solely will touch integrate display unlocking large values tomorrow by cutting costs in half and earn good license applications. Neonode pursues a multimodal approach and will integrate burnunlocking rate is large about values USD tomorrow1m per quarter, by cutting meaning costs there in half should and earnbe a goodplan B license in differentdifferent types types of sensors of sensors on itson platform its platform and and use use its own its own production production unlocking large values tomorrow by cutting costs in half and earn good license differentapplications. types Neonode of sensors pursues on its a platform multimodal and approachuse its own and production will integrate revenue with 100 % margin. This opportunity is not new in itself, but the different types of sensors on its platform and use its own production unlockingrevenue with large 100 values % margin. tomorrow This opportunityby cutting costs is not in new half in and itself, earn but good the license technologytechnology and and distribution distribution network network to be to thebe thefront front end. end. In addition, In addition, Neonode Neonode is is revenue with 100 % margin. This opportunity is not new in itself, but the technologydifferent types and of distribution sensors on network its platform to be and the usefront its end. own In production addition, Neonode is difference, in our own view, is that the new main owners are not sentimental technology and distribution network to be the front end. In addition, Neonode is revenuedifference, with in 100our own% margin. view, isThis that opportunity the new main is not owners new inare itself, not sentimentalbut the surfacesurface independent, independent, meaning meaning it does it does not noteven even need need displays displays or glass. or glass. The The new new difference, in our own view, is that the new main owners are not sentimental surfacetechnology independent, and distribution meaning network it does to not be eventhe front need end. displays In addition, or glass. Neonode The new is and will not tolerate more years of disappointment, meaning these values will surface independent, meaning it does not even need displays or glass. The new anddifference, will not in tolerate our own more view, years is that of thedisappointment, new main owners meaning are not these sentimental values will surfacebusinessbusiness independent, model model for Neonode’sfor meaning Neonode’s ittouch does touch technology not technology even need will willbedisplays manufacturingbe manufacturing or glass. Theand and new and will not tolerate more years of disappointment, meaning these values will business model for Neonode’s touch technology will be manufacturing and eventually be unlocked if the business does not turn. selling of hardware modules instead of just licenses. The modules together eventuallyand will not be tolerate unlocked more if the years business of disappointment, does not turn. meaning these values will sellingbusiness of modelhardware for modulesNeonode’s instead touch oftechnology just licenses. will beThe manufacturing modules together and eventually be unlocked if the business does not turn. selling of hardware modules instead of just licenses. The modules together eventually be unlocked if the business does not turn. sellingwithwith the of theramp-up hardware ramp-up of modulesnew of new car car andinstead and printer printerof justmodels modelslicenses. on theon The thewon modules won platforms platforms together is the is thekey key with the ramp-up of new car and printer models on the won platforms is the key partswithparts the of theramp-up of thegrowth growth of strategy.new strategy. car andBesides Besidesprinter its modelsmany its many technology on technology the won competitive platforms competitive is the key parts of the growth strategy. Besides its many technology competitive partsadvantagesadvantages of the growthNeonode Neonode strategy. has has wide Besides wide barriers barriers its to many entry to entry technology in its in automotive its automotive competitive focus focus (see (see Big autotech option free of charge advantages Neonode has wide barriers to entry in its automotive focus (see Big autotech option free of charge further the investment case section. Big autotech option free of charge furtheradvantages the investment Neonode has case wide section. barriers to entry in its automotive focus (see BigSmartSmart autotech Eye Eyehas has the option theexact exact same free same market of market charge and and drivers drivers etc. etc. as Neonode as Neonode but butthe the further the investment case section. Smart Eye has the exact same market and drivers etc. as Neonode but the valuation differs by over 5x. In addition, Neonode has higher ASP and even Listing:furtherListing: theListed investmentListed on NASDAQon NASDAQ case since section. since 2007Locations: 2007Locations: Headquarter Headquarter in Stockholm, in Stockholm, valuationSmart Eye differs has the by exact over 5x.same In addition,market and Neonode drivers has etc. higher as Neonode ASP and but even the Listing: Listed on NASDAQ since 2007Locations: Headquarter in Stockholm, valuation differs by over 5x. In addition, Neonode has higher ASP and even better barriers to entry (hardware vs software) compared to Smart Eye. Thus, Listing:SwedenSweden Listed but butglobal on global NASDAQ sales sales reach since reach 2007Locations: Headquarter in Stockholm, bettervaluation barriers differs to byentry over (hardware 5x. In addition, vs software) Neonode compared has higher to SmartASP and Eye. even Thus, Sweden but global sales reach better barriers to entry (hardware vs software) compared to Smart Eye. Thus, webetter havewe barriers have reason reason to to entry believe to believe (hardware that that the vs theperception software) perception change compared change could couldto beSmart quitebe quiteEye. Thus, Sweden but global sales reach we have reason to believe that the perception change could be quite Investment case substantialwe havesubstantial reason should should to believeNeonode Neonode that be the perceivedbe perception perceived as a aschange hot a hotautotech couldautotech becompany. quite company. Smart Smart Investment case substantial should Neonode be perceived as a hot autotech company. Smart substantialEye Eyehas has an expectedshouldan expected Neonode order order value be value perceived of over of over SEK as SEK 1a bnhot 1 for bnautotech itsfor total its totalcompany. future future license Smart license Investment case Eye has an expected order value of over SEK 1 bn for its total future license Eyerevenue. revenue.has an Neonode expected Neonode has order has not notpubliclyvalue publicly of quantifiedover quantified SEK 1 its bn itsfororder itsorder values total values future but theybut license they should should revenue. Neonode has not publicly quantified its order values but they should • Turnaround• Turnaround case case turned turned credible credible with with new new main main owners owners • Turnaround case turned credible with new main owners reasonablyrevenue.reasonably Neonode be severalbe several has times not times publicly larger larger thanquantified than today's today's its market order