Nordic Technology Report 2020

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REDEYE TECHNOLOGY REPORT - 2020 2 w

TECHNOLOGY REPORT 2020

Table of contents

About Redeye 4

Redeye Technology Team 5

Transactions 8

Executive Summary 10

Technology Market Drivers 14

M&A in the Technology Sector 20

Nordic Tech IPOs 2019: A Review 24

Market Expectations 28

Redeye Screening 38

Top Picks-portfolio 46

Redeye Research Rating 52

Companies (2-pagers A-Z) 58

REDEYE TECHNOLOGY REPORT - 2020 3 w

ABOUT REDEYE RESEARCH-POWERED INVESTMENT BANKING

Leading Nordic Investment Bank Leading Advisor for Growth Companies

Founded 1999 Corporate Broking 110+ 110+ public corporates as clients Under supervision of the Swedish FSA

Ownership Partner owned Corporate Finance 150+ 150+ transactions executed over the last five years

Employees 65+ Key Specialties Tech & Life Science

Analysts: 20

Corporate Advisory: 20 Redeye.se 130,000+ Focused themes 10+ Attracting 130,000+ unique visitors monthly Includes 5G, AI, AR, Autotech, Cybersecurity, Disease of the Brain, Envirotech, Fight Cancer, Digital Entertainment and SAAS

Redeye Corporate Advisory Leading Advisor for Growth Companies

Corporate Broking Corporate Finance

• In-depth research coverage – sector expertise • The go-to adviser for growth companies

Investor events & activities • One of the most active advisors within the segment

• Create brand awareness, credibility and manage • Leading adviser within private and public transactions expectations • Highly skilled team with vast experience from private and • Stratetgic advise regarding how to create the optimal public transactions shareholder structure and build a strong and well-positioned financial brand • Over 150+ executed transactions including IPO:s,

Certified Adviser ECM

• Requirement for companies listed on Nasdaq First North • The most relevant investor network for growth companies incl. Premier • Matching companies with the right investors • Ensures compliance with Nasdaq Rule Book • Broad network of investors including institutional investors, • CA-breakfast seminars and newsletters to ensure client family offices and retail investors companies are up-to-date with the latest information and hot topics

REDEYE NORDIC TECHNOLOGY REPORT - 2020 4 w

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-commerce 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.

Niklas Blumenthal Client Manager

Niklas has studied business administration at Uppsala University and has over 20 years of experience in the financial market. He has previously worked as client manager at Nordnet, CMC Markets, Remium and ABG Sundal Collier. At Redeye, Niklas works with Corporate Broking in both Technology and Life Science teams.

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 NORDIC TECHNOLOGY REPORT - 2020 5 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.

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.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 6 THE REDEYE TECHNOLOGY TEAM

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.

Oskar Vilhelmsson Analyst

Oskar Vilhelmsson holds a BSc in Finance from University of Gothenburg and has previously worked as a consultant within Investor Relations. Oskar works as an equity analyst, covering companies in the tech sector with a prime focus on cleantech and consumer discretionary.

Magnus Skog Analyst

Magnus Skog is an equity analyst within Redeye’s technology team. He has an MSc in Corporate Finance from Lund university. Currently he is specialized within Augmented reality and Saas-companies for smartphones.

Erika Madebrink Analyst

Erika is an equity analyst within Redeye’s technology team. She holds a Master’s degree in Finance from the Stockholm School of Economics as well as a degree in Industrial Management from KTH Royal Institute of Technology in Stockholm.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 7 Technology Selected Transactions

REDEYE NORDIC TECHNOLOGY REPORT - 2020 8 TECHNOLOGY SELECTED TRANSACTIONS

RECENT

NOVEMBER 2019 OCTOBER 2019 OCTOBER 2019 JUNE 2019 IPO Private Placement Directed Issue + Rights Issue Rights Issue SEK 26m SEK 15m SEK 51m SEK 40m

MAY 2019 MAY 2019 APRIL 2019 APRIL 2019 MARCH 2019 Directed Issue + Rights Issue Co-Lead Manager Dual Listing Rights Issue IPO SEK 139m SEK 135m 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 NORDIC TECHNOLOGY REPORT - 2020 9 Executive Summary

REDEYE NORDIC TECHNOLOGY REPORT - 2020 10 EXECUTIVE SUMMARY

Introduction

Redeye tech team continues to expand and now consists of 11 analysts, which probably makes it the biggest team in the Nordics fully dedicated to tech companies. The team covers around 70 of the most promising tech companies listed on the different exchanges in Stockholm.

In this Nordic Technology Report we summarize some of the main trends and themes we currently see in the market including Cybersecurity, Gaming, Edge computing and Artificial Intelligence. We also look into the expectations and valuations and compare them to the global tech sector. Finally we do a screening of our universe and highlight 3 companies that we find particularly interesting going into 2020.

Technology market drivers and M&A

In this section, we have identified trends that will shape and disrupt businesses in the next few years and where investors may find several interesting investment opportunities. We highlight two key areas that are relevant for a big number of Swedish companies; Cybersecurity and Gaming, which are both USD 100+ bn markets growing at a robust pace. We also touch upon two more wide-ranging trends of great interest; Edge computing and AI-as-a-Service. These are still in fairly early stages but are expected to have significant impact on society in the coming decade.

High M&A activity Global technology-related M&A is expected to remain solid in 2020, as companies in all sectors expected in 2020 look for technologies to acquire. While valuations remain at record-high levels for technology companies as strategic buyers and PE compete, acquisitions are often considered less risky and faster compared to in-house development. Technology companies are increasingly focusing on acquisitions adding new markets and additional customers rather than just technology.

Only one takeover bid: The M&A activity in Redeye’s tech universe was slightly lower in 2019 relative to 2018 in terms of the deal value, while the number of deals was largely unchanged. The so-called “compounders” were at the top in terms of the number of deals. Lagercrantz made the most acquisitions, while Stillfront’s takeover of KIXEYE was the largest deal. Only one company in our tech universe, Opus Group, received a takeover bid in 2019. In 2018 three companies were taken over and later delisted.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 11 EXECUTIVE SUMMARY

Tech IPO’s

The downward trend in tech IPO activity continued during 2019. The number of new companies listed decreased to 28, from 39 in 2018, whereas total capital raised decreased to SEK 2.0bn 28 Nordic tech IPO’s (SEK 2.8bn in 2018). Most of the companies are early stage with a median 2018 revenue of SEK 8m and still not profitable. In total, the companies listed in 2019 were less mature compared to the 2018 IPO’s.

The performance of the listed tech companies was poor. Only half of the companies yielded On average poor relative a positive return over the year, with a couple of high performing outliers, putting the average performance after IPO absolute return at almost 10%. However, compared to OMX Nordic Small Cap Index, the median excess return was minus 11%, implying continued poor relative performance for tech IPOs also in 2019.

Market expectations regarding tech companies

Multiple expansion across In 2019, we witnessed multiple expansion for tech stocks across the board, globally, in Sweden, the board and in the Nordics. Almost all stocks are up significantly, including companies with declining sales. Globally, semiconductor companies were the winners (+54%), due to the trade war. All semiconductor multiples have increased by about 50% from last year, as their sales CAGR projections for 2019-2021E have increased from 7% to 10%. In comparison, the estimates related to e.g. platform companies (Facebook, Alphabet, etc.) have decreased.

Except iGaming which In Sweden, iGaming stocks are down -32% (excl. Evolution Gaming) and have the lowest valu- have taken a beating ations. iGaming multiples are now even lower than last year, dropping about 25-30%. However, iGaming sales are expected to grow in line with other subsectors.

Valuations in the different regions are about the same and estimates for 2019-2021E do not differ materially from last year. In contrast to global players, Nordic stocks have seen an im- Nordic tech stocks looking proved reported growth and higher CAGR estimates (up from 11% to 19%), since last year, more robust than global allowing them to outperform their global peers. Despite reported growth coming down from peers 23% to 12% for global stocks, their estimated CAGR has increased slightly. In that sense, we view the increase in valuations in the Nordics as a bit more robust, compared to global stocks.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 12 EXECUTIVE SUMMARY

Redeye screening

In our screening, we present four different strategies that combine our Redeye Rating, valuation range and financial projections in a variety of ways to generate unique output. The strategies are Growth At a Reasonable Price (GARP), Deep Value, Growth Junkies and Jockey Stocks.

Screening should not be viewed as a portfolio suggestion, but instead as a smart way to narrow Top tech picks 2020: down the “research subjects”. Qualitative factors and timing must also be taken into account. Redeye focuses on key catalysts for timing and risk limitation. Catalysts are defined as triggers • Embracer that are likely to materialize in the near future with an impact on the share price. Our screens do • Hexatronic not “capture” these possible catalytical events and must be evaluated case by case, which we • Smart Eye do in our portfolio of top picks. Our three top picks for 2020; Embracer, Hexatronic and Smart Eye all occurred in one or more of our screenings.

Redeye Top Picks portfolio

Our Top Picks portfolio aims to provide a basis for investment ideas for long-term positive returns relative to risk. The portfolio consists of a selection of companies from the Redeye Universe where we see the most attractive risk/reward.

Redeye’s Top Picks portfolio gained 61% during 2019, while the local comparative index OMXSPI Top picks gained 61% rose by 30%, thereby beating the index by as much as 31 percentage points. Our three top tech in 2019! picks for 2019 averaged a return of 52%. Hence a little below the aggregated portfolio, but still also considerably outperforming the market.

Our hurdle for portfolio inclusion remains high, with a disciplined assessment of companies’ qualitative factors and economic cycle dependency. Whilst we have increased our cyclical exposure somewhat since the summer of last year, we do not expect a major pick up in the growth rate. For 2020, our three top tech picks are: Hexatronic, Embracer and Smart Eye. Brief motivations are provided for these investment cases on page50.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 13 Technology Market Drivers

In this section, we have identified trends that will shape and disrupt businesses in the next few years and where investors may find many interesting investment opportunities. We highlight two key areas that are relevant for a big number of Swedish companies; Cybersecurity and Gaming but also two more wide-ranging trends; Edge computing and AI.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 14 TECHNOLOGY MARKET DRIVERS

Cybersecurity

Cybersecurity The shift to cloud computing, increased network connectivity, regulation and public spending Companies to watch: initiatives, and the growing complexity of disruptive cyber-attacks are all drivers supporting a growing cybersecurity need. • Clavister • Yubico USD 120 billion • Verisec Cybersecurity is a $120 billion global market with more than 3 000 vendors, making it difficult • Advenica for companies to rise above the competitive noise, while investors rarely have the full view of • Detectify this dynamic market to make informed decisions. Security products related to cloud, mobile, • Baffin Bay Networks IoT, and specialised threats are some of the fastest-growing areas within the space. Financial • F-Secure and insurance companies are the most significant customer segments. The human factor is • Cognosec still (and will continue to be) a huge issue. • Recorded Future • Omada Focus on detection and response • Unomaly Enterprises are transforming their security spending strategy, moving away from prevention • BehavioSec only approaches to focus more on detection and response. This is strongly coupled to the lever- aged use of AI and big data-driven security solutions to identify security issues before they can be exploited.

Another trend is the “platform approach” where one vendor ideally covers all security needs with one single solution (organizations have too many tools, few of which are integrated, generating too many alerts for understaffed teams to triage). Add to this the fact that cloud, mobile, social media, IoT and big data have profoundly expanded the attack surface, and it’s no surprise organizations will need more tools in their security infrastructure. Cybersecurity manufacturers will need to build in efficiencies by bringing all the capabilities of the security infrastructure into a single platform. In this scenario, they help organizations advance toward efficiency by attempting to consolidate functionality into their eco-system of products

Lastly, many new companies with new approaches and technologies are constantly emerging, leading to highly fragmented sectors (a perpetually consolidating industry).

REDEYE NORDIC TECHNOLOGY REPORT - 2020 15 TECHNOLOGY MARKET DRIVERS

Gaming

Companies to watch: Gaming continues to be one of our favourites from a pure investment perspective. Besides the “usual” growth trends, such as improving living standards and demographic shifts (the number • Embracer Group of players and the average playtime per player is proliferating), there are a few other aspects • G5 Entertainment that we believe make the future of gaming spectacular and are worth highlighting. • Paradox Interactive • Stillfront Group Television time is being redistributed • Starbreeze The dominant attention medium, television, has peaked and its time is being redistributed, • Rovio Entertainment among other mediums to gaming. It’s not a surprise that Netflix CEO said that Fortnite was • Nitro Games Netflix’s most threatening competitor (everyone is competing for finite attention, and there are more applications for this attention than ever before).

Gaming has unprecedented content leverage Three challenges confine most media categories. First is their finite length. Second, elongating requires more investment. The third, for traditional content consumers can’t participate in it, let alone leverage it. None of this is true in gaming. Most superficially, games are often designed around additional content that exists outside the core story – badges, side missions, etc. While this requires additional programming, it typically achieves significant leverage over prior investment (e.g. characters, items, stories, programming). More broadly, games are increasingly driven by social experiences. Gamers are not playing to “complete” a story; they’re playing because they love competitive play – especially play with their friends. On top of this, many games leverage audience obsessiveness to generate more content. A whole sub-economy on Fortnite has emerged where “players” can build (and monetize) their games and worlds, while Roblox and Minecraft are entirely based on this model.

Social signals The most successful mediums, like the most successful content, are all driven by social networks. As more people game, the importance of being a gamer, the “fun” of gaming, and signalling value of being “good” at gaming all increase. Gaming will be more connected than ever — Fortnite and other top cross-platform games have grown in popularity through their social elements and network effects (some games have become a fundamentally social medium).

REDEYE NORDIC TECHNOLOGY REPORT - 2020 16 TECHNOLOGY MARKET DRIVERS

Consistent growth through technology changes Technology changes have always driven massive net additive growth within gaming. In other media categories, new generations of devices or formats have tended to replace the prior one (e.g. DVD replacing VHS, Streaming Music replacing Digital Download replacing CDs replacing Cassettes replacing Vinyl, on-demand TV replacing cable replacing broadcast). In gaming, growth has piled up on top of each other as each new “thing” tends to unlock fundamentally new types of content.

Lasting IPs It’s common to hear the argument that video games don’t create durable IP that’s highly valued by large audiences. This isn’t true. The degree of audience attachment and time spent with video games is without parallel. To point, we don’t hear of regulators and royals warning of “Pixar addiction” or “Star Wars obsession”. The Legend of Zelda and Mario are in their fourth decades, Warcraft and Pokémon are in their third. What’s more, Pokémon has now generated more revenue than any other franchise, including Marvel, Star Wars and Mickey Mouse. Further- more, each year’s highest-grossing games are remarkably consistent over the past decade — it’s all Call of Duty, Grand Theft Auto, Red Dead Redemption, Warcraft, Battlefield, Counter-Strike, Pokémon, etc. To this end, it’s remarkable how resilient the core gaming IP is.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 17 TECHNOLOGY MARKET DRIVERS

Edge computing

Companies to watch: Edge computing is all about processing data closer to where it’s generated, as opposed to send- ing it to a central location (i.e. cloud computing) that can be thousands of miles away. That’s • Clavister so that data, especially real-time data, does not suffer latency issues that can affect an applica- • Enea tion’s performance. • Ericsson • Gapwaves Real-time applications • Hexatronic While the early goals for edge computing were to reduce bandwidth costs for IoT devices over • Ranplan long distances, the growth of real-time applications that require local processing and stor- • Sivers IMA age capabilities will drive the technology forward over the coming years. Edge computing will • Telia become a dominant factor across virtually all industries and use cases as the edge is empow- • HMS Networks ered with increasingly more sophisticated and specialised compute resources and more data • Crosser storage. Complex edge devices, including robots, drones, autonomous vehicles, and operational • Ekkono systems, will accelerate this shift.

Platform approach While many investors may be interested in looking into infrastructure providers (shoving traditional servers and storage boxes out to the edge) there are industry voices that argue that these players won’t win the edge, but rather by platforms (i.e. build new applications and workloads on top of infrastructure). We believe that a platform approach will be the norm as the edge will require integrations, analytics, monitoring, security, innovation etc to optimise the experience.