market cap.values cap. If Neonodebut If Neonodethey shouldwould would • Turnaround case turned credible with new main owners reasonably be several times larger than today's market cap. If Neonode would • Limited• Limited downside downside from from underlying underlying values values that that could could be unlockedbe unlocked • LimitedTurnaround downside case turned from underlying credible with values new that main could owners be unlocked reasonablyonlyonly manage manage be to several close to close onetimes one single larger single automotive than automotive today's contract market contract it cap.could it could If haveNeonode have a value a would value the the • Limited downside from underlying values that could be unlocked only manage to close one single automotive contract it could have a value the • Big• Bigautotech autotech option option free free of charge of charge • BigLimited autotech downside option from free underlying of charge values that could be unlocked onlysizesize ofmanage today's of today's to market close market onecap. cap.single We Westill automotive stillbelieve believe that contract that the thesteering it steering could wheel have wheel partnership a value partnership the • Big autotech option free of charge size of today's market cap. We still believe that the steering wheel partnership • Break-even• Break-even and and large large module module deals deals to drive to drive the thestock stock price price • Break-evenBig autotech and option large free module of charge deals to drive the stock price sizewithwith ofAutoliv today's Autoliv could market could alone alonecap. be We worthbe worthstill USD believe USD 100m, 100m,that although the although steering this this lieswheel liesa couple partnership a couple of of • Break-even and large module deals to drive the stock price with Autoliv could alone be worth USD 100m, although this lies a couple of • Break-even and large module deals to drive the stock price withyearsyears Autoliv down down thecould theroad. alone road. Euro be Euro NCAP worth NCAP is USD now is 100m,now mandating mandating although driver thisdriver monitoring lies monitoring a couple of years down the road. Euro NCAP is now mandating driver monitoring yearstechnologytechnology down butthe but itroad. still it stilldoesEuro does NCAPnot nothave is have now any anyactivitiesmandating activities within driver within hands monitoring hands on theon thesteering steering Turnaround case turned credible with new main owners technology but it still does not have any activities within hands on the steering Turnaround case turned credible with new main owners wheel. According to our industry sources though, it is likely that such activities Turnaround case turned credible with new main owners technologywheel. According but it stillto our does industry not have sources any activities though, itwithin is likely hands that on such the activities steering TurnaroundThe stock market's case turnedconfidence credible in Neonode with has new completely main ownersvanished, for very wheel. According to our industry sources though, it is likely that such activities The stock market's confidence in Neonode has completely vanished, for very wheel.will willstart Accordingstart going going forward. to forward. our industry sources though, it is likely that such activities The stock market's confidence in Neonode has completely vanished, for very will start going forward. Thegoodgood stock reasons reasons market's in our in confidence ourview, view, most most notablyin Neonodenotably the thecommunication.has communication. completely vanished,As fundamentalsAs fundamentals for very good reasons in our view, most notably the communication. As fundamentals will start going forward. goodare arebasically reasons basically unchanged, in ourunchanged, view, the most thelow notably lowvaluation valuation the iscommunication. simply is simply a punishment a punishment As fundamentals for oldfor oldsins. sins. are basically unchanged, the low valuation is simply a punishment for old sins. areHowever, However,basically this unchanged,this means means that thatthe there lowthere are valuation arevery very clear is clear simplyreasons reasons a punishmentfor whyfor why the theshares for sharesold aresins. are However, this means that there are very clear reasons for why the shares are Break-evenBreak-even and and large large module module deals deals to driveto drive the the stock stock price price undervalued. Neonode has evolved into a turnaround case with a very Break-even and large module deals to drive the stock price undervalued.However, this Neonodemeans that has there evolved are veryinto aclear turnaround reasons case for why with the a veryshares are Break-even and large module deals to drive the stock price undervalued. Neonode has evolved into a turnaround case with a very Our Ourbase base case case of USD of USD 6 per 6 pershare share in relation in relation to our to ourreasonably reasonably pessimistic pessimistic promising set of new people. Besides a new CEO, the new owners and board OurBreak-even base case of and USD large 6 per sharemodule in relation deals to toour drive reasonably the stockpessimistic price promisingundervalued. set Neonode of new people. has evolved Besides into a newa turnaround CEO, the casenew ownerswith a very and board Our base case of USD 6 per share in relation to our reasonably pessimistic promising set of new people. Besides a new CEO, the new owners and board scenarioscenario of USD of USD 3 and 3 and our ourbull bull case case of USD of USD 12 indicate12 indicate a good a good risk/reward. risk/reward. We We members are very engaged and involved in the company. The COB comes from scenarioOur base ofcase USD of 3 USD and 6our per bull share case in ofrelation USD 12 to indicateour reasonably a good pessimisticrisk/reward. We memberspromising areset veryof new engaged people. and Besides involved a new in the CEO, company. the new The owners COB andcomes board from scenario of USD 3 and our bull case of USD 12 indicate a good risk/reward. We members are very engaged and involved in the company. The COB comes from argueargue that that financial financial reports reports with withblack black figures figures are areneeded needed in orderin order to changeto change the the a long career in private equity where the COB works tight with Management. arguescenario that of financial USD 3 and reports our bull with case black of USDfigures 12 indicate are needed a good in order risk/reward. to change We the amembers long career are invery private engaged equity and where involved the COB in the works company. tight withThe COBManagement. comes from argue that financial reports with black figures are needed in order to change the a long career in private equity where the COB works tight with Management. perceptionperception of investors of investors and and move move the thestock. stock. In addition, In addition, large large module module contracts contracts The new owners also have excellent track records in business and investing. argueperception that financialof investors reports and movewith blackthe stock. figures In addition, are needed large in moduleorder to contractschange the Thea long new career