The effects on cloud computing? Lastly, the effect on cloud computing will be one interest factor to consider and monitor. Will edge computing render cloud computing obsolete, or should it be seen as a compliment and a third option to the traditional private versus public cloud structures.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 18 TECHNOLOGY MARKET DRIVERS

AI-as-a-Service

Companies to watch: AI, a megatrend that continues to be at the forefront of tech discussions, conferences and development. Most companies have started to explore how they can use AI to improve cus- • Softrobot tomer experience and to streamline their business operations, and this will continue in 2020. • Peltarion However, factors like limited qualified practitioners, immature tools and frameworks and the • Sana Labs fact that it is time-consuming and costly to obtain the large data sets often needed remains • Univrses an expensive proposition for most businesses. • Imagimob • Inovia Vertical solutions • Nepa For this reason, much of the AI applications will continue to be done through providers of • Smart Eye as-a-service platforms, which allow to feed in own data and pay for the algorithms or compute • IP Soft resources as used. Currently, these platforms, provided by the likes of Amazon, Google, and • Artificial Solutions Microsoft, tend to be somewhat broad in scope (horizontal AI across the enterprise IT stack), • Mapillary with custom-engineering required to apply them to the specific tasks an organization may • Captario require. During 2020, we will see wider adoption and a growing pool of providers that are likely • Optomed to start offering more tailored applications and services for specific or specialized tasks (vertical AI SaaS solutions to tackle specific business challenges). These applications use AI to help automate the steps and processes involved in the life cycle of creating, deploying, managing, and operating AI models to help scale AI more widely into the enterprise.

During the last years Redeye has focused on theme based events. Click on each theme below (or visit our website; www.redeye.se) to dig deeper and watch videos from the events.

− Augmented Reality (AR) − Autotech − Online Gambling − 5G − Gaming − Cybersecurity − Artificial Intelligence − Software-as-a-Service

In 2020 new themes with associated events will be presented (so keep your eyes open).

REDEYE NORDIC TECHNOLOGY REPORT - 2020 19 M&A in the technology sector

REDEYE NORDIC TECHNOLOGY REPORT - 2020 20 • Global technology-related M&A is expected to remain solid in 2020, as companies in all sub across the board look for technologies to acquire. While valuations remain at record-high levels for technology companies, as strategic buyers and PE compete, acquisitions are often considered less risky and faster compared to in-house development.

• Technology companies are increasingly focusing on acquisitions that are adding new markets and additional customers, rather than just technology.

• The M&A activity in Redeye’s tech universe was slightly lower in 2019 relative to 2018 in terms of the deal value, while the number of deals was largely unchanged. The so-called “compounders” were at the top in terms of the number of deals. Lagercrantz made the most acquisitions, while Stillfront’s takeover of KIXEYE was the largest deal.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 21 M&A IN THE TECHNOLOGY SECTOR

Global M&A

According to Baker McKenzie, global M&A will decrease by 25% in 2020, due to uncertain global economic conditions. However, the firm expects companies in every sector to look for digital technologies to acquire, in order to remain competitive .

The Global Capital Confidence Barometer, by EY, states that the outlook for technology M&A remains solid as all kinds of companies prefer technology-related M&A as a growth driver. For example, companies favor acquiring technology firms over in-house development, which can be slow and risky. According to EY’s survey, 63% of the companies are allocating more than 25% of their annual investment in digital and technology. ~75% of the investments in digital and technology are externally focused, i.e., acquisitions, joint ventures, and corporate venture funds2.

Also, according to the EY report, competition between strategic buyers and private equity is testing record-high valuations2. The 2019 Technology M&A Mid-Year Market Review by FE International, claims that the valuation of technology M&A deals remained at record high levels in the first half of 2019. According to the report, the success of many “tech-business models,” such as SaaS, on the public markets have given venture capital, and private investors increased confidence in the sector4.

While several reports expect companies in all sectors to acquire technology, tech firms themselves will focus their M&A on more than just adding technology. According to Deloitte, technology companies are increasingly interested in entering new markets and expanding its customer base through M&A3.

Deals regarding Infrastructure software is still dominating the technology deal volumes2. Given the high valuation multiples on most software companies, this is not surprising. Also, among software companies in our universe, valuations are high – including both mature and fastgrowing software companies.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 22 M&A IN THE TECHNOLOGY SECTOR

M&A in Redeye’s universe

M&A activity in Redeye's Tech universe Acquirer Target Deal Size Earnouts Addnode Group IntraPhone Unknown Unknown Addnode Group KPASS Unknown Unknown Addnode Group Majenta Unknown Unknown Aspire Global Pariplay EUR 13.1m - Beijer Electronics Virtual Access EUR 18m Yes Beijer Electronics Neratec SEK ~62m Yes Better Collective MyBettingsites.co.uk GBP 1.85m GBP 0.35m Better Collective Vegasinsider & Scoreandodds USD 20m - Better Collective RotoGrinders Network 60% for USD 21m - Christian Berner Bullerbekämparen SEK 16.3m SEK 4m Doro Invicta Telecare SEK 60m - Embracer Group Milestone EUR 44.9m EUR 37.6m Embracer Group Warhorse Studios EUR 33.2m - Enea Atos EUR ~18m - Enlabs KDB Games EUR 0.127m - Lagercrantz Group Schmitztechnik Unknown Unknown Lagercrantz Group Dorotea Mekaniska Unknown Unknown Lagercrantz Group OJ:s Vågsystem Unknown Unknown Lagercrantz Group G9 Unknown Unknown Lagercrantz Group Frictape Unknown Unknown Northbaze KAVAJ EUR 0.9m Yes Northbaze CLINT SEK 0.75m - Proact PeopleWare up to EUR 17m - Railcare Elpro AB SEK 4.1m - Sdiptech Redspeed Internation GBP 10.6m GBP 2m Sdiptech Water Treatment Products GBP 15.9m GBP 7.2m Sdiptech Cryptify Unknown Unknown Sdiptech Auger Site Investigations GBP 19m GBP 5.7m Speqta Netpixel Media & Captana NOK 20.75m NOK 10.75m Speqta Lånakuten SEK 16m - Stillfront KIXEYE USD 90m USD 30m Strax Richmond & Finch Unknown Unknown Strax Brandvault Unknown Unknown Systemair Pacific Ventilation SEK 32m - Systemair Systemair Maroc 60% for SEK 28m - TagMaster Sensys Networks USD 16m - ZetaDisplay Gauddi SEK 52.7m SEK 18.4m Source: Redeye Research

The total number of deals was in line with last year, while the total deal value declined slightly relative to 2018 among the companies in Redeye’s Tech universe. However, several companies in Redeye’s Tech universe had high M&A activity in 2019. The so-called “compounders” were at the top in terms of the number of acquisitions. Lagercrantz added five new companies and was the most active in terms of the number of deals. Regarding deal value, Stillfront was at the top

1 Baker McKenzie, M&A to drop 25% in 2020 in with its USD 90m acquisition on KIXEYE. the face of an Uncertain Global Economic Landscape, 2019.

2 EY, The Global Capital Confidence Barometer, The pending bid on Opus is not included in the list, as it is uncertain whether the bid will be 2019, p14. accepted or not. However, as the bidder raised the bid to SEK 8.50 per share, we believe the 3 Deloitte, 2020 Technology Industry Outlook, bid will be completed. Last year, three companies out of Redeye’s tech universe were acquired, 2019, p 4. including two in the online gambling sector. Thus, the number of takeovers has declined relative 4 FE International, 2019 Technology M&A Mid-year Market Review. to 2018 in Redeye’s Tech universe.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 23 Nordic Tech IPOs of 2019: A Review

• The downward trend in tech IPO’s continued during 2019. The number of companies listed decreased to 28, from 39 in 2018, whereas total capital raised decreased to SEK 2.0bn (SEK 2.8bn in 2018).

• The performance of the listed tech companies was poor. Half of the companies yielded a positive return over the year, with a couple of high performing outliers, putting the average absolute return at almost 10%. However, compared to OMX Nordic Small Cap Index, the median excess return was -11%, implying continued poor relative performance for tech IPOs also in 2019.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 24 NORDIC TECH IPOS 2019

IPO covered In 2019, 28 tech companies were listed on the Nordic stock exchanges. A majority, 23 companies were listed in Sweden. These numbers can be compared to the 39 tech companies listed in Adventure Box Technology 2018, of which 26 companies in Sweden. Amido Danish Aerospace Company We could also see a slight decline in IPO activity over the year, with 60% of the IPOs taking place Divio Technologies in the first half of the year. However, there was a surge of listings towards the end of 2019, with Eco Wave Power 7 IPO’s (or 25% of total IPOs) taking place in December. The largest subgroup among listed Ferroamp companies was software (8 companies), followed by internet (3 companies). FundedByMe Crowdfunding Game Chest Capital raised Gogo Lead Tech Overall, the capital raised in Nordic tech IPOs was in line with the numbers from last year. The InCoax Networks average capital raised was SEK 70.4m (SEK 72m in 2018), whereas the median was SEK 26.7m Industrial Solar (SEK 28.5m in 2018). Average capital raised was affected by a few large transactions, especially Inzile the IPO of Karnov Group (SEK 1.1bn). We note that Karnov is the only transaction over Karnov Group SEK 200m, whereas, in 2018, we had four tech IPOs over SEK 200m. Kollect On Demand Konsolidator Capital raised LeadDesk M.O.B.A. Networks 1 150 Nustay 1 100 QleanAir 1 050 QuickBit 1 000 150

Teqnion (mSEK) Triboron 100 Upsales Technology 50 Waturu 0 Vertiseit ZignSec Zoomability Zwipe

Source: Redeye Research

The largest issues were made by Karnov Group (SEK 1.1bn), Zwipe (SEK 128m), Eco Wave Power (SEK 122m), and Teqnion (SEK 80m).

REDEYE NORDIC TECHNOLOGY REPORT - 2020 25 NORDIC TECH IPOS 2019

Valuations The size of listed companies was slightly smaller compared to in 2018. The average post- money valuation amounted to SEK 339m (SEK 620m in 2018), and the median was SEK 156 (SEK 166m in 2018). One reason for this deviation is that only one company had a valuation above SEK 1bn in 2019, compared to four in 2018.

Post-money valuations

4 200

4 000

3 800

600 (mSEK) 400

200

Source: Redeye Research

The largest of the listed tech companies, based on post-money valuation, were Karnov Group (SEK 4.2bn), Eco Wave Power (SEK 670m), QleanAir (SEK 594m) and Teqnion (SEK 419m).

Financials An overview of the 2018 financials tells us that most of the listed companies are early-stage companies. The average revenue is SEK 148m, but the average is biased by a few outliers. The median reported revenue the year before the IPO was SEK 8.3m. Hence, the median P/S’18 multiple, based on post-money valuation, was 8.1x (7.8x in 2018), if we exclude firms with no revenues.

The average EBIT was SEK -0.3m, whereas the median amounted to SEK -1.5m. The companies also reported an average net income of SEK -7.3m in 2018, with median earnings of SEK -2.3m. We can conclude that the companies listed in 2019 were less profitable in terms of margins than the year before compared to the year before. During 2018, half of the listed companies reported positive EBIT and earnings, compared to 36% this year. Based on post-money valuation, this means that the implied median P/E’18 was 75x (37x in 2018), given that we only include companies that made a profit.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 26 NORDIC TECH IPOS 2019

Share performance Although the absolute performance of tech IPO’s was better in 2019 compared to the year before, this was mostly driven by more favorable market performance. In relative terms, the stock performance compared to OMX Nordic Small Cap Index was poor.

The average absolute return of the listed companies was almost 10% in 2019 from IPO date to year-end. However, a couple of strong outperformers skewed the average. Only about half of the companies generated a positive return if held from the first trading day to the end of the year. We note that only five companies traded within +/- 20% from the offered price at IPO, at year-end.

The average excess return amounted to -1%, with a median excess return of almost -11%. Here we use the OMX Nordic Small Cap Index as a benchmark. We conclude that tech IPO’s continue to underperform in relative terms.

Excess returns

350% 300% 250% 200% 150% 100% 50% 0% -50% -100% -150%

Source: Redeye Research

The best performing shares in comparison to the benchmark were Waturu (299%), Ferroamp (170%), QuickBit (61%), and ZignSec (31%).

Sources: Bloomberg, Nasdaq, Spotlight, Nordic Growth Market, and company documents (financial reports, IPO prospectus, and memorandums).

REDEYE NORDIC TECHNOLOGY REPORT - 2020 27 Market expectations regarding technology companies

• In 2019, we witnessed multiple expansion for tech stocks across the board, globally, in Sweden, and in the Nordics. Almost all stocks are up significantly, including companies with decreasing sales. Globally, semiconductor companies were the winners (+54%), due to the trade war. All semiconductor multiples have increased by about 50% from last year.

• In Sweden, iGaming stocks are down -32% (excl. Evolution Gaming) and have the lowest valuations. iGaming multiples are now even lower than last year, dropping about 25-30%, despite expected sales growth in line with other subsectors.

• Valuations in the different regions are about the same and estimates for 2019-2021E do not differ materially from last year. In contrast to global players, Nordic stocks have seen an improved reported growth and higher CAGR estimates (up from 11% to 19%), since last year, allowing them to outperform their global peers. Despite reported growth coming down from 23% to 12% for global stocks, their estimated CAGR has increased slightly. In that sense, we view the increase in valuations in the Nordics as a bit more robust, compared to global stocks.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 28 MARKET EXPECTATIONS

In this section, we have investigated the consensus estimates and valuations for the largest listed technology companies globally, as well as in the Nordic region and in Sweden, respectively. Following tanking in the end of 2018, tech stocks had their revenge in 2019, as indicated by the graph below, showing the furious progression of the S&P’s global tech index (SGI), in comparison to the Dow Jones index (DIJA). SGI returned 46% in 2019, compared to 22% for DIJA.

The tech companies in our selection are separated into two groups; more mature companies with sales growth below 10 percent and fast growers with revenues expected to show double digit growth. The selections include 25 technology companies in each region and are, besides the level of tech, based on market cap size. We do not mutually rank how leading the companies are. Consequently, we have, for the sake of clarity, scrapped the word “leading” (as in “leading tech companies” ) in the headings, in this year’s version, but the methodology is the same as before.

We include the weighted mean in the tables. However, since a handful players account for the majority of the total market cap (Spotify & Ericsson in Sweden, and Microsoft, Alphabet, Amazon & Apple on the global list) we always use the un-weighted mean when discussing different examples in the text.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 29 MARKET EXPECTATIONS

Global technology companies

In the table on the next page we list the 25 largest global tech companies, by market cap size. All players from last year remained on the list, the only change being Uber replacing Baidu. As we require a certain level of high-tech we do not include e.g., telecom carriers.

Similar to last year, Netflix, Tesla and Salesforce have the highest valuations and are expected to grow faster than the average, although their stock performance is actually below the mean. Looking closer at the average share performance of 37%, all stocks are up for full year 2019 (excl. Uber who IPO-ed during the year and has traded down). We especially note that even slower growing companies with negative sales growth during the last 12 months, like Apple, Samsung, and IBM, have surged a fair amount.

In essence, all 25 players can be divided into either semiconductors (Nvidia, Qualcomm, Intel, etc.) , software (Microsoft, Adobe, Salesforce, Oracle, SAP, VmWare, etc.), or platforms (Al- phabet, Uber, Facebook, etc.) The best performing group was semicon (54%), which also was the worst sector last year (-11%). The fall and rise of semiconductors are likely related to the trade-war, and easing of the trade war, respectively. All semiconductor multiples have increased by 50% from last year. This can be compared to about 6% higher earnings multiples and +27% EV/S for the software companies and the platform companies whose multiples only rose by single digits. The semicon analysts have increased the expected CAGR for years 2019-2021 by three percentage points from 7% to 10%, which is explained and supported by a 26% CAGR sales on a rolling 12-month, compared to -1% last year. We also note that the 2019-2021 expectations on the platform companies’ sales growth and EBITDA margins have been lowered by 2 and 6 percentage points, respectively.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 30 MARKET EXPECTATIONS

Largest Global Tech Companies: Consensus Estimates & Valuation Company Industry Mkt cap Share pr. P/E EV/EBITDA EV/S CAGR grow. EBITDA Growth R12M USD bn 1 yr ch. 20E 21E 20E 21E 20E 21E rev. 19-21E avr. 19-21E EBITDA Sales

Group 1: Fast growers (10 % or more) MICROSOFT CORP Applications Software 1217 64% 26 23 17 15 7.4 6.7 11% 45% 20% 13% ALPHABET INC-CL A Web Portals/ISP 942 33% 23 20 12 11 5.3 4.6 17% 44% 28% 19% AMAZON.COM INC E-Commerce/Products 930 25% 48 33 19 15 2.9 2.5 18% 15% 46% 20% FACEBOOK INC-CLASS A Internet Content-Entmnt 597 59% 21 18 13 10 6.5 5.4 21% 53% 3% 28% ALIBABA GROUP HOLDING-SPE-Commerce/Products ADR 583 66% 24 19 19 15 5.8 4.7 26% 31% 45% 43% TENCENT HOLDINGS LTD Internet Content-Info/Ne 470 23% 29 24 21 17 7.1 5.9 22% 34% 8% 21% TAIWAN SEMICONDUCTOR MANUFACSemicon Compo-Intg Circu 293 63% 21 18 10 9 6.7 6.0 14% 63% -3% 2% ADOBE INC Electronic Forms 161 54% 29 24 23 20 10.6 9.3 15% 46% 22% 24% SALESFORCE.COM INC Applications Software 148 28% 53 43 25 22 7.1 5.9 21% 28% 110% 26% NVIDIA CORP Electronic Compo-Semicon 145 85% 33 28 30 27 10.7 9.2 18% 34% -46% -19% NETFLIX INC Internet Content-Entmnt 143 21% 53 35 34 25 6.2 5.2 20% 18% 52% 27% PAYPAL HOLDINGS INC Commercial Serv-Finance 128 33% 31 26 23 19 5.9 5.1 17% 26% 9% 14% QUALCOMM INC Semicon Compo-Intg Circu 100 57% 14 13 11 10 3.8 3.6 15% 34% 316% 7% TESLA INC Auto-Cars/Light Trucks 80 49% 83 41 26 16 3.1 2.6 20% 13% 408% 39% VMWARE INC-CLASS A Software Tools 63 18% 22 20 16 14 5.9 5.4 11% 38% 9% 13% UBER TECHNOLOGIES INC E-Commerce/Services 53 -25 2.9 2.3 30% -12% -191% 22% Weigthed mean: group 1 721 46% 30 24 17 14 6.0 5.2 18% 37% 33% 20% Mean: group 1 378 45% 34 26 17 16 6.1 5.3 19% 32% 52% 19% Median: group 1 154 49% 29 24 19 15 6.1 5.3 18% 34% 21% 21%

Group 2: Maturing companies (less than 10 % growth) APPLE INC Computers 1330 111% 20 18 14 14 4.2 4.0 6% 29% -7% -2% SAMSUNG ELECTRONICS CO ElectronicLTD Compo-Semicon 284 48% 13 9 4 3 1.0 0.9 10% 26% -33% -8% INTEL CORP Electronic Compo-Semicon 263 36% 13 13 8 8 3.8 3.7 2% 47% 2% 2% CISCO SYSTEMS INC Networking Products 203 16% 14 13 10 10 3.7 3.6 3% 37% 3% 3% ORACLE CORP Enterprise Software/Serv 173 21% 13 12 10 10 4.9 4.7 3% 48% 5% 0% SAP SE Enterprise Software/Serv 165 43% 22 19 16 14 5.3 5.0 8% 35% -1% 12% BROADCOM INC Electronic Compo-Semicon 126 37% 13 12 11 10 6.0 5.7 5% 54% 0% 8% TEXAS INSTRUMENTS INC Electronic Compo-Semicon 120 45% 25 23 19 16 8.6 8.0 3% 47% -8% -7% INTL BUSINESS MACHINES CORPComputer Services 119 19% 10 9 9 9 2.2 2.1 2% 24% 3% -4% Weigthed mean: group 2 741 71% 17 16 12 11 4.1 3.9 5% 34% -6% -1% Mean: group 2 309 42% 16 14 11 10 4.4 4.2 5% 39% -4% 1% Median: group 2 173 37% 13 13 10 10 4.2 4.0 3% 37% 0% 0%

Weighted mean (total) 727 54% 26 21 15 14 5.4 4.8 14% 36% 21% 14% Mean (total) 353 42% 26 21 15 14 5.5 4.9 14% 34% 32% 12% Median (total) 165 37% 22 19 16 14 5.8 5.0 15% 34% 5% 13% Source: Redeye Research, Bloomberg

REDEYE NORDIC TECHNOLOGY REPORT - 2020 31 MARKET EXPECTATIONS

Leading Nordic technology companies

The Nordic top 25 tech companies, by market cap, are scattered within a variety of different subsectors (see the table below). Several of the iGaming players that were on the list for the previous versions of this report have seen their market caps become decimated. Thus, it is unfortunately not possible in this report to compare Nordic subsectors.

We have included Spotify and Veoneer as we consider these to be Nordic/Swedish companies, albeit listed in the US. We also include Adevinta, the Schibsted spin-off, which was Norway’s largest IPO in 13 years and edtech company Kahoot. One interesting trend is that there are several growing tech companies in Finland, and also somewhat in Norway, whose market caps have emerged to SEK 2-3 bn. We have therefore included e.g., QT and Crayon in the Nordic list (even though there are a couple of larger Swedish companies), in order to get a wider, Nordic distribution of companies. The blank spots in the table (and in the Swedish table further below) are related to unavailable data and correction for outliers.

Nordic tech stocks outperformed their global peers (53% vs. 42%), in a similar manner as in 2018. There are no significant differences between the earnings multiples in the two regions. One should of course note that the Nordic companies are substantially smaller and should have it easier to find growth. The smallest global company, Uber (USD 53 bn), is about twice the size of the largest Nordic company, Ericsson (SEK 276 bn). Thus, one would expect Nordic stocks to have both higher expected and reported sales growth, which also is the case by 2 and 5 percentage points, respectively. This is a notable change from last year. We therefore believe that the strong performance and multiple expansion in the Nordics is a bit more robust and perhaps more related to improved fundamentals, in comparison to global stocks. See further comparison of the three regions (next page).

REDEYE NORDIC TECHNOLOGY REPORT - 2020 32 MARKET EXPECTATIONS

Largest Nordic Tech Companies: Consensus Estimates & Valuation Company Industry Mkt cap Share pr. P/E EV/EBITDA EV/S CAGR grow. EBITDA Growth R12M SEK bn 1 yr ch. 20E 21E 20E 21E 20E 21E rev. 19-21E avr. 19-21E EBITDA Sales

Group 1: Fast growers (10 % or more) SPOTIFY TECHNOLOGY SA Internet Content-Info/Ne 263 40% 2.9 2.4 23% 1% 30% ADEVINTA ASA Internet Content-Entmnt 79 52 41 29 24 9.6 8.5 15% 33% 58% 16% EVOLUTION GAMING GROUP Gambling (Non-Hotel) 52 181% 29 25 22 20 11.0 9.5 20% 49% 61% 46% TIETOEVRY OYJ Computer Services 35 17% 14 13 9 8 1.2 1.2 36% 15% 7% 2% KONGSBERG GRUPPEN ASAMachinery-General Indust 28 27% 20 14 10 8 1.0 0.9 16% 10% 54% 43% NETCOMPANY GROUP AS Computer Services 22 44% 27 22 20 17 5.6 4.7 20% 28% VEONEER INC-SDR Auto/Trk Prts&Equip-Orig 16 -33% -5 -17 0.5 0.4 13% -11% PARADOX INTERACTIVE AB Entertainment Software 16 18% 32 27 16 14 9.3 8.1 21% 58% 23% 23% SINCH AB Communications Software 16 243% 39 32 23 20 2.6 2.3 19% 11% 62% 24% KINDRED GROUP PLC Internet Gambling 13 -28% 10 12 6 7 1.2 1.0 11% 16% -27% 3% NORDIC SEMICONDUCTOR ASAElectronic Compo-Semicon 11 98% 23 11 20 13 3.0 2.4 27% 14% -31% -3% KAHOOT! AS Entertainment Software 9 109 72 144% -13% -67% QT GROUP OYJ Computer Services 5 143% 77 34 44 23 6.5 5.3 25% 14% 18% CRAYON GROUP HOLDING ASApplications Software 4 246% 24 20 13 12 0.3 0.3 15% 2% 69% 43% Weighted mean: group 1 144 50% 16 15 10 9 4.5 3.9 23% 14% 14% 25% Mean: group 1 41 83% 32 30 17 17 4.2 3.6 29% 16% 21% 22% Median: group 1 16 42% 27 23 18 14 2.9 2.4 20% 14% 38% 23%

Group 2: Maturing companies (less than 10 % growth) ERICSSON LM-B SHS Applications Software 276 10% 16 13 7 7 1.0 1.0 3% 14% 111% 10% HEXAGON AB-B SHS Machinery-General Indust 194 34% 22 20 14 14 5.0 4.7 5% 34% 7% 6% NOKIA OYJ Wireless Equipment 204 -30% 14 11 7 6 0.8 0.8 3% 12% 44% 4% SIMCORP A/S Transactional Software 43 73% 39 33 28 24 8.5 7.7 9% 31% 24% SAAB AB-B Aerospace/Defense 43 7% 17 15 10 9 1.3 1.2 6% 13% 63% 11% EMBRACER GROUP AB Toys 22 46% 22 17 8 7 2.8 2.7 9% 36% ATEA ASA E-Services/Consulting 20 24% 19 16 10 9 0.5 0.4 6% 5% 11% 6% MYCRONIC AB Lasers-Syst/Components 18 62% 25 22 17 16 4.1 3.9 5% 25% 14% VAISALA OYJ- A SHS Electronic Measur Instr 13 106% 32 29 18 17 2.9 2.7 5% 16% 16% 15% HMS NETWORKS AB Networking Products 8 45% 37 31 23 20 5.3 4.8 9% 23% 6% 18% BETSSON AB Gambling (Non-Hotel) 6 -39% 7 8 5 5 1.2 1.1 7% 23% 4% 2% Weighted mean: group 2 190 13% 19 16 11 10 2.5 2.3 4% 20% 52% 8% Mean: group 2 77 31% 23 20 13 12 3.0 2.8 6% 21% 33% 11% Median: group 2 22 34% 22 17 10 9 2.8 2.7 6% 23% 14% 11%

Weigthed mean (total) 171 28% 18 16 10 9 3.3 2.9 12% 18% 35% 15% Mean (total) 57 53% 24 23 14 14 3.5 3.1 19% 18% 15% 14% Median (total) 20 34% 22 20 13 13 2.8 2.4 13% 15% 0% 11% Source: Redeye Research, Bloomberg

REDEYE NORDIC TECHNOLOGY REPORT - 2020 33 MARKET EXPECTATIONS

Swedish technology companies (and companies listed in Sweden)

Karnov went straight into the Swedish list, following its 2019 IPO, joined by Invisio and Vitec. Both Invisio and Karnov are Danish companies listed in Sweden, but for the sake of sim- plicity we will refer to all companies on this list (also including Spotify and Veoneer) as “Swedish” companies. Cherry was acquired and delisted during 2019 while Leo Vegas, IAR and Hexatronic did not quite make the market cap cut for this year’s edition.

Unsurprisingly, the large iGaming stocks performed worst (+11%) on the back of the issues with the regulation. The positive +11% appreciation is due to one player (Evolution Gaming) who saved the day with a 181% performance, indicating the importance of stock picking. Last year, we wrote that sectors with pessimistic perception is good stock picking ground. The other players aside of Evolution Gaming, (Kindred, Kambi, NetEnt & Betsson) were all down, by on average -32%. Betsson, Kindred and Net Ent have the lowest valuations with EV/EBITDA around 5-7x, which is about 25-30% lower than last year’s 7-9x.

The software group, on the other hand, had a phenomenal average return of 121%, due to especially Fortnox (+162%), Vitec (+149%) and Sinch, previously CLX, (+243%). Hardware and gaming together both returned just below 60%, which is significantly higher than 45% for the global SGI tech index. The EV/S multiples are overall similar across the sectors, but investors only want to pay on average 14-15x EV/EBITDA for iGaming, compared to 22x for gaming, 33x for software and 28x for hardware. Nevertheless, gaming, iGaming and software are all expected to grow revenue by around 15% during 2019-2021. However, the rolling-12-month growth has been much stronger for gaming and software (25-33%). Thus, if stronger recent growth history suggests better future growth prospects, iGaming is not necessarily a better pick compared to other subsectors.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 34 MARKET EXPECTATIONS

Largest Swedish Tech Companies: Consensus Estimates & Valuation Company Industry Mkt cap Share pr. P/E EV/EBITDA EV/S CAGR grow. EBITDA Growth R12M SEK bn 1 yr ch. 20E 21E 20E 21E 20E 21E rev. 19-21E avr. 19-21E EBITDA Sales

Group 1: Fast growers (10 % or more) SPOTIFY TECHNOLOGY SA Internet Content-Info/Ne 263 40% 2.9 2.4 23% 1% 30% EVOLUTION GAMING GROUP Gambling (Non-Hotel) 52 181% 29 25 22 20 11.0 9.5 20% 49% 61% 46% VEONEER INC-SDR Auto/Trk Prts&Equip-Orig 16 -33% -5 -17 0.5 0.4 13% -11% PARADOX INTERACTIVE AB Entertainment Software 16 18% 32 27 16 14 9.3 8.1 21% 58% 23% 23% SINCH AB Communications Software 16 243% 39 32 23 20 2.6 2.3 19% 11% 62% 24% KINDRED GROUP PLC Internet Gambling 13 -28% 10 12 6 7 1.2 1.0 11% 16% -27% 3% FORTNOX AB Applications Software 10 162% 58 45 39 30 14.6 11.5 27% 38% 69% 41% STILLFRONT GROUP AB Entertainment Software 10 182% 18 16 11 9 4.2 3.8 17% 40% 136% 50% MODERN TIMES GROUP-B SHSCable/Satellite TV 8 -8% 110 17 12 1.4 1.3 11% 7% 198% 3% STORYTEL AB Publishing-Books 9 77% -32 -35 3.7 3.0 25% -12% -125% 24% NETENT AB Entertainment Software 6 -27% 10 8 7 7 3.9 3.6 15% 51% -1% -1% VITEC SOFTWARE GROUP AB-BE-Services/Consulting SH 6 149% 31 28 16 14 5.0 4.5 12% 31% 26% 18% KAMBI GROUP PLC Internet Gambling 4 -33% 20 17 9 8 3.1 2.8 19% 34% 9% 19% TOBII AB Computers-Peripher Equip 4 44% 45 27 13 2.3 1.9 19% 8% 24% INVISIO COMMUNICATIONS ABWireless Equipment 5 105% 45 34 31 24 8.7 7.3 26% 27% 19% 8% Weighted mean: group 1 167 65% 9 10 6 4 4.3 3.7 21% 13% 16% 29% Mean: group 1 29 71% 29 33 13 9 5.0 4.2 19% 23% 38% 22% Median: group 1 10 44% 30 27 16 13 3.7 3.0 19% 27% 24% 23%

Group 2: Maturing companies (less than 10 % growth) ERICSSON LM-B SHS Networking Products 276 10% 16 13 7 7 1.0 1.0 3% 14% 111% 10% HEXAGON AB-B SHS Machinery-General Indust 194 34% 22 20 14 14 5.0 4.7 5% 34% 7% 6% EMBRACER GROUP AB Toys 22 46% 22 17 8 7 2.8 2.7 9% 36% MYCRONIC AB Lasers-Syst/Components 18 62% 25 22 17 16 4.1 3.9 5% 25% 14% HMS NETWORKS AB Networking Products 8 45% 37 31 23 20 5.3 4.8 9% 23% 6% 18% BETSSON AB Gambling (Non-Hotel) 6 -39% 7 8 5 5 1.2 1.1 7% 23% 4% 2% FINGERPRINT CARDS AB-B Identification Sys/Dev 6 88% 35 37 4.0 4.0 -1% 11% -13% ADDNODE GROUP AB E-Marketing/Info 6 83% 25 23 15 14 1.8 1.7 7% 12% 29% 16% KARNOV GROUP AB Consulting Services 5 32 30 18 16 8.0 7.6 4% 43% 17% 58% ENEA AB Communications Software 4 67% 20 18 12 11 3.9 3.7 6% 32% 81% 34% Weigthed mean: group 2 210 24% 19 17 11 10 2.8 2.7 4% 23% 60% 9% Mean: group 2 55 44% 23 20 15 15 3.7 3.5 5% 25% 32% 18% Median: group 2 7 46% 22 20 15 14 4.0 3.8 6% 24% 19% 16%

Weighted mean (total) 191 42% 15 14 9 8 3.5 3.1 12% 18% 7% 18% Mean (total) 39 59% 20 23 14 11 4.5 4.0 13% 24% 16% 19% Median (total) 9 45% 23 22 15 13 3.9 3.6 12% 24% 0% 18% Source: Redeye Research, Bloomberg

REDEYE NORDIC TECHNOLOGY REPORT - 2020 35 MARKET EXPECTATIONS

Regional comparisons & concluding remarks

Comparing and summarizing the three tables above we first note that stocks in all regions had a strong performance, but Nordic and Swedish stocks outperformed the global peers by 11-17 percentage points (see the table below). Overall, average multiples for 2020-2021 combined are about the same in the three regions - EV/EBITDA of 14x and P/E of 22-23x.