owners in private also have equity excellent where trackthe COB records works in tight business with Management.and investing. perception of investors and move the stock. In addition, large module contracts The new owners also have excellent track records in business and investing. similarsimilar to the to theUSD USD 11 million11 million deal deal in the in thefall fallof 2016 of 2016 are areimportant important catalysts catalysts for for The new board immediately took two important steps. First, it decided to focus perceptionsimilar to the of USDinvestors 11 million and move deal inthe the stock. fall of In 2016 addition, are importantlarge module catalysts contracts for The new boardowners immediately also have excellent took two track important records steps. in business First, it decidedand investing. to focus similar to the USD 11 million deal in the fall of 2016 are important catalysts for The new board immediately took two important steps. First, it decided to focus the theNeonode Neonode shares shares (but (but of course of course the thecompany company also also need need to deliver to deliver on thoseon those and closed several far-fetched, non-core projects initiated by the previous thesimilar Neonode to the sharesUSD 11 (but million of course deal in the the company fall of 2016 also are need important to deliver catalysts on those for andThe closednew board several immediately far-fetched, took non-core two important projects steps. initiated First, by it the decided previous to focus the Neonode shares (but of course the company also need to deliver on those and closed several far-fetched, non-core projects initiated by the previous contractscontracts - not - notonly only announce announce them). them). Management. Second, the failed change in business model was reversed. The contractsthe Neonode - not shares only announce (but of course them). the company also need to deliver on those Management.and closed several Second, far-fetched, the failed non-core change projectsin business initiated model by was the reversed.previous The contracts - not only announce them). Management. Second, the failed change in business model was reversed. The contracts - not only announce them). Management.companycompany had had toldSecond, told the thecustomers the customers failed change they they could in could business only only buy modelbuy modules modules was and reversed. and not notlicenses Thelicenses company had told the customers they could only buy modules and not licenses companygoinggoing forward. forward.had told This theThis decision customers decision was was theyreversed reversed could around only around buy year-end modules year-end 2017 and 2017 and not and licenses going forward. This decision was reversed around year-end 2017 and CatalystCatalyst types types goingcustomerscustomers forward. are arenowThis now freedecision free to choose. to was choose. reversed However, However, around lead lead times year-end times are 2017arearound around and 18 months18 months Catalyst types customers are now free to choose. However, lead times are around 18 months so it is still a bit too early to see the results of the actions. Despite all of MajorCatalystMajor module module dealstypes deals socustomers it is still aare bit now too freeearly to to choose. see the However,results of lead the actions.times are Despite around all 18 of months Major module deals so it is still a bit too early to see the results of the actions. Despite all of In the fall of 2016 Neonode received a module deal of in total USD 11 million soNeonode's itNeonode's is still failuresa bit failures too in early the in thepast,to see past, the the thecompany results company of has the has only actions. only lost lost a Despite few a few customers, all customers, of InMajor the fallmodule of 2016 deals Neonode received a module deal of in total USD 11 million Neonode's failures in the past, the company has only lost a few customers, In the fall of 2016 Neonode received a module deal of in total USD 11 million which is remarkable and implies a strong value proposition for the customers. Inrelated therelated fall to ofdoor to 2016 door handle Neonode handle modules modules received for onefor a moduleone car carmodel. dealmodel. Similar of inSimilar total deals USDdeals would 11 would million have have a a whichNeonode's is remarkable failures in and the impliespast, the a companystrong value has proposition only lost a fewfor the customers, customers. related to door handle modules for one car model. Similar deals would have a which is remarkable and implies a strong value proposition for the customers. major impact on the share price. We especially believe that a design win for the whichOur Ourconclusion is conclusion remarkable is that is and that the implies thetechnology technology a strong and and valuecustomer customer proposition benefits benefits for are the fantasticare customers. fantastic while while majorrelated impact to door on handle the share modules price. for We one especially car model. believe Similar that deals a design would win have for thea Our conclusion is that the technology and customer benefits are fantastic while major impact on the share price. We especially believe that a design win for the execution and communication have been lousy and it is our view that most steeringmajorsteering impact wheel wheel on together the together share with price. with Autoliv/Veoneer Autoliv/VeoneerWe especially is believe close is close due that due to a the designto thelong longwin for the executionOur conclusion and communication is that the technology have been and lousycustomer and itbenefits is our view are thatfantastic most while steering wheel together with Autoliv/Veoneer is close due to the long execution and communication have been lousy and it is our view that most qualification period. executionownersowners agree. and agree. communicationAll inAll all, in thereall, there are have areevidence beenevidence lousy suggesting suggesting and it isthat our that Neonode view Neonode that could most could steeringqualification wheel period. together with Autoliv/Veoneer is close due to the long owners agree. All in all, there are evidence suggesting that Neonode could qualification period. indeed finally turn. qualification period. indeedowners finally agree. turn.All in all, there are evidence suggesting that Neonode could Break-even indeed finally turn. Break-even indeed finally turn. Break-even We Weexpect expect the thereaching reaching of break-even of break-even in the in theend end of 2021 of 2021 which which would would be anbe an WeBreak-even expect the reaching of break-even in the end of 2021 which would be an importantWe importantexpect milestone the milestone reaching for ofthefor break-even thestock stock market marketin the to graspend to grasp of that 2021 that Neonode which Neonode would has has left be leftthean the important milestone for the stock market to grasp that Neonode has left the importantlosseslosses behind milestonebehind and and hit for thehit the thepoint stock point of inflection.market of inflection. to grasp that Neonode has left the losses behind and hit the point of inflection. losses behind and hit the point of inflection.