Average Valuation Multiples & Share Performance Per Region Region Share pr. P/E EV/EBITDA EV/S 1 yr ch. 20E 21E 20E 21E 20E 21E

Leading Global Tech Companies 42% 26.1 20.5 15.0 13.6 5.5 4.9 Fast growers 45% 34.0 25.6 17.1 16.4 6.1 5.3 Maturing companies 42% 15.8 14.4 11.3 10.5 4.4 4.2

Leading Nordic Tech Companies 53% 23.8 23.0 14.2 14.1 3.5 3.1 Fast growers 83% 31.5 29.9 17.4 16.9 4.2 3.6 Maturing companies 31% 22.6 19.7 13.3 12.1 3.0 2.8

Leading Swedish Tech Companies 59% 19.9 23.3 13.6 10.9 4.5 4.0 Fast growers 71% 29.2 33.2 13.3 8.9 5.0 4.2 Maturing companies 44% 22.9 20.4 15.4 14.7 3.7 3.5 Source: Redeye Research, Bloomberg

All valuation multiples have been raised across the board compared to last year, especially the average EV/S multiples that are up 28%, 17% and 45% for global, Nordic and Swedish stocks, respectively. Swedish stocks have the highest increase in EV/EBITDA multiples (20-33%), as can be seen in the table below, where we look at the changes from last year, i.e. year Y+0 (2020E) is measured against 2019E last year.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 36 MARKET EXPECTATIONS

Changes From Last Year: Average Valuation Multiples P/E EV/EBITDA EV/S Region 20E 21E 20E 21E 20E 21E ( %) ( %) ( %) ( %) ( %) ( %)

Leading Global Tech Companies 21% 19% 11% 23% 28% 29% Fast growers 21% 20% 1% 23% 25% 25% Maturing companies 31% 30% 39% 36% 30% 27%

Leading Nordic Tech Companies 13% 35% 9% 26% 18% 16% Fast growers 32% 73% 30% 60% 24% 29% Maturing companies 19% 16% 5% 3% 9% 9%

Leading Swedish Tech Companies -11% 34% 20% 33% 44% 46% Fast growers 32% 94% 18% 39% 34% 36% Maturing companies -4% 10% 32% 39% 62% 61% Source: Redeye Research, Bloomberg

The most interesting and relevant (albeit most difficult) question is, of course, if the increased valuations are mandated and supported by fundamentals, as multiple expansion with e.g. strong growth or improved profitability is arguably better and more sustainable than the oppo- site. Comparing the average EBITDA margins and sales CAGR two years out to last year, there are no major changes, besides for the Nordic players where the sales CAGR increased by eight percentage points (from 11% to 19%). This is likely partly driven by a 2% higher rolling 12-month sales CAGR. However, we note that the Global players has a 1 percentage point higher expected sales CAGR compared to last year, despite the rolling 12-month sales growth coming down from 23% to 12%. In that sense, we view the raised valuation and multiple expansion as more robust in the Nordics, compared to global stocks.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 37 Redeye Screening

• In our screening, we present four different strategies that combine our Redeye Rating, valuation range, and financial projections in a variety of ways to generate unique output. The strategies are Growth At a Reasonable Price (GARP), Deep Value, Growth Junkies and Jockey Stocks.

• Screening should not be viewed as a portfolio suggestion, but instead as a smart way to narrow down the “research subjects.” Qualitative factors and timing should also be taken into account. Redeye focuses on key catalysts for timing and risk limitation. Catalysts are defined as triggers that are likely to materialize in the near future with an impact on valuation. Our screens do not “capture” these possible catalytical events and must be evaluated case by case, which we do in our portfolio of top picks.

• Our three top picks for 2020; Embracer Group, Hexatronic and Smart Eye all occurred in one or more of our screenings.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 38 REDEYE SCREENING

Review of last year’s screen output

In this chapter, we include last year’s screen output and the return of those stocks during 2019. In the table below, we cover the top 10 (Cherry and MRG excluded due to buy-outs) companies in each strategy that we presented in last year’s tech-report. On average, every strategy showed positive and robust performance, just like the general stock market. The best performance was, just like in 2017 and 2018, seen in GARP that also outperformed the stock market as a whole. Jockey stocks came in second closely followed by Deep Value. Growth junkies were the only strategy that underperformed the market.

Stock return of screen output during 2019 GARP Return Deep value Return Growth junkies Return Jockey Stocks Return Mycronic 61% Lagercrantz 62% Allgon 105% XMReality -57% Lagercrantz 62% Allgon 105% Polygiene 51% Systemair 88% Polygiene 51% Enea 60% Smart Eye 57% Mycronic 61% Enea 60% Opus Group 68% G5 Entertainment -19% G5 Entertainment -19% Allgon 105% Systemair 88% Embracer Group 31% Allgon 105% Westpay -33% ZetaDisplay 38% Bambuser 17% Opus Group 68% Smart Eye 57% Bambuser 17% Global Gaming -82% Bredband2 4% A3 18% Nokia -37% Neonode -30% Polygiene 51% Paynova -65% Clavister 14% Enea 60% Doro 31%

Average return 48% 37% 16% 40% Source: Redeye Research

REDEYE NORDIC TECHNOLOGY REPORT - 2020 39 REDEYE SCREENING

Our universe of companies

The screens are based on the 64 tech companies that currently exist in the Redeye Universe. Redeye has full research coverage of these companies where we present quarterly research updates, more extended analysis, ongoing comments, investment thesis, valuation range, company ratings, and more.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 40 REDEYE SCREENING

Tech companies in Redeye Universe Valuation range Redeye Rating Company Share price Bear-case Base-case Bull-case People Busine ss Financials A3 17 13 17 26 4 3 2 Acconeer 20 18 33 60 3 2 2 Addnode Group 186 73 151 222 5 5 4 Alelion Energy Systems 1 0 1 3 3 2 2 Artificial Solutions 9 3 20 42 4 3 1 Aspire Global 28 30 57 85 4 3 3 Atari 3 2 4 6 4 4 3 Avtech 3 1 3 9 3 3 2 aXichem 84 18 60 145 4 3 1 Beijer Electronics Group 65 33 57 78 4 4 3 Better Collective 78 55 100 170 5 4 3 Bredband2 1 1 1 2 5 4 4 Christian Berner Tech Trade 30 18 29 39 4 4 3 Cimco Marine 2 3 3 1 Clavister 16 10 22 55 4 3 2 Doro 50 38 61 84 3 3 3 Embracer Group 70 60 100 125 5 4 4 Enea 180 91 161 200 4 4 3 Enlabs 25 16 32 51 4 4 4 Ericsson 84 75 91 100 4 4 4 Evolution Gaming Group 287 175 280 440 5 5 4 Fingerprint Cards 21 5 9 20 3 2 2 Flexion Mobile 8 5 14 50 4 3 2 Formpipe Software 22 12 18 25 4 5 3 Fortnox 171 94 200 317 4 5 5 Funcom 13 9 20 35 4 3 4 G5 Entertainment 100 70 160 600 4 3 4 Gaming Innovation Group 8 4 13 29 3 3 1 Gapwaves 27 9 30 67 3 3 2 Global Gaming 5 3 6 12 2 2 2 Heliospectra 7 2 7 12 3 3 2 Hexatronic 60 31 73 120 5 4 3 Image Systems 2 1 2 4 4 4 2 Imint 10 10 18 40 3 3 3 Impact Coatings 13 2 7 17 4 2 2 Invisio 119 62 130 224 4 5 5 I-Tech 68 40 80 140 4 3 2 Jondetech 15 3 8 50 2 1 2 Lagercrantz 148 75 116 140 5 5 4 Mycronic 185 67 152 187 4 4 4 Neonode 2 2 4 10 3 3 2 Nitro Games 10 5 14 45 3 2 1 Northbaze Group 1 1 1 2 3 2 2 Opus Group 8 6 10 13 4 4 3 Paynova 10 8 25 50 3 3 1 Polygiene 9 3 7 12 3 2 2 Powercell 174 39 60 76 4 3 2 Proact 187 131 201 287 4 5 4 Ranplan Group 13 4 17 36 3 4 2 Remedy 12 6 14 21 4 4 3 Sdiptech 76 38 78 126 4 5 3 Sensys Gatso Group 2 1 2 3 3 4 2 Sivers IMA 8 1 7 16 3 3 2 Smart Eye 121 77 153 212 5 4 2 Speqta 7 3 10 20 4 3 2 Starbreeze 2 0 1 3 3 3 1 Stillfront 366 235 415 520 5 4 4 Strax 4 4 6 10 4 3 2 Systemair 184 115 168 210 4 4 3 TagMaster 1 1 2 3 4 3 2 Toadman Interactive 19 16 26 34 4 3 2 Westpay 3 3 4 6 4 3 2 XMReality 4 3 6 18 3 3 2 ZetaDisplay 24 17 30 40 4 4 2 Source: Redeye Research

REDEYE NORDIC TECHNOLOGY REPORT - 2020 41 REDEYE SCREENING

The screening

Screening is one of the most valuable tools for investors to generate investment ideas. At Redeye, we believe investors have to look further than just reported numbers and classic valuation multiples. We put significant emphasis on quality factors like; management skill, ownership by insiders, competitive position, growth opportunities and more. All these quality factors can be understood throughout our proprietary Redeye Rating (see Appendix: Research & Rating). Besides the quality judgment of companies, an investor also needs to know what the current valuation levels imply about the prospects of the business in question. Our screening combines our proprietary Redeye Rating, financial forecasts, and Valuation Range. We here present four different strategies that combine these three elements in a variety of ways to generate unique outputs. The strategies, as explained earlier, are; Growth At a Reasonable Price (GARP), Deep Value, Growth Junkies and Jockey Stock’s all of which are explained below.

GARP

The GARP strategy is a combination of both value and growth investing. It looks for companies that are somewhat undervalued and have solid and sustainable growth potential. At Redeye we believe a reasonable price is a price that is below our Base-case valuation. The Base-case value is determined by a relatively likely scenario modeled by our analyst. The valuation is based on the expected Free Cash Flow (FCF), discounted at a WACC derived by our Redeye Rating, usually between 9-15%. In this strategy, we want the growth to be high, but not too high, for the next few years, looking at companies that are expected to grow at a CAGR of 10-45% for the next three years. After the first criteria of a low price and projected high growth, we will rank the output and choose the top companies based on their average Redeye Rating.

Criteria: Price < Base-case and sales CAGR of 10-45% for the coming three years. Ranking: Average Redeye Ranking

GARP screen output Criteria parameter Ranking parameter 3 year forward Distance Screen Company Redeye rating CAGR to Ba se Rank

Invisio 24% 10% 4,7 1 Fortnox 28% 17% 4,7 2 Embracer Group 17% 43% 4,3 3 Hexatronic 21% 22% 4,0 4 Better Collective 24% 29% 4,0 5 Enlabs 27% 30% 4,0 6 Sdiptech 12% 2% 4,0 7 G5 Entertainment 13% 59% 3,7 8 Funcom 43% 50% 3,7 9 Remedy 12% 17% 3,7 10 Source: Redeye Research

REDEYE NORDIC TECHNOLOGY REPORT - 2020 42 REDEYE SCREENING

Deep value

Value investing is about buying a stock for substantially less than what the company is worth today (i.e., its intrinsic value). Deep value investing seeks to purchase shares at an even more significant discount to their intrinsic value.

Value investors assert that “Mr. Market” often inefficiently prices stocks in the short-term for various reasons (e.g., forced stock sales, bad publicity, lack of analyst coverage, etc.). Once disciplined value investors have performed the required fundamental analysis of the business, they will arrive at an estimate of the “intrinsic value” of the stock. This intrinsic value is then compared to the current price of the shares, and if there is enough of a discount, value investors will strongly consider purchasing the stock.

Some deep value stocks might be value traps, i.e., stocks that always look cheap on paper. One good way to address this issue is by looking at management’s ownership and overall quality of the team. Our Deep value strategy screens for companies that trade close to our Bear-case valuation, i.e., the fundamental implied expectations are low. Our first criteria is that the share is trading no higher than 30% above the Bear-case. After this, we will rate the output based on our management rating in a way to decrease the risk of a value trap.

Criteria: Price 30% > Bear-case or lower. Ranking: Highest-ranked based on People rating

Deep value screen output Criteria parameter Ranking parameter Screen Company Distance to Bear People rating Rank Embracer Group −14% 5,0 1 Better Collective −29% 5,0 2 A3 −21% 4,0 3 Opus Group −29% 4,0 4 Image Systems −20% 4,0 5 Aspire Global 7% 4,0 6 Strax 0% 4,0 7 Imint −4% 3,0 8 Doro −24% 3,0 9 Neonode −5% 3,0 10 Source: Redeye Research

REDEYE NORDIC TECHNOLOGY REPORT - 2020 43 REDEYE SCREENING

Growth junkies

Growth investing is the pursuit of increasing one’s wealth through long- or short-term capital appreciation. Growth investing is typically considered to be the “offensive” portion of an investment portfolio. When it comes to stocks, “growth” means that the company has substantial potential for capital appreciation. Our Growth junkie screen will look for businesses that are forecasted more than 25% CAGR for the next three years and with a high-profit outlook rating. We will then rank the output based on the average Redeye rating and distance to Base-case. Even though we want hyper-growth, we still want a relatively fair price.

Criteria: Three-year sales CAGR>25% and Business rating >3. Ranking: Average Redeye rating and distance to Base-case, combined score.

Growth junkies screen output Criteria parameter Ranking parameter 3 year forward Business Redeye Distance Screen Company CAGR rating rating to Base Rank Fortnox 28% 5,0 4,7 17% 1 Enlabs 27% 4,0 4,0 30% 2 Funcom 43% 3,0 3,7 50% 3 Flexion Mobile 55% 3,0 3,0 75% 4 Smart Eye 111% 4,0 3,7 26% 5 Evolution Gaming Group 26% 5,0 4,7 −2% 6 Neonode 44% 3,0 2,7 90% 7 Clavister 43% 3,0 3,0 39% 8 Westpay 39% 4,0 3,0 28% 9 I-Tech 61% 3,0 3,0 18% 10 Source: Redeye Research

REDEYE NORDIC TECHNOLOGY REPORT - 2020 44 REDEYE SCREENING

Jockey stocks

Jockey investing is attempting to find a smart allocator of shareholder capital that can create exceptional returns for investors, ideally early in the game. We will here look at the companies that have the highest management rating in our universe. Our ranking will be based on net insider buying during the last 12 months and their relative distance to the Base-case valuation. We believe this strategy to be a combination of GARP and value as most insider buying happens at relatively low levels when the underlying fundamentals are under-appreciated by the market.

Criteria: People rating >4. Ranking: Twelve-month net insiders’ buy and distance to Base-case, combined score top 10.

Jockey stocks screen output Criteria parameter Ranking parameter Insider Distance Screen Company People rating net buy to Base Rank (msek) Aspire Global 4,0 104% 5.0 1 Image Systems 4,0 60% 2.0 2 G5 Entertainment 4,0 59% 2.0 3 Clavister 4,0 39% 4.0 4 Smart Eye 5,0 26% 5.0 5 Flexion Mobile 4,0 75% 0.0 6 Fortnox 4,0 17% 0.3 7 Atari 4,0 14% 0.0 8 Bredband2 5,0 −8% 2.0 9 Better Collective 5,0 29% 0.0 10 Source: Redeye Research

REDEYE NORDIC TECHNOLOGY REPORT - 2020 45 Top Picks-portfolio

REDEYE NORDIC TECHNOLOGY REPORT - 2020 46 • Top Picks gained 61% in 2019, while the comparative index OMXSPI rose by 30%. Our portfolio’s return thereby exceeded the index with 31 percentage points. Over three years, Top Picks rose 88% while the OMXSPI index gained 27%. Thus, the portfolio outperformed by 61 percentage points between the years 2017 to 2019.

• Our three top tech picks for 2019 beat the market and averaged a return of 52%. For 2020, we provide our top three investment ideas.

• Our hurdle for portfolio inclusions remains high, with a disciplined assessment of companies’ qualitative factors and economic cycle dependency. Whilst we have increased our cyclical exposure somewhat since the summer of last year, we do not expect a major pick up in the growth rate and continue to keep our eyes on leading indicators of wage inflation. We believe our bottom-up approach can continue to achieve long-term positive returns exceeding the market.

• Redeye’s Top Picks portfolio is actively managed and consists of stocks from Redeye’s Universe of Tech and Life Science companies.

• The underlying strategy relies on high-conviction cases found through Redeye’s fundamental analysis. The inclusion and portfolio size of each respective holding depends on the attractiveness in the company qualities, risk/reward ratio, and catalysts.

• Redeye’s Top Picks portfolio aims to provide a basis for investment ideas for long-term positive returns relative to risk.

• Redeye Premium members receive updates and can continuously follow portfolio transactions and performance on our website.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 47 TOP PICKS-PORTFOLIO

Portfolio Performance

Top Picks gained 61% in 2019, while the comparative index, OMXSPI, rose by 30%. Our portfolio’s return thereby exceeded index with 31 percentage points. Over three years, Top Picks rose 88% while the OMXSPI index gained 27%. The portfolio outperformed by 61 percentage points during 2017-2019.

The outperformance was also significant in a global context with the MSCI World Index +24%. In Europe, the broad Stoxx 600 index gained 23%, while the UK FTSE 100 was up 12%. The German DAX 30 index rose by 25%.

In the USA, 2019 was the best year for stocks since year 2013. The tech-oriented Nasdaq Composite led the pack with a 35% gain during the year, while S&P 500 closed +28% and Dow Jones Industrial Average was up 22%.

Below, we show the performance of our Top Picks portfolio versus OMXSPI index over three years. A description of the investment criteria for our portfolio is presented at the end of this chapter. For additional information, we refer to: https://www.redeye.se/premium/top-picks

Top Picks: Three Year Performance � 31 C, � � tl) .., ".C (1) .., 3 tl) (I) � 0 ?-. 100%0 I)) �i='. 80%0 ?-. a, 60%0 Retum ?-. 40%.§ �/=: t·.) 20%C1 ?-. 0%0 t0 ?-. -20%0

7 7 1 / Jul/17 Jul/18 Jul/19 Oct/18 Oct/19 Oct/17 Jan/17 Apr/17 Jun/17 Apr/18 Jun/18 Jan/19 Jun/19 Jan/18 Apr/19 Aug/19 Feb / Mar/1 Sep/17 Nov/17 Dec/17 Feb/18 Mar/ 1 8 Sep/18 Nov/18 Dec/18 Feb/19 Mar/19 Sep/19 No v /19 Dec/19 May/17 Aug/17 May/18 Aug/18 May/19 I "1J (ri "1J

Top"O Picks OMXSPI Source: Redeye Research, Nasdaq Stockholm � 0 � i � � I � .., 76 i

REDEYE NORDIC TECHNOLOGY REPORT - 2020 48 TOP PICKS-PORTFOLIO

Stock Performance in 2019

Enea (+78%), Smart Eye (+74%), and Remedy Entertainment (+64%) were the best performing tech stocks in our portfolio 2019. Ranplan Group’s share price doubled after our purchase but has fallen and was the only tech stock in our portfolio with a negative return (-5%) during our holding period in 2019.

Redeye Top Tech Picks 2019 Company Return 2019 Embracer Group (THQ Nordic) 47% Enea 78% Hexatronic Group 30% Average 52% Median 47% OMXSPI 30%

Source: Nasdaq Stockholm, Redeye Research

Enea has transformed from an IT consultant to a software business. In line with our investment case, the stock market has now revalued the company accordingly. Last year, we highlighted management’s strong track record of value-adding acquisitions, which is also what has fueled the growth and profitability in 2019. Multiple expansion coupled with high growth and rising margins has enabled Enea’s share to significantly outperform the market.

Embracer Group (previously named THQ Nordic) was a winner also for 2019, despite a decline of 10% in Q4’19. Value-adding acquisitions and successful launches of new games were once again the key ingredients for superior returns - validating our view of CEO and majority owner Lars Wingefors as one of the most prominent leaders among the listed companies in Sweden.

Hexatronic Group‘s stock price was volatile but developed in line with index for the full year. One year ago, we were attracted by the company’s strong growth abroad, M&A capability and valuation (11x EBIT on our 2019 est.). Much of what we expected for 2019 has also occurred, with the continuing international growth improving the stock market perception and valuation.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 49 TOP PICKS-PORTFOLIO

Top Picks Portfolio for 2020

Our hurdle for portfolio inclusion remains high, with a disciplined assessment of companies’ qualitative factors and economic cycle dependency. We have over the past two years been concerned about a global economic slowdown but again it looks as major central banks have been able to massage a soft landing, which in turn has raised expectations of a recovery in 2020.

Whilst we have increased our cyclical exposure somewhat since the summer of last year, we do not expect a major pick up in the growth rate. We continue to keep our eyes on leading indicators, in particular of wage inflation as we regard labor markets to be quite tight, and where wage increases already are close to being passed on to prices on goods and services. Such an overheating scenario, we currently believe is more likely in 2021 or 2022.

We believe our bottom-up approach can continue to achieve long-term positive returns exceeding the market. The portfolio has 18% in cash, giving flexibility to act swiftly in strong conviction cases with attractive risk-reward.

Top Tech Picks for 2020

In this section, we provide our top three tech cases for 2019. All Redeye Universe companies are briefly described in the appendix of this report.

Embracer Group (Redeye base case SEK 100) We view Embracer Group as a quality company in a growth sector, led by a shareholder-friendly management with top-notch track-record. The share price has dropped in Q4’19, due to a negative analyst report. We believe this is unjustified and instead regard the current share price level very attractive. The company has a long-term focus, a vast pipeline of development projects, and a strong cash position that enables additional value-adding acquisitions.

Hexatronic Group (Redeye base case SEK 73) In our view, Hexatronic’s global journey has just begun. For 2020, we expect 20%+ sales growth and improved profitability as the international markets offset the decline in Sweden and capacity utilization increases. We argue that investors underestimate the structural growth for fiber optic/broadband products abroad, which is and will remain a growth market for many years.

Smart Eye (Redeye base case SEK 153) Smart Eye is the market leader for Driver Monitoring Systems with 57 design wins from ten OEMs in the automotive industry. Several vital procurement processes from players like Volk- swagen and Volvo are expected to close during 2020. Smart Eye has a strong position and we believe the high potential is not fully reflected in the current share price.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 50 TOP PICKS-PORTFOLIO

Investment Strategy

Redeye’s Top Picks portfolio aims to provide a basis of investment ideas for long-term positive returns relative to risk. Management is active and the portfolio consists of a selection of companies from the Redeye Universe where we perceive current risk/reward to be most attractive.

The underlying strategy relies on high-conviction cases found through Redeye’s fundamental research. Our focus is on value companies where we see opportunities for good returns with reduced risk over a period of at least two years. The investment approach is bottom-up, rather than top-down. The underlying, and unrealized, value and catalysts should, therefore, emanate from within the company rather than from macro factors.

The selection process does not only rely on the potential upside in the share price but also on our Quality Rating. The rating model evaluates important success factors such as experience and track record of the company management, the quality of ownership, profit outlook, profitability, and financial strength. A holding in the Top Picks-portfolio is divested if:

• The investment conditions have changed, or • The share has appreciated and realized its full value, or • The holding can be replaced by stocks with better upside potential

The holdings in the Top Picks portfolio also follow some basic guidelines. A position may not exceed 30% of the portfolio’s total value and not more than 20% of the portfolio’s total value at initial purchase. Unless trading liquidity is low, a holding should not be less than 5% of the portfolio value at initial purchase but can be lower if it has decreased due to a negative return. Most of the companies in the portfolio should have proven business models, high growth potential and preferably be close to, or already deliver profitability.

The portfolio is primarily suitable for investors with an investment horizon of at least two years. The portfolio invests primarily in small and medium-sized companies listed on stock markets characterized by high risk but also a potential for a high return. As the portfolio’s investments are concentrated in a limited number of markets, it has a higher risk than an alternative that distributes holdings across several different markets. In terms of trading, shares in small and medium-sized companies may also have lower liquidity and thereby higher risk than larger companies.

Redeye Premium members receive regular portfolio updates and can follow the development continuously on our website.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 51 Redeye Research & Ratings

REDEYE NORDIC TECHNOLOGY REPORT - 2020 52 RESEARCH & RATINGS

Making educated investment decisions

How we cut the deck when it comes to investing Our proprietary rating system is developed to encourage investors to look deeper into the business characteristics and valuation dynamics before investing in it. There are three key pillars behind our investment philosophy; business quality, margin of safety and catalysts. We have developed unique tools to give investors an accurate picture on each of these three characteristics. These tools will guide the decision making process while taking emotion out of the equation. We briefly introduce the tools below.

Focus on Business Quality

To search for companies with better chances of surviving and potential for achieving long- term stable profit growth, Redeye looks at a set of clearly defined fundamental criteria that rate companies based on their quality characteristics. Company Qualities is our tool to illustrate and rate business quality. The rating is based on soft and hard criteria that are grouped into three categories, each represented by a bar in the graphic down to the right..

The company qualities rating Company Quality is based on a set of quality checks across three categories; PEOPLE, BUSINESS, FINANCIALS. These are the building blocks that enable a company to deliver sustained operational outperformance and attractive long term earnings growth. Each category is grouped into multiple sub-categories assessed by five checks. These are based on widely accepted and tested investment criteria and used by demonstrably successful investors and investment firms. Each sub-category may also include a complemen- tary check that provides additional information to assist with investment decision-making. If a check is successful, it is assigned a score of one point; the total successful checks are added to give a score for each sub-category. The overall score for a category is the average of all sub-category scores, based on a scale that ranges from 0 to 5 rounded up to the nearest whole number. The overall score for each category is then used to generate the size of the bar in the Company Quality graphic.

People At the end of the day, people drive profits. Not numbers. Understanding the motivations of people behind a business is a significant part of understanding the long-term drive of the company. It all comes down to doing business with people you trust, or at least avoiding deal- ing with people of questionable character. The People rating is based on quantitative scores in seven categories:

• Passion, Execution, Capital Allocation, Communication, Compensation, Ownership, and Board

REDEYE NORDIC TECHNOLOGY REPORT - 2020 53 RESEARCH & RATINGS

Business If you don’t understand the competitive environment and don’t have a clear sense of how the business will engage customers, create value and consistently deliver that value at a profit, you won’t succeed as an investor. Knowing the business model inside out will provide you some level of certainty and reduce the risk when you buy a stock. The Business rating is based on quantitative scores grouped into five sub-categories:

• Business Scalability, Market Structure, Value Proposition, Economic Moat, and Operational Risks

Financials Investing is part art, part science. Financial ratios make up most of the science. Ratios are used to evaluate the financial soundness of a business. Also, these ratios are key factors that will impact a company’s financial performance and valuation. However, you only need a few to determine whether a company is financially strong or weak. The Financial rating is based on quantitative scores that are grouped into five separate categories:

• Earnings Power, Profit Margin, Growth Rate, Financial Health, and Earnings Quality

The fair Valuation Range approach/Margin of Safety

Account for the unforeseen Never count on making a good sale at a high price. Instead, purchase the stock at a lower attractive price so that even a mediocre sale gives good results. The entrance strategy is actually more important than the exit strategy. At Redeye it all comes down to our Valuation Range, where we argue that a reasonable margin of safety is achieved when a stock is purchased at price below or on par with our bear-case.

In order to better assess the risk/reward we use a valuation range, which ranges from a bull-case (upside) to a bear-case (downside) scenario. It is critical to ensure that the scenarios are within the realm of reasonable- ness, and not once-in-a-century events. Looking more closely at the bear-case scenario will help you to have a more balanced view than just focusing on the potential upside in the bull-case scenario, i.e. a sobering reminder that the bull-case always faces a headwind.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 54 RESEARCH & RATINGS

When to buy A vital element to achieving outstanding returns in the long run is having the discipline to avoid investing in companies until their shares are available at a price that provides a good margin of safety. Fortunately, the bipolar nature of the stock market ensures the reliable delivery of these opportunities to the patient investor. At Redeye, margin of safety is heavily conscious of what can go wrong, not what the discount is to fair value. We argue that a reasonable margin of safety is achieved when a stock is purchased at a price below or on par with our bear-case. When you pay significantly less than what the company is worth, you have less potential to fall prey to the market noise and hype. A discount to fair value will not only cushion mistakes, but also provide an enhancement to returns as the margin of safety gap closes.

When to sell The bull-case serves your sell discipline in order to identify a potential exit. The key here is to really think long-term in the bull-case and be patient. Patient enough to hold good investments at least until the market is willing to recognise its full potential. Once you have taken a position, the bull-case will help you to avoid premature selling. A position in a company should be sold entirely when the share price reflects the bull-case or when cash is needed ot take advantage of a superior opportunity elsewhere.

A word about risk A common mistake investors make is to equate share price volatility with risk. Share price volatility is only a risk for those investors who lack confidence in a fair value or have patience to hold on at least until the markets are willing to recognise the true value. A much better definition of investing risk is the permanent loss of capital. Investors can reduce the incidence of permanent losses of capital by estimating what a company is worth and then paying a lot less. Investors should always be more concerned with the return of their money, rather than the return on their money.

Share price volatility works both ways and to investors who have a margin of safety built into what they are buying and holding, price fluctuations will become opportunities to buy cheap and sell dear. Fundamentals generally don’t change from day to day, so market moves are often driven by emotions. Remember that sharp market pullbacks are the best hunting seasons for bargain stocks and that some stocks are cheap for good reasons. If few or no attractive investment opportunities are available, you should protect your capital by moving a significant proportion of it into the safety of cash.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 55 RESEARCH & RATINGS

The Key Catalysts approach

Look for catalysts It is important to look beyond the numbers and seek a likely catalyst, which would unlock value, and estimate how long it will take for the catalyst to play out. These events, or Key Catalysts, reduce risk by narrowing the gap between price and value in a more predictable way. This is particularly important when investing in a low-quality business where time is like a ticking bomb stacked against the company.