REDEYE AUTOTECH SEMINAR - 2019 23 17004M7
OPUS Company page Opus Group https://www.redeye.se/company/opus-group
Redeye Rating
COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL
Last price Impact Timeframe 5.3 Major Long Moderate Mid Minor Short 4 4 2 Bear Base Bull People Business Financials 6.0 10.0 13.0 Turn page for catalyst specifics
Snapshot Financials
Opus Group Redeye Estimates OMXS30 2017 2018 2019E 2020E 2021E 6.5 1600 Revenue, MSEK 1,860 2,497 2,705 2,839 2,997 6 1500 5.5 Growth 9.5% 34.3% 8.3% 5.0% 5.6% 1400 5 EBITDA 308 504 641 687 728 4.5 1300 EBITDA margin 16.6% 20.2% 23.7% 24.2% 24.3%
Volume EBIT 107 206 255 300 371
2M EBIT margin 5.7% 8.2% 9.4% 10.6% 12.4% 0 Nov Jan Mar May Jul Sep Pre-tax earnings 3 51 72 192 288 Net earnings 81 26 22 131 196
Marketplace NASDAQ Stockholm Net margin 4.4% 1.0% 0.8% 4.6% 6.5%
CEO Lothar Geilen Dividend/Share 0.05 0.05 0.07 0.10 0.15 Chairman Katarina Bonde EPS adj. 0.28 0.09 0.07 0.45 0.67
Share information P/E adj. 23.9 61.3 79.8 13.2 8.8 Share price (SEK) 5.3 EV/S 1.5 1.2 1.1 1.0 0.8
Number of shares (M) 290.3 EV/EBITDA 9.3 6.2 4.8 4.1 3.4 Market cap (MSEK) 1,542 Last updated: 2019-08-19 Net debt (MSEK) 1,450
Owner Equity Votes Analyst RWC Asset Management 19.9% 19.9% Magnus Greko och Jörgen Hentschel 14.6% 14.6% Henrik Alveskog [email protected] Lothar Geilen 6.8% 6.8% Andra AP-fonden 6.4% 6.4% Henrik Wagner Jørgensen 3.5% 3.5% Conflict of interests Dimensional Fund Advisors 3.2% 3.2% Henrik Alveskog owns shares in Opus Group: Yes Rickard Andersson 2.9% 2.9% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this.
REDEYE AUTOTECH SEMINAR - 2019 24 The stock market has certainly become aware of the company, but has The stock market has certainly become aware of the company, but has Company description probably not dared to factor in the journey being able to continue for a good probably not dared to factor in the journey being able to continue for a good Company description while yet. Vehicle inspection is a typically Western phenomenon, but the Opus was founded in the early 90's in Gothenburg where their head office is while yet. Vehicle inspection is a typically Western phenomenon, but the Opus was founded in the early 90's in Gothenburg where their head office is problemThe stock of substandard market has vehicles certainly is become far greater aware in developing of the company, countries. but hasIn the still situated. During the first years the strategy was to provide AB Svensk problem of substandard vehicles is far greater in developing countries. In the still Companysituated. During thedescription first years the strategy was to provide AB Svensk longprobably term there not is dared huge to potential factor in for the further journey growth being in able these to continuecountries, for and a good Bilprovning with equipment for emission testing as the catalytic converters long term there is huge potential for further growth in these countries, and Bilprovning with equipment for emission testing as the catalytic converters Opuswhile has yet. the Vehicleproducts, inspection experience is aand typically ambition Western to participate. phenomenon, The risks but the in a wereOpus introduced was founded in the market.in the early Step 90's by stepin Gothenburg Opus extended where its their offering head officeand is Opus has the products, experience and ambition to participate. The risks in a were introduced in the market. Step by step Opus extended its offering and countryproblem like Pakistanof substandard are obviously vehicles higher is far than greater in the in developingUS. But with countries. more new In the costumerstill situated. base and During grew the internationally. first years the The strategy big change, was to from provide an equipment AB Svensk country like Pakistan are obviously higher than in the US. But with more new costumer base and grew internationally. The big change, from an equipment establishmentslong term there the isrisk huge becomes potential diversified for further while growth growth in these prospects countries, improve. and supplierBilprovning to a service with equipmentprovider, came for emission in 2008 when testing Opus as the aquired catalytic Systech, converters a US establishments the risk becomes diversified while growth prospects improve. supplier to a service provider, came in 2008 when Opus aquired Systech, a US AccordingOpus has to Opusthe products, profitability experience in emerging and ambition markets toshould participate. be higher The to risks justify in a basedwere vehicle introduced testing in company. the market. Step by step Opus extended its offering and According to Opus profitability in emerging markets should be higher to justify based vehicle testing company. the countryrisks that like are Pakistan involved. are obviously higher than in the US. But with more new Sincecostumer then revenues base and from grew vehicle internationally. inspection Theprograms big change, has grown from substantially,an equipment the risks that are involved. establishments the risk becomes diversified while growth prospects improve. Since then revenues from vehicle inspection programs has grown substantially, In the US and Western Europe, the overall market has been relatively moresupplier than 25 to percent a service annually provider, during came 2008-16, in 2008 excludingwhen Opus the aquired acquisitions Systech, of a US In theAccording US and Western to Opus Europe,profitability the overall in emerging market marketshas been should relatively be higher to justify more than 25 percent annually during 2008-16, excluding the acquisitions of unchanged in size in recent years, but now there are some factors that point to Envirotestbased vehicleand the testing Swedish company. operations. These programs make upp for unchangedthe risks in that size are in involved.recent years, but now there are some factors that point to Envirotest and the Swedish operations. These programs make upp for growth in the coming decade. One of these is a new EU directive covering more approximatelySince then revenues90 percent from of revenues vehicle inspection whereas the programs remaining has 10 grown percent substantially, growth in the coming decade. One of these is a new EU directive covering more approximately 90 percent of revenues whereas the remaining 10 percent stringentIn the controlsUS and Western on electronic Europe, safety the overallsystems. market Safety has features been relatively in modern comesmore from than equipment 25 percent sales. annually Starting during in 20182008-16, Opus excluding is reporting the acquisitionstwo divisions: of stringent controls on electronic safety systems. Safety features in modern comes from equipment sales. Starting in 2018 Opus is reporting two divisions: vehiclesunchanged are based in size on multiplein recent systems years, but and now sensors there arethat some interact factors to give that the point to