At Redeye we define Key Catalysts as an event or a series of events that are expected to bring about change within a timeframe of 3 years. A difference that ultimately will unlock shareholder value or take a serious turn for the worse. This is very important since it will give you a heads up on what signs to watch for, which will help you make better decisions when positive or negative news comes down the road.

How to use key catalyst The Key Catalysts table is divided into four different elements that are described below:

Expected catalyst Description of potential events, which could be catalysts to cause the stock to perform significantly different than its peers or the broader market. It explains how the catalysts are expected to affect our model assumptions, the change to the financial forecast (i.e. firm cash flow, growth, profitability or risk) or investor sentiment.

Expected timeframe Estimate of when the event is about to happen, could be short or long term in duration.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 56 RESEARCH & RATINGS

Potency/Impact Estimate the potency of the event to move the share price up or down rated on a scale of 0 to 3 as shown in the figure below.

Scale Definition

3 - Major Major impact on the share price by affecting the sentiment and valuation in both short and long term

2 - Moderate Moderate impact on the share price by affecting the sentiment and/or valuation in both short and long term

1 - Minor Minor impact on share price by affecting the sentiment and/ or and valuation in short term

0 - Negligible Negligible impact on share price

Likelihood (up & down) Estimate the likelihood for respectively up- and downside scenario to occur rated on a scale of 0 to 3 as shown in the figure below.

Rating Definition

3 - Highly Likely It is highly likely that the scenario will occur

2 - Possible There is a possible/even chance that the scenario will occur

1 - Unlikely It is unlikely that the scenario will occur

0 - Extreme The scenario is extremely unlikely to occur

REDEYE NORDIC TECHNOLOGY REPORT - 2020 57 Companies

REDEYE NORDIC TECHNOLOGY REPORT - 2020 58 REDEYE NORDIC TECHNOLOGY REPORT - 2020 59 1900300k17

ATRE Company page A3 https://www.redeye.se/company/a3

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 16.5 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 13.0 18.0 27.0 Turn page for catalyst specifics

Snapshot Financials

A3 Redeye Estimates OMXS30 2018 2019E 2020E 2021E 1800 16 Revenue, MSEK 814 802 826 849 1700 15 1600 Growth -5.1% -1.5% 3.0% 2.8% 14 1500 EBITDA 56 72 77 96 13 1400 EBITDA margin 6.9% 9.0% 9.3% 11.3%

Volume EBIT 3 4 9 88 200k 100k EBIT margin 0.4% 0.5% 1.1% 10.4% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 0 4 7 87 Net earnings 1 6 6 68

Marketplace NASDAQ Stockholm Net margin 0.1% 0.7% 0.7% 8.0%

CEO Paul Moonga Dividend/Share 1.25 1.25 1.25 1.25 Chairman Thomas Nygren EPS adj. 0.03 0.17 0.18 2.06

Share information P/E adj. 433.2 92.8 91.7 7.8 Share price (SEK) 16.5 EV/S 0.6 0.7 0.6 0.6

Number of shares (M) 32.9 EV/EBITDA 8.9 7.7 6.9 5.1 Market cap (MSEK) 534 Last updated: 2019-11-27 Net debt (MSEK) 0

Owner Equity Votes Analyst Mark Hauschildt 46.7% 46.7% On Top of IT AB (Johan Åsberg) 8.4% 8.4% Havan Hanna [email protected] Wilderness Consulting AB (Mikael Holmlund) 8.4% 8.4% Pemberton Holding Ltd 4.0% 4.0% Ola Norberg 3.1% 3.1% Conflict of interests Hans Hellspong 2.8% 2.8% Havan Hanna owns shares in A3: No Six Sis AG 2.7% 2.7% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Thomas Nygren 1.7% 1.7% Milos Tankosić 1.6% 1.6% Sasa Cvijić 1.5% 1.5%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 60 COMPANIES

Company description Catalyst types Today's A3 (formerly AllTele) was born in 2017 and is a merger of the Acquisition companies AllTele, T3 and the IT companies Delegate and IT-Total A3 has been unusually clear about the consolidation trend in the industry (open Västernorrland. A3 is a challenger in the Swedish broadband market and has to an exit) and we see recent opex measures as a confirmatory signal where A3 been trading on Nasdaq OMX Stockholm, Small Cap since June 15, 2009. The seeks to improve its negotiating space. company has a broad product portfolio for the consumer market and small and medium-sized companies. A3 has around 170 employees, revenue and EBITDA Increased growth in the enterprise segment amounted to SEK 813.6 million and SEK 56.4 million, respectively, in 2018. A3’s ability to mitigate the gross margin pressure will be important in the long term. Increased enterprise sales will then be central as the segment has higher Investment case gross margins (will also drive sales). • The new strategy - an IT company • Acquisition - the most attractive option • Our DCF valuation indicates a base case of SEK 18 per share, and the fair value range is SEK 13-27

The new strategy - an IT company The new A3 presented its strategy during the report for the first quarter of 2017. The products are divided into two product areas, Sunrise (growth areas) and Sunset (areas with negative growth, mainly coax and ADSL). The focus is on Sunrise and especially on IT services. Above all, the strategy is unique compared to the closest competitors, Bredband2 and Bahnhof. Competition in this category looks different, with players such as ATEA, Elgiganten, Dustin etc. A3 is thus unique as it comes from the telco industry.

Acquisition - the most attractive option The latest reports make it clear that full focus is on reducing opex, streamlining and completing synergy projects. These priorities inevitably affect growth opportunities. As A3 has previously been unusually explicit about the consolidation trend in the industry (open to an exit), we see the opex measures as a confirmation signal where A3 seeks to improve the company's negotiating space. From a shareholder perspective, we argue that an acquisition should be seen as the most attractive option. A3 has been one of the losers in an attractive market climate, as the trend is now reversing (the fiber market has reached its peak), we have a hard time seeing a better A3.

Main risks:

• Increased network fees (COGS) would put gross margins at risk. A3 has so far mitigated this trend due to scalability in other opex. • A generic product that is difficult to differentiate, where customers buying decision are based on price. Going forward, we believe that the risk of pricing pressure is low as a result of industry consolidation and a maturing fiber market.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 61 1900750k26

ACCON Company page Acconeer https://www.redeye.se/company/acconeer

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 20.7 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 2018 2019E 2020E 2021E 1800 24 Revenue, MSEK 1 6 18 50 1700 22 1600 Growth >100% >100% >100% >100% 20 1500 EBITDA -31 -56 -57 -39 18 1400 EBITDA margin Neg Neg Neg Neg

Volume EBIT -35 -67 -69 -51 500k 250k EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -35 -67 -69 -51 Net earnings -35 -67 -69 -51

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Lars Lindell Dividend/Share 0.00 0.00 0.00 0.00 Chairman Bengt Adolfsson EPS adj. -1.84 -3.50 -3.56 -2.65

Share information P/E adj. -13.1 -5.6 -5.5 -7.4 Share price (SEK) 20.7 EV/S 320.1 52.2 22.1 9.2

Number of shares (M) 19.2 EV/EBITDA -10.6 -5.5 -7.0 -11.7 Market cap (MSEK) 391 Last updated: 2019-10-26 Net debt (MSEK) 18

Owner Equity Votes Analyst Bengt Adolfsson 14.1% 14.1% Winplantan AB 11.6% 11.6% Viktor Westman [email protected] Avanza Pension 5.7% 5.7% Nordnet Pensionsförsäkring 3.2% 3.2% Dreamtech Co Ltd 3.1% 3.1% Conflict of interests Uniquest Corporation 3.1% 3.1% Viktor Westman owns shares in Acconeer: No 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% Peak Partners 1.5% 1.5%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 62 COMPANIES

Company description Acconeer is a semiconductor company in Lund, Sweden, who went public in in Europe must have CPD. We believe Acconeer has a strong competitive December 2017. It develops and sells radar sensors, with a fabless business advantage in CPD as Acconeer's radar can detect a sleeping baby from its model, to manufacturers of electronics. The manufacturing partners are some pulse or breathing, meaning, i our opinion, that radar will be the go-to of the World's largst (Global Foundries & Amkor). Acconeer has developed a technology for CPD. 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 a vast, global network of local, niche distributors. The company's current focus Main bear point: areas are robotics, smart presence, child presence detection, parking sensors, • Acconeer’s minor size is a disadvantage that likely explains why major level measurement (incl.waste management) and automotive. 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 • Automotive has the largest potential Catalyst types • 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. Strong unique product offering & scalability Smaller customers are moving faster. While news of orders gradually will from unmatched cost de-risk the case we assume certain larger deals are key catalysts. They are Acconeer’s radar of 5x5x1 mm is the tiniest radar on the market, which means more worth than others and have the potential to substantially move the unmatched cost. Other radars are more than three times larger, suggesting that shares; especially big deals within automotive. 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 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.

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) since it is being mandated by Euro NCAP from 2022, meaning all vehicles sold

REDEYE NORDIC TECHNOLOGY REPORT - 2020 63 19001200 000k

ANOD B Company page Addnode Group https://www.redeye.se/company/addnode-group

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 184.0 Major Long Moderate Mid Minor Short 5 5 4 Bear Base Bull People Business Financials 73.0 151.0 222.0 Turn page for catalyst specifics

Snapshot Financials

Addnode Group Redeye Estimates OMXS30 2018 2019E 2020E 2021E 180 1800 Revenue, MSEK 2,942 3,422 3,787 4,136 160 1700

140 1600 Growth 16.7% 16.3% 10.7% 9.2%

120 1500 EBITDA 319 410 410 453 100 1400 EBITDA margin 10.8% 12.0% 10.8% 11.0%

Volume EBIT 203 219 278 318

500k EBIT margin 6.9% 6.4% 7.3% 7.7% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 192 182 266 305 Net earnings 146 134 208 238

Marketplace NASDAQ Stockholm Net margin 5.0% 3.9% 5.5% 5.8%

CEO Johan Andersson Dividend/Share 2.50 2.40 3.73 4.27 Chairman Staffan Hanstorp EPS adj. 5.10 4.01 6.22 7.11

Share information P/E adj. 20.3 42.9 27.7 24.2 Share price (SEK) 184.0 EV/S 1.1 1.7 1.5 1.4

Number of shares (M) 33.4 EV/EBITDA 9.8 14.3 14.3 13.0 Market cap (MSEK) 6,151 Last updated: 2019-11-01 Net debt (MSEK) 114

Owner Equity Votes Analyst Swedbank Robur Fonder 9.6% 7.6% SEB Fonder 9.2% 7.3% Fredrik Nilsson [email protected] ODIN Fonder 8.7% 6.9% Staffan Hanstorp & Jonas Gejer 6.8% 18.7% Creades AB 6.4% 5.0% Conflict of interests Lannebo Fonder 5.2% 4.1% Fredrik Nilsson owns shares in Addnode Group: No Nordea Fonder 5.2% 4.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Dick Hasselström 4.3% 11.1% Fjärde AP-fonden 4.2% 3.4% Andra AP-fonden 3.5% 2.8%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 64 Company description Addnode Group was established in 2003 and is listed on Nasdaq OMX In recent years, Addnode has had a favorable demand from manufacturing Stockholm. In 2016 Addnode had a turnover of SEK 2.2 billion, with an EBITDA industries, as well as the construction and property sector. During the last of SEK 113million. Addnode Group is divided into three divisions: Design quarters, some smaller and specialized companies in the real estate industry Management, Product Lifecycle Management, Process Managemen. The appear to have problems. However, Addnode’s direct exposure to housing business segments operate in different regions with about 25 different brands. developers is low, and it should therefore not be concluded that Addnode will Operating margin varies considerably between the various business areas face lower demand in the coming quarters. Even so, we will follow the where the most profitable can perform up to 20 percent. Addnode Group uses a development of the Design Management business area as well as the very decentralized management model where the individual subsidiaries are underlying industry.

run by management teams to maintain an entrepreneurial spirit. A key growth Acquisition-led growth always risky strategy in Addnode Group is to grow through acquisitions, which they Organic growth can be slow, international expansion is complex and managed to do successfully in recent years. The company's own financial acquisitions tend to be difficult. Despite Addnode’s successful acquisition goals is to reach a growth of 10% per year (both organically and through history, acquiring companies takes time and poses a risk. Nevertheless, we acquisitions), an EBITA margin of 10% and at least 50% of profit after tax have confidence in the management team. will be distributed to shareholders.

Investment case Catalyst types Acquisitions • Has evolved into becoming a software company The company has a successful acquisition history, which driven by its focus on • Interesting acquisition history fair price, good people, and management in place. Since 2013, Addnode has • Well-diversified in three different divisions acquired about 30 businesses, adding a total of over SEK 1 500m in sales. Historically, the company has acquired at 6x EBITA, way below Addnode’s Investment case valuation. We believe the prospects for additional value-adding acquisitions is Has evolved into becoming a software company. Today, only about 30% of good, however, it is partly already priced in according to us. Addnode’s sales are related to services, and most of these services are related to the implementation of the company’s software solutions. Moreover, the International expansion company has a strong focus on recurring revenues, and today more than 50%of Continued international expansion. Addnode acquired their first company sales are recurring revenues. These qualities make us believe the company in GB, in 2014 and Germany during 2015. The announcement of additional should be valued at a premium compared to the IT-consultants. More precisely, acquisitions in GB, Germany or other markets may potentially increase general we claim Addnode should be valued in line with comparable software market exposure and growth opportunities. companies.

Interesting acquisition history. Addnode has for a long been one of our Economic downturn favorites in its sector. The company has a successful acquisition history, which While we believe Addnode diversification in terms of markets and regions as driven by its focus on fair price, good people, and management in place. As a well as the digitalization help making the company rather resilient to economic result of the completed acquisitions, Addnode has increased its debt. However, downturns, software revenue is generally related to the number of users. Thus, we claim that the leverage is healthy and that the acquisitions have been value- layoff of engineers likely has a negative effect on Addnode’s revenue and profit. creating. Since 2013, Addnode has acquired about 30 businesses, adding a total of over SEK 1 500m in sales. Historically, the company has acquired at 6x EBITA, way below Addnode’s valuation. We believe the prospects for additional value-adding acquisitions is good, however, it is partly already pricedCOMPANIES in according to us.

Well-diversified in three different divisions. To sum up, Addnode is well diversified in three different divisions with interesting niches. Further, the company has taken a leading Nordic position in most of its niches, which also is the ambition for all of its business areas.

Company description Counter-Thesis – Bear points AddnodeCompany Group was description established in 2003 and is listed on Nasdaq OMX InDependent recent years, on theAddnode economy has and had the a favorable willingness demand to invest from manufacturing Stockholm.Addnode Group In 2016 was Addnode established had ina turnover2003 and of is SEK listed 2.2 on billion, Nasdaq with OMX an EBITDA industries,In recent years, as well Addnode as the construction has had a favorable and property demand sector. from During manufacturing the last ofStockholm. SEK 113million. In 2016 Addnode Addnode Group had a is turnover divided ofinto SEK three 2.2 divisions: billion, with Design an EBITDA quarters,industries, some as well smaller as the and construction specialized and companies property in sector. the real During estate the industry last Management,of SEK 113million. Product Addnode Lifecycle Group Management, is divided into Process three Managemen. divisions: Design The appearquarters, to havesome problems. smaller and However, specialized Addnode’s companies direct in exposure the real estateto housing industry businessManagement, segments Product operate Lifecycle in different Management, regions Process with about Managemen. 25 different The brands. developersappear to have is low, problems. and it should However, therefore Addnode’s not be direct concluded exposure that toAddnode housing will Operatingbusiness segmentsmargin varies operate considerably in different between regions the with various about business 25 different areas brands. facedevelopers lower demand is low, and in the it should coming therefore quarters. not Even be concludedso, we will followthat Addnode the will whereOperating the most margin profitable varies considerably can perform between up to 20 the percent. various Addnode business Group areas uses a developmentface lower demand of the Designin the coming Management quarters. business Even so, area we as will well follow as the the verywhere decentralized the most profitable management can performmodel where up to the20 percent.individual Addnode subsidiaries Group are uses a underlyingdevelopment industry. of the Design Management business area as well as the runvery by decentralized management management teams to maintain model an where entrepreneurial the individual spirit. subsidiaries A key growth are Acquisition-ledunderlying industry. growth always risky strategyrun by management in Addnode Group teams is to to maintain grow through an entrepreneurial acquisitions, spirit.which A they key growth OrganicAcquisition-led growth can growth be slow, always international risky expansion is complex and managedstrategy in to Addnode do successfully Group is in to recent grow years.through The acquisitions, company's whichown financial they acquisitionsOrganic growth tend can to bebe difficult.slow, international Despite expansionAddnode’s issuccessful complex andacquisition goalsmanaged is to toreach do successfully a growth of 10%in recent per year years. (both The organically company's and own through financial history,acquisitions acquiring tend companies to be difficult. takes timeDespite and Addnode’s poses a risk.successful Nevertheless, acquisition we acquisitions),goals is to reach an EBITA a growth margin of 10% of 10%per yearand at(both least organically 50% of profit and afterthrough tax havehistory, confidence acquiring in companies the management takes time team. and poses a risk. Nevertheless, we willacquisitions), be distributed an EBITA to shareholders. margin of 10% and at least 50% of profit after tax have confidence in the management team. will be distributed to shareholders. Investment case Catalyst types Acquisitions •Investment Has evolved into becomingcase a software company Catalyst types TheAcquisitions company has a successful acquisition history, which driven by its focus on •• Interesting Has evolved acquisition into becoming history a software company fairThe price, company good has people, a successful and management acquisition in history,place. Since which 2013, driven Addnode by its focus has on •• Well-diversified Interesting acquisition in three history different divisions acquiredfair price, about good 30 people, businesses, and management adding a total in place. of over Since SEK 2013,1 500m Addnode in sales. has • Well-diversified in three different divisions Historically,acquired about the company30 businesses, has acquired adding aat total 6x EBITA, of over way SEK below 1 500m Addnode’s in sales. Investment case valuation.Historically, We the believe company the prospects has acquired for additionalat 6x EBITA, value-adding way below acquisitionsAddnode’s is HasInvestment evolved into case becoming a software company. Today, only about 30% of good,valuation. however, We believe it is partly the alreadyprospects priced for additionalin according value-adding to us. acquisitions is Addnode’sHas evolved sales into are becoming related toa softwareservices, company.and most ofToday, these only services about are 30% related of good, however, it is partly already priced in according to us. toAddnode’s the implementation sales are related of the tocompany’s services, softwareand most solutions. of these services Moreover, are the related International expansion companyto the implementation has a strong focusof the on company’s recurring software revenues, solutions. and today Moreover, more than the 50%of ContinuedInternational international expansion expansion. Addnode acquired their first company salescompany are recurring has a strong revenues. focus Theseon recurring qualities revenues, make us and believe today the more company than 50%of inContinued GB, in 2014 international and Germany expansion. during 2015. Addnode The acquiredannouncement their first of additional company shouldsales are be recurringvalued at revenues.a premium These compared qualities to the make IT-consultants. us believe the More company precisely, acquisitionsin GB, in 2014 in andGB, Germany orduring other 2015. markets The mayannouncement potentially increaseof additional general weshould claim be Addnode valued at should a premium be valued compared in line towith the comparable IT-consultants. software More precisely, marketacquisitions exposure in GB, and Germany growth oropportunities. other markets may potentially increase general companies.we claim Addnode should be valued in line with comparable software market exposure and growth opportunities. Interestingcompanies. acquisition history. Addnode has for a long been one of our Economic downturn favoritesInteresting in itsacquisition sector. The history. company Addnode has a hassuccessful for a long acquisition been one history,of our which WhileEconomic we believe downturn Addnode diversification in terms of markets and regions as drivenfavorites by itsin itsfocus sector. on fair The price, company good haspeople, a successful and management acquisition in place.history, As which a wellWhile as we the believe digitalization Addnode help diversification making the company in terms ratherof markets resilient and to regions economic as resultdriven of by the its completed focus on fair acquisitions, price, good Addnode people, and has management increased its indebt. place. However, As a downturns,well as the softwaredigitalization revenue help ismaking generally the relatedcompany to therather number resilient of users. to economic Thus, weresult claim of thethat completed the leverage acquisitions, is healthy and Addnode that the has acquisitions increased itshave debt. been However, value- layoffdownturns, of engineers software likely revenue has a is negative generally effect related on Addnode’sto the number revenue of users. and profit.Thus, creating.we claim Since that the 2013, leverage Addnode is healthy has acquired and that about the acquisitions 30 businesses, have adding been value-a layoff of engineers likely has a negative effect on Addnode’s revenue and profit. totalcreating. of over Since SEK 2013, 1 500m Addnode in sales. has Historically, acquired about the company 30 businesses, has acquired adding at a 6x EBITA,total of way over below SEK 1Addnode’s 500m in sales. valuation. Historically, We believe the companythe prospects has acquired for additional at 6x value-addingEBITA, way below acquisitions Addnode’s is good, valuation. however, We itbelieve is partly the already prospects priced for in additional accordingvalue-adding to us. acquisitions is good, however, it is partly already priced in

Well-diversifiedaccording to us. in three different divisions. To sum up, Addnode is well diversifiedWell-diversified in three in different three different divisions divisions. with interesting To sum up,niches. Addnode Further, is well the companydiversified has in threetaken differenta leading divisions Nordic position with interesting in most ofniches. its niches, Further, which the also iscompany the ambition has taken for all a of leading its business Nordic areas. position in most of its niches, which also is the ambition for all of its business areas. Counter-Thesis – Bear points DependentCounter-Thesis on the economy – Bear and points the willingness to invest Dependent on the economy and the willingness to invest

REDEYE NORDIC TECHNOLOGY REPORT - 2020 65 1900190015M5 15M5

Company page ALAELLELIOIO Company page AlelionAAlelionlelion Energy Energy SystemsS Syste...yste... https:/https://www/www.rede.redeye.se/company/alelion-enerye.se/company/alelion-energy-systemsgy-systems

RedeRedeyey eRating Rating

COMPCOMPANYANY QUALITY QUALITY FAIRFAIR VALUE VALUE RANGE RANGE CATCAALTYSTALYST POTENTIAL POTENTIAL

LastLast price price ImpactImpact TimefrTimeframeame 0.90.9 MajorMajor LongLong ModerModerateate MidMid MinorMinor ShorShort t 3 3 2 2 2 2 BearBear BaseBase BullBull PeoplePeople BusinessBusiness FinancialsFinancials 0.10.1 0.80.8 2.82.8 TurnTurn page page for for catalyst catalyst specifics specifics

SnapshotSnapshot FinancialsFinancials

AlelionAlelion Ener Energy gySystems Systems RedeRedeye yEstimatese Estimates OMOMXS30XS30 20182018 2019E2019E 2020E2020E 2021E2021E 4 4 18001800 RevReenue,venue, MSEK MSEK 185185 8989 4949 8080 3 3 17001700 Growth 34.8% -51.8% -45.3% 64.8% 2 2 16001600 Growth 34.8% -51.8% -45.3% 64.8%

1 1500 1 1500 EBIEBITDTDA A -26-26 -55-55 -49-49 -47-47 0 0 14001400 EBIEBITDTDA marA margingin NegNeg NegNeg NegNeg NegNeg

Volume Volume EBIEBIT T -32-32 -67-67 -68-68 -64-64 10M10M EBIT margin Neg Neg Neg Neg 5M5M EBIT margin Neg Neg Neg Neg 0 0 Pre-tax earnings -36 -81 -78 -74 MarMar MayMay Jul Jul SepSep NovNov JanJan Pre-tax earnings -36 -81 -78 -74 NetNet earnings earnings -36-36 -81-81 -78-78 -74-74 Net margin Neg Neg Neg Neg MarkMarketplaceetplace FirstFirst Nor North Stthockholm Stockholm Net margin Neg Neg Neg Neg

CEOCEO ÅsaÅsa Nor Nordstrdströmöm Dividend/SharDividend/Share e 0.000.00 0.000.00 0.000.00 0.000.00 ChairmanChairman JanJan Forsber Forsberg g EPSEPS adj. adj. -0.74-0.74 -0.55-0.55 -0.53-0.53 -0.50-0.50 P/E adj. -11.4 -1.2 -1.3 -1.3 SharShare informatione information P/E adj. -11.4 -1.2 -1.3 -1.3 EV/S 2.5 1.3 3.1 2.7 SharShare pricee price (SEK) (SEK) 0.90.9 EV/S 2.5 1.3 3.1 2.7 EV/EBITDA -17.3 -2.1 -3.1 -4.6 NumberNumber of sharof shares es(M) (M) 147.4147.4 EV/EBITDA -17.3 -2.1 -3.1 -4.6 MarkMarket capet cap (MSEK) (MSEK) 137137 LastLast updated: updated: 2019-11-29 2019-11-29 NetNet debt debt (MSEK) (MSEK) 5454

OwnerOwner EquityEquity VotesVotes AnalystAnalyst FourierFouriertransformtransform AB AB 44.2%44.2% 44.2%44.2% PegrPegrocooco Inv Investest AB AB (Publ) (Publ) 18.5%18.5% 18.5%18.5% EddieEddie Palmgr Palmgren en Sammaj AB 2.6% 2.6% eddie.palmgreddie.palmgren@[email protected] Sammaj AB 2.6% 2.6% JohnJohn Fällstr Fällströmöm 2.0%2.0% 2.0%2.0% AvanzaAvanza Pension Pension 1.9%1.9% 1.9%1.9% ConflictConflict of interof interestsests NorNordnetdnet Pensionsförsäkring Pensionsförsäkring 1.3%1.3% 1.3%1.3% EddieEddie Palmgr Palmgren enowns owns shar shares esin Alelionin Alelion Ener Energy gySystems: Systems:NoNo GunvGunvaldald Ber Bergerger 0.9%0.9% 0.9%0.9% RedeRedeye ypere performs/haforms/have vpere performedformed ser servicesvices for for the the Company Company and and receiv receives/haes/have ve JRS Asset Management AB 0.6% 0.6% receivreceived edcompensation compensation from from the the Company Company in connectionin connection with with this. this. JRS Asset Management AB 0.6% 0.6% StefanStefan Wikstr Wikströmöm 0.4%0.4% 0.4%0.4% LarsLars Br yldeBrylde 0.4%0.4% 0.4%0.4%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 66 COMPANIES

Company description Bear points Alelion Energy Systems provides industrial battery modules, currently based on Below we review the most relevant risks and uncertainties in the case. lithium-ion technology. It also develops a software system for smart energy Capital intensive business management; AIES. Alelion sells via OEMs, which in turn have industrial end In-house manufacturing is a competitive strength, while it is also capital customers around the world. 95% of revenues in 2018 came from Toyota and intensive with assembly lines, testing stations, and inventory. To fund the Jungheinrich, two of the world’s leading OEMs within logistics trucks (forklifts). production and pay off debt, Alelion has recently conducted a rights issue of Europe is Alelion’s largest market. SEK 135m. We view additional funding as likely before break-even, although the financial health has improved substantially in 2019. Investment case Challenging market dynamics • Rising demand for energy reductions The electrification wave is benefiting Alelion, but also spurs competition. • Strong investment partners Commoditization and low-cost providers threaten the industry’s profitability. • Industrialization improves efficiency Alelion is targeting niche market segments and develops customized solutions • Attractive growth prospects for challenging environments. As a result, it should leverage its profound Rising demand for energy reductions expertise within energy management and keep up its margins. Alelion is fulfilling its end customers’ desires and regulatory requirements to lower energy consumption. Its products have proved to both reduce power Customer concentration risk costs and environmental impact. We view the company’s value proposition and 95% of Alelion’s revenues in 2018 came from two of the world’s leading OEMs business case as attractive. within Warehouse Logistics. These are valuable reference customers, validating the products. However, as seen in recent quarters, it also creates a Strong investment partners high dependence and risk as they now seem to have ceased orders. Alelion is Two large investment companies and Alelion’s founder back up the company expanding in other verticals, which gradually could reduce the customer with 65% of capital and votes. For several years and most recently in the share concentration risk. issue 2019, these shareholders have demonstrated their conviction in Alelion by providing capital, loans and guarantees. The largest owner (Fouriertransform) should eventually be dissolved, but at this point, we argue Catalyst types that the core owners’ interests are well aligned with other shareholders. New orders and customer diversification Alelion can handle ever larger and more complex orders in its battery module Industrialization improves efficiency factory. At the same time, investors are thirsting for new orders and customers. Alelion made a breakthrough and reached SEK 100+m in sales 2017. It is now We estimate that Alelion gains new customers within both Special Vehicles and automating manufacturing in a proprietary facility to scale up sales and lower the Warehouse Logistics segment during 2020. Customer diversification and production costs. We believe the transformation will reduce component costs new orders should be significant catalysts for the pressured stock. by 30% in 2020, significantly improving its competitiveness and time to market in its niches. Improving margins Alelion is working hard to optimize its costs. It cuts sourcing expenses, Attractive growth prospects As a pioneer in the introduction of lithium-ion technology in the Warehouse automates production, reduces costs for leasing personnel, and launches a new Logistics segment, Alelion is now broadening its portfolio. Special purpose product generation. The closure of the German subsidiary also reduces losses. vehicles at airports, mines, and ports are all necessary to electrify. The On the sales side, Alelion expands to new niche segments where products have demanding environments require relatively few vehicles but specialized higher margins. We believe that sales growth, efficiency measures and better solutions – enabling Alelion to charge higher prices. We are optimistic about pricing conditions gradually will improve Alelion's margins. the opportunities, supported by the test orders received in 2018.