VehicleEnvirotest Inspection and theand Swedish Intelligent operations. Vehicle Suport. These Theprograms latter is make a newly upp formed for vehicles are based on multiple systems and sensors that interact to give the Vehicle Inspection and Intelligent Vehicle Suport. The latter is a newly formed desiredgrowth outcome. in the coming This means decade. that One tests of are these becoming is a new more EU directive sophisticated covering and more divisionapproximately assisting vehicle90 percent technicians of revenues with whereasmodel-specific the remaining vehicle 10systems percent desired outcome. This means that tests are becoming more sophisticated and division assisting vehicle technicians with model-specific vehicle systems requirestringent a higher controls level of on technology electronic safetyat inspection systems. stations. Safety Thisfeatures perfectly in modern suits data.comes from equipment sales. Starting in 2018 Opus is reporting two divisions: require a higher level of technology at inspection stations. This perfectly suits data. Opusvehicles since it are is abased technology-oriented on multiple systems company and sensorswith its own that development.interact to give the OpusVehicle currently Inspection operates and a number Intelligent of vehicleVehicle inspectionSuport. The programs latter is ain newly North formed and Opus since it is a technology-oriented company with its own development. Anotherdesired growth outcome. factor This was means illustrated that by tests the areVW becoming scandal. Realistically, more sophisticated and Opus currently operates a number of vehicle inspection programs in North and Southdivision America, assisting Sweden vehicle and Pakistan.technicians Sweden with model-specific is an open market, vehicle but insystems reality Another growth factor was illustrated by the VW scandal. Realistically, authoritiesrequire awill higher increasingly level of technologyturn to independent at inspection third stations.parties to This carry perfectly out suits South America, Sweden and Pakistan. Sweden is an open market, but in reality it is data.an oligopoly since the barriers of entry are rather high. In the other markets authorities will increasingly turn to independent third parties to carry out relevantOpus measurements, since it is a technology-oriented rather than relying company on laboratory with its testing own development.by automobile it is an oligopoly since the barriers of entry are rather high. In the other markets the Opusauthorities currently give operates exclusive a rightsnumber to ofrun vehicle testing inspection programs, programs usually for in a North and relevant measurements, rather than relying on laboratory testing by automobile manufacturers.Another growth In the factor US, Environmentalwas illustrated Protectionby the VW Agencyscandal. (EPA) Realistically, tightened the the authorities give exclusive rights to run testing programs, usually for a periodSouth of 8-10America, years. Sweden In both and cases Pakistan. revenues Sweden are stable is an and open EBITDA-margins market, but in reality manufacturers. In the US, Environmental Protection Agency (EPA) tightened the standardsauthorities for ground-level will increasingly ozone turn not to very independent long ago. thirdThis partiesmeans thatto carry a number out period of 8-10 years. In both cases revenues are stable and EBITDA-margins aroundit is 20an percent.oligopoly The since company the barriers has aroundof entry 2 are 600 rather (2019) high. employees In the other at their markets standards for ground-level ozone not very long ago. This means that a number of areasrelevant in the measurements, United States rather must improvethan relying their on air laboratory quality. Many testing states by automobile and around 20 percent. The company has around 2 600 (2019) employees at their facilitesthe authorities in North- and give South exclusive America, rights Sweden, to run testing UK and programs, Pakistan. usuallyThe shares for a are of areas in the United States must improve their air quality. Many states and countiesmanufacturers. have no vehicle In the inspectionUS, Environmental at all, which Protection would appearAgency to (EPA) be the tightened the facilites in North- and South America, Sweden, UK and Pakistan. The shares are listedperiod on Nasdaq of 8-10 Stockholms years. In both Main cases market. revenues are stable and EBITDA-margins counties have no vehicle inspection at all, which would appear to be the obviousstandards first step,for ground-level but of course ozone not thenot onlyvery one.long ago.Since Thisthen meansthe Trump that a number listed on Nasdaq Stockholms Main market. around 20 percent. The company has around 2 600 (2019) employees at their obvious first step, but of course not the only one. Since then the Trump administrationof areas in thehas United forced States EPA to must take improvea different their course, air quality. which Many has caused states and facilites in North- and South America, Sweden, UK and Pakistan. The shares are administration has forced EPA to take a different course, which has caused Investment case uncertaintycounties and have confusion. no vehicle Fortunately inspection most at all, states which seemwould a appear lot more to interestedbe the Investmentlisted on Nasdaq case Stockholms Main market. uncertainty and confusion. Fortunately most states seem a lot more interested in doingobvious something first step, about but theof courseair quality not thanthe onlythe federalone. Since government. then the Trump in doing something about the air quality than the federal government. • A number of new businesses are at this point running with low or administration has forced EPA to take a different course, which has caused • A number of new businesses are at this point running with low or negativeInvestment profits, but case will gradually improve as volumes pick up. These are uncertainty and confusion. Fortunately most states seem a lot more interested Bear points: negative profits, but will gradually improve as volumes pick up. These are in doing something about the air quality than the federal government. primarily EaaS, the testing programs in Pakistan and South America and Bear points: primarily EaaS, the testing programs in Pakistan and South America and the• Adivision number Intelligent of new businesses Vehicle Support. are at this point running with low or • Some of the new countries that Opus has entered, e.g. Pakistan, are the division Intelligent Vehicle Support. • Some of the new countries that Opus has entered, e.g. Pakistan, are • Thenegative risk for Opus profits, loosing but somewill gradually of its current improve programs as volumes in the pick US up. should These are unstable in several aspects. The amount of business coming from these • The risk for Opus loosing some of its current programs in the US should unstableBear points: in several aspects. The amount of business coming from these not primarilybe ignored. EaaS, The the bigger testing contracts programs are innot Pakistan due for andrenewal South in Americaseveral and markets is not extensive so far, which limits the effect of any potential not be ignored. The bigger contracts are not due for renewal in several markets is not extensive so far, which limits the effect of any potential yearsthe but division these Intelligentprocurements Vehicle are Support.sometimes difficult to predict. damage,• Some if of things the new go sour.countries that Opus has entered, e.g. Pakistan, are years but these procurements are sometimes difficult to predict. damage, if things go sour. • Opus• The seems risk for to Opushave aloosing number some of new of itsdeals current in their programs pipeline in for the 2019-20. US should • Opusunstable could loose in several some aspects. of its current The amount contracts of businessin the US. coming If that happens from these it • Opus seems to have a number of new deals in their pipeline for 2019-20. • Opus could loose some of its current contracts in the US. If that happens it Bothnot new be marketsignored. andThe newbigger clients contracts in current are not markets. due for If renewalsome of in these several mightmarkets be interpreted is not extensive as if they so haven't far, which delivered limits accordingthe effect ofto anythe clientspotential Both new markets and new clients in current markets. If some of these might be interpreted as if they haven't delivered according to the clients materializeyears but a theserevaluation procurements of the company are sometimes may be triggered.difficult to predict. expectations.damage, if Or things that pricesgo sour. are under preassure. Even if the size of the materialize a revaluation of the company may be triggered. expectations. Or that prices are under preassure. Even if the size of the • Opus seems to have a number of new deals in their pipeline for 2019-20. contract• Opus iscould modest loose these some signals of its couldcurrent be contracts clearly negative. in the US. If that happens it Both new markets and new clients in current markets. If some of these contract is modest these signals could be clearly negative. Over the past seven years, Opus has tenfolded its revenues while considerably might be interpreted as if they haven't delivered according to the clients Over thematerialize past seven a years,revaluation Opus ofhas the tenfolded company its may revenues be triggered. while considerably boosting its margins. The growth comes both from a number of major Catalystexpectations. types Or that prices are under preassure. Even if the size of the boosting its margins. The growth comes both from a number of major Catalyst types acquisitions and several new contracts gained primarily in the US market. The contract is modest these signals could be clearly negative. Full impact from current business acquisitions and several new contracts gained primarily in the US market. The next few years are unlikely to be as dramatic, but there are still plenty of growth Full impact from current business Over the past seven years, Opus has tenfolded its revenues while considerably Throughout the group there are currently a number of activities paving the way next few years are unlikely to be as dramatic, but there are still plenty of growth opportunities. The company's own target is 5-10 percent annual growth. The Throughout the group there are currently a number of activities paving the way boosting its margins. The growth comes both from a number of major for betterCatalyst profits in types the coming years: 1) The rental business in California, opportunities. The company's own target is 5-10 percent annual growth. The factacquisitions that Opus has and won several several new contracts contracts suggests gained primarily it has a competitive in the US market. offering The for better profits in the coming years: 1) The rental business in California, GeorgiaFull impactand other from upcoming current businessstates will gradually feed through. 2) Testing fact that Opus has won several contracts suggests it has a competitive offering andnext is well few regarded years are by unlikely its customers. to be as References dramatic, but are there extremely are still important plenty of in growth Georgia and other upcoming states will gradually feed through. 2) Testing programsThroughout in Pakistan the group and thereChile are currentlynow stepping a number up 3) ofDrew activities Tech's paving RAP and the way and is well regarded by its customers. References are extremely important in the opportunities.vehicle inspection The business.company's Of own course target there is 5-10 is also percent a risk annual of losing growth. existing The programs in Pakistan and Chile are now stepping up 3) Drew Tech's RAP and Fastlignfor better gaining profits traction. in the coming years: 1) The rental business in California, the vehicle inspection business. Of course there is also a risk of losing existing contractsfact that from Opus time has to wontime, several but with contracts its track suggestsrecord there it has is aa greatercompetitive offering Fastlign gaining traction. Georgia and other upcoming states will gradually feed through. 2) Testing contracts from time to time, but with its track record there is a greater probabilityand is well of it regarded instead managing by its customers. to win new References business. are This extremely means that,important over in Winningprograms new contractsin Pakistan and Chile are now stepping up 3) Drew Tech's RAP and probability of it instead managing to win new business. This means that, over time,the Opus vehicle should inspection be able business.to continue Of to course grow thereand capitalise is also a onrisk its of market- losing existing Winning new contracts OpusFastlign has a provengaining track traction. record, particularly in the US market, giving them good time, Opus should be able to continue to grow and capitalise on its market- Opus has a proven track record, particularly in the US market, giving them good leadingcontracts position. from time to time, but with its track record there is a greater chances of winning new contracts. Each year some contracts are usually leading position. chances of winning new contracts. Each year some contracts are usually probability of it instead managing to win new business. This means that, over renegotiatedWinning new and contractsnew programs are implemented in some states or counties. renegotiated and new programs are implemented in some states or counties. time, Opus should be able to continue to grow and capitalise on its market- Opus has a proven track record, particularly in the US market, giving them good leading position. chances of winning new contracts. Each year some contracts are usually renegotiated and new programs are implemented in some states or counties.
REDEYE AUTOTECH SEMINAR - 2019 25 17001401 000k
SEYE Company page Smart Eye https://www.redeye.se/company/smart-eye
Redeye Rating
COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL
Last price Impact Timeframe 91.0 Major Long Moderate Mid Minor Short 5 4 2 Bear Base Bull People Business Financials 77.0 153.0 212.0 Turn page for catalyst specifics
Snapshot Financials
Smart Eye Redeye Estimates OMXS30 2017 2018 2019E 2020E 2021E 120 1600 Revenue, MSEK 43 51 64 128 296 100 1500 Growth 6.0% 17.5% 26.2% 99.1% >100% 80 1400 EBITDA -31 -42 -72 -43 79 60 1300 EBITDA margin Neg Neg Neg Neg 26.7%
Volume EBIT -42 -56 -89 -65 55
500k EBIT margin Neg Neg Neg Neg 18.6% 0 Nov Jan Mar May Jul Sep Pre-tax earnings -42 -56 -89 -65 55 Net earnings -42 -56 -89 -65 55
Marketplace First North Stockholm Net margin Neg Neg Neg Neg 18.6%
CEO Martin Krantz Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Anders Jöfelt EPS adj. -4.24 -4.80 -5.88 -4.24 3.56
Share information P/E adj. -11.7 -10.4 -15.4 -21.3 25.4 Share price (SEK) 91.0 EV/S 11.3 11.2 18.8 10.1 4.3
Number of shares (M) 15.1 EV/EBITDA -16.0 -13.4 -16.7 -29.8 16.0 Market cap (MSEK) 1,402 Last updated: 2019-08-25 Net debt (MSEK) -165
Owner Equity Votes Analyst Mats Krantz inklusive närstående 8.9% 8.9% Ålandsbanken I Ägares Ställe 7.8% 7.8% Viktor Westman [email protected] Swedbank Robur Fonder 7.4% 7.4% Första AP-fonden 6.6% 6.6% Martin Krantz 6.5% 6.5% Conflict of interests Anders Jöfelt 5.7% 5.7% Viktor Westman owns shares in Smart Eye: Yes Linda Jöfelt 5.6% 5.6% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Danica Pension 5.1% 5.1% Avanza Pension 3.8% 3.8% Handelsbanken Fonder 3.6% 3.6%
REDEYE AUTOTECH SEMINAR - 2019 26 every year over the platforms’ lives of about 10 years. For Smart Eye this every year over the platforms’ lives of about 10 years. For Smart Eye this Company description createsevery year a very over foreseeable the platforms’ and lives stable of aboutrevenue 10 stream years. Forfor manySmart years Eye this to come Company description creates a very foreseeable and stable revenue stream for many years to come Company description ascreates the large a very switching foreseeable costs and provide stable solid revenue barriers stream to entry. for many The stockyears marketto come Smart Eye provides eye tracking software for especially automotive asevery the year large over switching the platforms’ costs provide lives of solid about barriers 10 years. to entry. For Smart The stock Eye this market Smart Eye provides eye tracking software for especially automotive however, as always, only sees the coming few quarters, meaning significant SmartapplicationsCompany Eye provides but addresses eye description tracking customers software in defence, for especially aircraft automotive and academic as thecreates large aswitching very foreseeable costs provide and stable solid revenuebarriers streamto entry. for The many stock years market to come applications but addresses customers in defence, aircraft and academic however, as always, only sees the coming few quarters, meaning significant applicationsresearch as well. but addresses In the Research customers Instruments in defence, segment, aircraft where and academicSmart Eye has potentialhowever,as the foras large always,patient, switching onlylong sees termcosts theinvestors. provide coming solid few barriers quarters, to meaning entry. 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When a car model with Smart Eye's technology is launched whichwon should procurements drive the shareas well price. as RFQ’s worth SEK 6 billion in progress for 2019, manufacturers.Smartembedding Eye will receive eyeWhen tracking a carroyalty modelin products based with license Smart that are feeEye's later per technology car.sold Within to the is Automotivecar launched OEM Smart Eye will receive a royalty based license fee per car. Within Automotive which should drive the share price. SmartSolutions Eye Smart will receive Eye has a royalty won designs based licensefrom about fee perhalf car. of the Within customers Automotive that Solutionsmanufacturers. Smart When Eye has a car won model designs with from Smart about Eye's half technology of the customers is launched that Solutionshas procured Smart eye Eye tracking has won thus designs far. The from automotive about half market of the has customers high barriers that to hasSmart procured Eye will eye receive tracking a royalty thus far.based The license automotive fee per market car. Within has high Automotive barriers to hasentry procured as it is costly eye tracking and time thus consuming far. The automotive to develop productsmarket has that high meet barriers the to entrySolutions as it Smartis costly Eye and has time won consuming designs from to develop about half products of the customersthat meet the that Catalyst types entrycustomers' as it is high costly standards and time and consuming switching to costs develop are productshigh, meaning that meet important the Catalyst types customers'has procured high eye standards tracking thus and far.switching The automotive costs are markethigh, meaning has high important barriers to Catalyst types customers'competitive high advantages standards for and Smart switching Eye.Listing: costs Stockholm are high, meaning Stock Exchange important Design wins in china competitiveentry as it is advantagescostly and time for Smart consuming Eye.Listing: to develop Stockholm products Stock that Exchange meet the Design wins in china competitive(First North) advantagessince year 2016.Locations: for Smart Eye.Listing: HQ in Sweden.Stockholm Offices Stock in Exchange Detroit, DesignWe Catalystbelieve wins there in china are types design wins overdue in China where Smart Eye's tier-1 (Firstcustomers' North) high since standards year 2016.Locations: and switching HQ costs in Sweden. are high, Offices meaning in Detroit, important We believe there are design wins overdue in China where Smart Eye's tier-1 (FirstChina North)and Japan. since year 2016.Locations: HQ in Sweden. Offices in Detroit, Wepartner Designbelieve has winsthere been in areselected china design and wins only overdue paperwork in China remains where before Smart Smart Eye's Eyetier-1 is Chinacompetitive and Japan. advantages for Smart Eye.Listing: Stockholm Stock Exchange partner has been selected and only paperwork remains before Smart Eye is China and Japan. partnerofficially has nominated. been selected and only paperwork remains before Smart Eye is (First North) since year 2016.Locations: HQ in Sweden. Offices in Detroit, officiallyWe believe therenominated. are design wins overdue in China where Smart Eye's tier-1 Investment case officiallypartner nominated.has been selected and only paperwork remains before Smart Eye is InvestmentChina and Japan. case Investment case officially nominated. Volvo win Volvo win • InInvestment pole position within case eye tracking for mandated driver monitoring VolvoFollowing win the announcement of NVIDIA winning a DMS contract for Volvo we • In pole position within eye tracking for mandated driver monitoring Following the announcement of NVIDIA winning a DMS contract for Volvo we • ImpatientIn pole position & short within term eye focused tracking stock for market mandated driver monitoring believeFollowingVolvo that winthe Smart announcement Eye might beof NVIDIAable to winwinning Volvo a givenDMS contractits strong for partnership Volvo we • Impatient & short term focused stock market believe that Smart Eye might be able to win Volvo given its strong partnership • DesignImpatient• In pole wins & position short to move term within the focused share eye tracking price stock market for mandated driver monitoring withbelieveFollowing NVIDIA. that Smart the announcement Eye might be able of NVIDIA to win Volvowinning given a DMS its strongcontract partnership for Volvo we • Design wins to move the share price with NVIDIA. with NVIDIA. • Design• Impatient wins to & moveshort termthe share focused price stock market believe that Smart Eye might be able to win Volvo given its strong partnership with NVIDIA. • Design wins to move the share price Design wins in general In pole position within eye tracking for mandated Design wins in general In pole position within eye tracking for mandated DesignThe major wins key in catalyst general in general is won contracts from the many RFQ’s worth driverIn pole monitoring position within eye tracking for mandated The major key catalyst in general is won contracts from the many RFQ’s worth driver monitoring inThe totalDesign major SEK keywins 6 billion, catalyst in general which in general should is drive won thecontracts share price. from the many RFQ’s worth driverNot Inonly pole monitoring due toposition the (semi) within autonomous eye tracking cars but more for actuallymandated because of in total SEK 6 billion, which should drive the share price. Not only due to the (semi) autonomous cars but more actually because of in totalThe SEK major 6 billion,key catalyst which inshould general drive is won the sharecontracts price. from the many RFQ’s worth increasedNot driveronly due traffic monitoring to the safety (semi) focus autonomous and Euro NCAP'scars but decision more actually to mandate because driver of increased traffic safety focus and Euro NCAP's decision to mandate driver in total SEK 6 billion, which should drive the share price. monitoring,increased traffic the market safety forfocus driver and monitoring Euro NCAP's systems decision (DMS) to mandate is about driverto monitoring,Not only due the to marketthe (semi) for autonomousdriver monitoring cars systemsbut more (DMS) actually is aboutbecause to of monitoring,explode with the an market expected for CAGR driver volumemonitoring growth systems of about (DMS) 200 is percent about toduring explodeincreased with traffic an expected safety focus CAGR and volume Euro NCAP's growth decisionof about to200 mandate percent driver during 2017-2025.explode with This an expectedexpected CAGRgrowth volume is a known growth fact of for about the 200stock percent market during but we 2017-2025.monitoring, theThis market expected for growthdriver monitoring is a known systems fact for the(DMS) stock is aboutmarket to but we believe2017-2025. many This do expectednot understand growth Smart is a known Eye’s strongfact for positioning. the stock market Smart butEye wehas believeexplode many with ando expectednot understand CAGR volumeSmart Eye’s growth strong of about positioning. 200 percent Smart during Eye has devotedbelieve many 18 years do not of 100understand percent Smartfocus toEye’s and strong investments positioning. in this Smart very niche Eye has devoted2017-2025. 18 yearsThis expected of 100 percent growth focus is a known to and fact investments for the stock in this market very nichebut we (whereofdevoted 18 16 years years of of 100 actual percent sales). focus The tocompany and investments is in pole positionin this very with niche an (whereofbelieve many 16 years do not of understand actual sales). Smart The Eye’scompany strong is inpositioning. pole position Smart with Eye an has unmatched(whereof 16 45 years design of actual wins forsales). 8 customers. The company As for is barriersin pole position to entry, with the an unmatcheddevoted 18 years45 design of 100 wins percent for 8 customers.focus to and As investments for barriers in to this entry, very the niche unmatchedtechnology needs45 design to cope wins with for 8e.g. customers. changing Aslight for conditions, barriers to tunnels,entry, the technology(whereof 16 needs years toof copeactual with sales). e.g. Thechanging company light is conditions, in pole position tunnels, with an sunshine,technology darkness, needs to vibrations cope with etc.e.g. andchanging at the lightsame conditions, time never tunnels, fail. Competition sunshine,unmatched darkness, 45 design vibrations wins for etc.8 customers. and at the As same for barrierstime never to entry, fail. Competition the sunshine,is therefore darkness, basically vibrations limited to etc. one and other at playerthe same and time the customers’ never fail. Competition own technologyis therefore needsbasically to copelimited with to e.g.one changingother player light and conditions, the customers’ tunnels, own issolutions. therefore However, basically we limited believe to itone is unlikelyother player that theand customers the customers’ in the own long run sunshine,solutions. darkness,However, wevibrations believe etc. it is andunlikely at the that same the timecustomers never fail.in the Competition long run aresolutions. willing However,to put up withwe believe all investments it is unlikely and that maintain the customers the focus in necessary the long run for areis therefore willing to basically put up with limited all investments to one other and player maintain and the the customers’ focus necessary own for arein house willing sourcing. to put up Smart with all Eye investments states that, and being maintain platform the independent focus necessary and for solutions.in house sourcing. However, Smart we believe Eye states it is unlikely that, being that platform the customers independent in the longand run inhardware house sourcing. agnostic, Smart it has Eyea competitive states that, edge being as platform its technology independent can be andlocked arehardware willing agnostic, to put up itwith has all a competitiveinvestments edge and maintainas its technology the focus can necessary be locked for latehardware in the agnostic,development it has process. a competitive edge as its technology can be locked latein house in the sourcing. development Smart process. Eye states that, being platform independent and latehardware in the development agnostic, it process. has a competitive edge as its technology can be locked late in the development process. Impatient & short term focused stock market Impatient & short term focused stock market ImpatientSmart Eye’s first & short design term wins focusedwith new customers stock market are in general worth a lot Smart Eye’s first design wins with new customers are in general worth a lot Smartmore than Eye’ smeets first thedesign eye aswins they with in newgeneral customers are platform are in based.general The worth platforms a lot Impatientmore than meets & short the eye term as they focused in general stock are platform market based. The platforms moreshould than usually meets (although the eye notas theyautomatically) in general areyield platform additional based. new Thecar modelsplatforms for Smartshould Eye’ usuallys first (although design notwins automatically) with new customers yield additional are in general new carworth models a lot for shouldmore usually than meets(although the eyenot automatically)as they in general yield are additional platform new based. car Themodels platforms for should usually (although not automatically) yield additional new car models for
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