Builds competitive advantages Alelion couples its first-mover advantage position with an intelligence edge; batteries are both smart and of high performance. The company’s battery management system (BMS) is a software with a guidance tool for optimal usage and control. Alelion is also developing an intelligent energy storage system (AIES) based on the technology acquired in the Siemens spin-off Caterva. The solutions add value to the hardware products, can raise profitability margins for Alelion, and has the potential to create switching costs among customers.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 67 1900300k60

ASAI Company page Artificial Solutions https://www.redeye.se/company/artificial-solutions

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 7.5 Major Long Moderate Mid Minor Short 4 3 1 Bear Base Bull People Business Financials 3.0 20.0 42.0 Turn page for catalyst specifics

Snapshot Financials

Artificial Solutions Redeye Estimates OMXS30 2018 2019E 2020E 2021E 50 1800 40 Revenue, MSEK 45 54 76 109 1700 30 1600 Growth -5.9% 20.3% 40.6% 44.0% 20 10 1500 EBITDA -95 -114 -81 -53 0 1400 EBITDA margin Neg Neg Neg Neg

Volume EBIT -119 -148 -94 -67 200k 100k EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -146 -181 -110 -79 Net earnings -146 -181 -110 -79

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Lawrence Flynn Dividend/Share 0.00 0.00 0.00 0.00 Chairman Åsa Hedin EPS adj. -10.28 -6.32 -3.85 -2.75

Share information P/E adj. 0.0 -1.6 -2.7 -3.8 Share price (SEK) 7.5 EV/S 2.2 7.3 6.6 5.2

Number of shares (M) 24.7 EV/EBITDA -1.0 -3.5 -6.2 -10.8 Market cap (MSEK) 186 Last updated: 2019-11-19 Net debt (MSEK) 208

Owner Equity Votes Analyst Scope 43.8% 43.8% AFA Försäkring 5.9% 5.9% Havan Hanna [email protected] SIX SIS AG 4.9% 4.9% UBS Switzerland AG 4.8% 4.8% SEB-Stiftelsen 4.2% 4.2% Conflict of interests Lgt Bank LTD 3.3% 3.3% Havan Hanna owns shares in Artificial Solutions: No JP Morgan Bank Luxembourg S.A. 2.8% 2.8% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. C WorldWide Asset Management 2.8% 2.8% Peter Lindell 2.7% 2.7% Andrew Walton-Green 2.7% 2.7%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 68 COMPANIES

Company description Counter-Thesis Artificial Solutions (AS) was founded in Stockholm in 2001. The company • Strategic failure: The company’s revised, partner-led strategy may not provides a conversational artificial intelligence (AI) platform for enterprises, deliver the growth it seeks. This would jeopardize the growth story, which which allows users to have a conversation with an application via text, voice, is at the core of our investment case. gestures etc. In 2010, the current CEO, Lawrence Flynn, began to transform AS • Competition: It would weigh heavily on the conversational AI industry if from its consultancy origins (licences and usage fees constituted 49% of the tech giants were to flex their muscles and exploit their dominant revenue for FY 2018, up from 36% for FY 2016) into a scalable software market positions in the cloud, data and AI. Even if they do not, this area’s company. AS released its proprietary Teneo platform in 2013. The company significant potential makes it likely that competition will increase further has 104 employees and is listed on First North. going forward. • Customer concentration: Given its concentrated customer base, any loss Investment case of customers could hurt AS’s revenue significantly. One customer accounts for ~20% of AS’s sales and the top five customers account for • Offers an attractive exposure to the conversational AI market more than 50% of sales, highlighting the importance of a broader • Validated by mayor customers customer base and revenue diversification to drive growth and reduce • Revenue scalability risk. • Tough start

Offers an attractive exposure to the conversational AI market Catalyst types As one of the leading vendors of conversational AI technology, Artificial Growth Solutions is well-positioned for significant growth. Its underlying market is set Customer acquisition and accelerated growth will be the most important to grow at around 40% a year over the next several years, while the company catalysts for the share over the next year should harness the benefits of its 2013 transformation into a software-based provider, its revised go-to-market strategy and the scaling of its initial deployments in this period too.

Major customers/partners AS’s blue-chip customers such as AT&T, Shell and Vodafone and its partner network of leading system integrators (including Accenture, Deloitte and KPMG) validate its technology. But now it must meet the key challenge of acquiring further customers from its target group of large global enterprises, whose sales cycles are usually long and complex. We view its crucial shift to a partner-led model as ensuring scalability and efficiency and note that partners’ share of revenue has already increased from 9% in 2016 to 32% in 2018.

Revenue Scalability Two of AS’s three revenue streams - licenses and usage fees - provide high gross margins (~90%) and recurring revenues. The company’s high operating leverage should translate into significant profitability if it succeeds in growing with its market while controlling customer churn and acquisition costs.

Tough start Since AS’s reverse takeover in March 2019, and the announced rights issue in December 2019 (subscription price of SEK 6.50 per share) the share has fallen for some 80%. We see good scope for a revaluation if the company performs as we forecast and the lowered financial risk (assuming the proceeds from the rights issue). Customer acquisition and accelerated growth will be the most important catalysts for the share over the next year.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 69 1900155 500k

ASPIRE Company page Aspire Global https://www.redeye.se/company/aspire-global

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 27.5 Major Long Moderate Mid Minor Short 4 3 3 Bear Base Bull People Business Financials 30.0 57.0 85.0 Turn page for catalyst specifics

Snapshot Financials

Aspire Global Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 50 1800 45 Revenue, MEUR 105 135 156 192 219 1700 40 1600 Growth 45.4% 29.5% 15.2% 23.0% 14.0% 35 30 1500 EBITDA 21 22 25 30 31 25 1400 EBITDA margin 20.3% 16.6% 15.8% 15.7% 14.3%

Volume EBIT 19 19 19 25 27 1 000k 500k EBIT margin 18.5% 13.7% 12.5% 12.8% 12.2% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 17 15 16 22 25 Net earnings 16 2 15 21 23

Marketplace First North Stockholm Net margin 15.5% 1.4% 9.9% 10.8% 10.6%

CEO Tsachi (Isaac) Maimon Dividend/Share 0.10 0.12 0.13 0.18 0.19 Chairman Carl Klingberg EPS adj. 0.36 0.04 0.33 0.44 0.49

Share information P/E adj. 12.4 65.8 8.1 6.1 5.5 Share price (SEK) 27.5 EV/S 1.7 0.9 0.7 0.5 0.4

Number of shares (M) 45.6 EV/EBITDA 8.1 5.3 4.4 3.1 2.6 Market cap (MSEK) 1,250 Last updated: 2020-01-08 Net debt (MEUR) -25

Owner Equity Votes Analyst Barak Matalon 26.0% 26.0% Pini Zahavi 16.2% 16.2% Jonas Amnesten [email protected] Eli Azur 16.2% 16.2% Aharon Aran 6.5% 6.5% Swedbank Robur Ny Teknik BTI 5.3% 5.3% Conflict of interests BNY MELLON (ESOP) 3.6% 3.6% Jonas Amnesten owns shares in Aspire Global: Yes Avanza Pension 3.1% 3.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Fondita Nordic small CAP 1.9% 1.9% Isaac Maimon 1.7% 1.7% BPSS LDN 1.6% 1.6%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 70 COMPANIES

Company description Counter-Thesis – Bear Points Aspire Global is an online gambling company operating in the B2B and B2C Low player retention: Comparing Aspire Global player data raises some segment. In the B2B segment, the company offers a platform solution targeting questions. For sure the figures for customer intake, FTDs, are impressive as non-gambling companies as well as established gambling operators. In well as the strong Hold (Revenue/Deposit). However, Aspire Global´s retention addition to the platform solution, the company has developed proprietary levels are lower than for the competitors. games, which are integrated into the platform, and can be offered to external Licenses: One of the main lock-in effects that Aspire Global has emphasized, is operators. In the B2C segment, the company operates proprietary online casino that the company hold licenses in many regulated markets. Which makes it brands, sportsbook brands and brands that offer both online casino and harder for a customer to find an alternative platform with the same licenses, if sportsbook. the customer has players on several of these licensed markets. The issue with Investment case this is that we believe that in the long-run all the competing platforms will hold, more or less, the same licenses. • Strong lock-in effects • A wide range of growth possibilities New markets and M&As: We expect Aspire Global to invest much in new • Own platform and strong financial position markets and M&As the next few years to continue to drive growth at a high rate. • Content provider However, it is important to choose markets and acquisitions wisely. What works in one market may not work in another due to culture or/and regulations Strong lock-in effects: Aspire Global has over the years shown that its B2B differences. The market entries and acquisitions may require much more customers stay loyal and that the company is able to attract brands from resources than initially estimated. external platforms. This indicates that Aspire Global has an attractive platform that adds value to its customers and creates significant exit barriers through Uncertain regulations: Aspire Global is focusing in regulated markets as these lock-in effects. We believe that key drivers behind this look-in effect are; the markets offer better possibilities to find interesting B2B partners. The regulated wide range of licenses, strong product, exclusive games, and beneficial markets are also seen as less risky than unregulated markets, which is true. business model. However, we believe that the regulated markets also have some risk connected to them. A wide range of growth possibilities: With Aspire Global´s existing business model the company has a wide range of possibilities where the company can create growth. That range includes; improving existing product, adding on new Catalyst types partnerships, migrating brands from external platforms, marketing campaigns Successfully executed M&A activities on the B2C brands, adding on new national gambling licenses, acquisitions, and Aspire Global has issued an EUR 27.5m secured bond under an EUR 80m commercialize the proprietary games. framework, allowing for M&A activities. The company is mainly looking at three types of targets: operators, affiliates and game developers. We believe that Own platform and strong financial position: Aspire Global´s proprietary successfully executed M&A activities at attractive multiples will, most likely, platform and strong financial position is the perfect combo for future growth. have a significant impact on the share price. The scalable proprietary platform gives Aspire Global very strong incitements to grow, and the strong financial position gives the company the means to do it. An acquisition target With the own platform, the growth can be realized both organically and through Aspire Global could be an interesting acquisition target for companies that like acquisitions. Without an own platform, acquisitions would not be considered a to acquire a strong B2B product on the European market. good option. Within some potential markets, it will be better to acquire an existing operator to acquire a license and to gain knowledge about the market. Large Media House Partnership Owning the platform also gives Aspire Global the freedom to enter into any With Aspire Globals´s B2B strategy to enter regulated markets and find suitable potential market that has the right conditions. partners. We believe that if Aspire Global are able to enter into a partnership with a major media house in any of these markets this will most likely become Content provider: With the acquisition of Pairplay and the propriety game a strong growth driver. portfolio of around 200 games, we believe Aspire Global has a strong content offering. We believe Pariplay´s content aggregator platform can enhance Aspire Global´s B2B offering and enable more value-adding content acquisitions.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 71 18004.51 000k

ATA SDB Company page Atari SDB https://www.redeye.se/company/atari-sdb

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 2.5 Major Long Moderate Mid Minor Short 4 4 3 Bear Base Bull People Business Financials 2.0 4.0 6.0 Turn page for catalyst specifics

Snapshot Financials

Atari SDB Redeye Estimates OMXS30 2017 2018 2019E 2020E 2021E 4 1700 Revenue, MEUR 18 21 34 42 43 3.5 1600

3 1500 Growth 16.9% 14.4% 66.9% 21.9% 1.5%

2.5 1400 EBITDA 4 6 7 9 11 2 1300 EBITDA margin 24.7% 27.2% 21.2% 21.6% 25.4%

Volume EBIT 3 3 4 4 5

500k EBIT margin 14.1% 12.1% 12.3% 10.7% 12.4% 0 Jan Mar May Jul Sep Nov Pre-tax earnings 2 2 4 4 5 Net earnings 2 3 4 4 5

Marketplace First North Stockholm Net margin 12.7% 13.1% 10.7% 10.1% 11.7%

CEO Frédéric Chesnais Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Frédéric Chesnais EPS adj. 0.01 0.01 0.01 0.02 0.02

Share information P/E adj. 70.4 32.9 1.9 1.7 1.4 Share price (SEK) 2.5 EV/S 8.0 3.6 -0.1 -0.1 -0.2

Number of shares (M) 256.1 EV/EBITDA 32.4 13.4 -0.4 -0.6 -0.8 Market cap (MSEK) 630 Last updated: 2019-08-06 Net debt (MEUR) -4

Owner Equity Votes Analyst Ker Ventures LLC (Frédéric Chesnais) 19.5% 39.0% Alexandre Zyngier 3.7% 7.4% Kristoffer Lindström [email protected] Financiere Arbevel SAS 2.5% 5.0%

Conflict of interests Kristoffer Lindström owns shares in Atari SDB: No Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 72 COMPANIES

Company description Atari is probably the most well-known brand within the gaming as it launched young gamers, but they also capitalize on the older audience where the the industry as we know it today. Atari was founded in 1972 and was originally awareness is strong by launching products that fit this demographic. a maker of arcade games. The company launched the first true home video Atari is also capitalizing on its brands' power through its Partner Segment console named Atari 2600 in 1977, which was a massive success. The top 10 where the company most often receives equity in companies without using any franchises have had a historical revenue of more than USD 2bn. Atari has over cash. These types of bets might be long-shots, but the company is also not 200 titles under its umbrella. Some of the most iconic games include Pong, taking any financial risk. The potential reward could be huge with extremely Asteroids, Centipede, Tempest and Missile Command. limited risk.

Investment case The VCS is under the radar Estimating sales for the VCS is of course extremely hard, it will be easier when • An untapped IP portfolio – The vast majority of Atari’s IP portfolio has the first customer reviews and test are in. However, we find that the market has not yet been brought into modern gaming mediums. We view the almost forgotten the VCS and the potential it holds. The Atari ”box” can be success of the Roller Coaster Tycoon (RCT) IP as a proof of concept. viewed as a ”mini-PC” at an attractive price-point. If the product has the high • Making the most of the Atari brand – Atari is a well-known brand, primary quality the market demands could be substantial in an era of game streaming among the older demographic. The company is capitalizing on the brand and digital distribution of games. In our Base-case projections, we assume awareness through expanding to new verticals, like Casino, and through about 250k units sold over the coming four years, that can be put in relation smart licensing partnerships. to the fact that each year about 500k Atari Flashbacks, which retails at around • The VCS is under the radar – We find that the market has forgotten about 80 dollars, are sold. the VCS a bit, likely due to some days of the launch. It’s hard to project with certainty the sales figures, but we view the potential for a mini-PC Management with skin in the game coupled with the Atari branding as significant. We view the ownership structure of Atari as highly favorable with the CEO and Chairman also being the largest shareholder. An untapped IP portfolio Atari has a massive portfolio of game franchises which still lies almost Counter-thesis (Bear points) untapped. We believe the market is yet to understand just how large the • Brand dilution – Entering new verticals like Casino or different ventures opportunity is for the Atari IP portfolio. The RollerCoaster Tycoon (RCT) was is a great way to capitalize on the Atari brands. However, it must always the first game series that was brought back to life under the new management be done with strategic caution as a misstep could dilute the brands' value that took over the company in 2013, since then the new games have generated and power. an income of EUR 33m+, which have extended the lifetime income of the • Retro to modern is hard – It’s no easy task to take a retro classic and put franchise to about EUR 230m, i.e., an extension of 16%+ over just a few years. it into a modern medium or updated graphics. We are rather certain that We believe that the success for RCT is true proof of concept that an older PONG or Asteroids games could have been created and at least be game can work very well in a newer medium, like the mobile. Atari’s ten top modestly successful sole due to their brands, however, Atari wants to franchises had generated about EUR 2bn in lifetime income. The potential if the make it right and sets the bar high. The retro audience is also relatively success for the RCT IP can be mimicked to some degree for one of the larger picky, and the brand can get hurt if a new game does not have the right franchisees cannot be understated. feeling. • Title risk – As always with gaming companies there is significant title Currently, we know of a game for the Asteroids IP that is in production and also risk when it comes to launching a new game. for the well-known brand series Pong. We find it likely that that at least one “new” IP can reach the same type of income level as the RCT franchise over the coming years. It’s obviously hard for us to make projections far into the future Catalyst types VCS release above expectations regarding game IP success when we don’t even know the exact roadmap. But It seems like the market has almost fully ignored the VCS and the potential it one thing is certain and that is that the opportunity is huge and the RCT holds. The VCS can be viewed as a form of mini-PC at an attractive price. Our success is only the beginning. base case assumes sales of about 250k units over the next four years, Making the most of the Atari brand compared to current annual sales of 500k Atari Flashbacks, which retail at Atari is a well-known brand. In a study conducted by E-Pool in 2010 63% of around USD 80. the people aged between 25 and 54 knew of the brand. In the younger demographic the awareness was about half of that. Atari is continuously Going beyond RCT working on creating more modern games and increase their awareness among Besides new RCT games, Atari is also developing new releases based on some of its largest brands: Asteroids and Pong. These will be key drivers of revenue growth in the year ahead.

An acquisition target We view Atari as an attractive acquisitions target thanks to the extensive IP portfolio, strong balance sheet, profitability, and the loss-carry forwards.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 73 1900750k3.2

AVT B Company page Avtech Sweden https://www.redeye.se/company/avtech-sweden

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 2.7 Major Long Moderate Mid Minor Short 3 3 2 Bear Base Bull People Business Financials 1.4 3.0 9.0 Turn page for catalyst specifics

Snapshot Financials

Avtech Sweden Redeye Estimates OMXS30 2018 2019E 2020E 2021E 3 1800 Revenue, MSEK 13 17 20 28 2.8 1700

2.6 1600 Growth -11.3% 31.0% 22.0% 37.0%

2.4 1500 EBITDA 2 5 7 9 2.2 1400 EBITDA margin 14.3% 27.3% 32.9% 34.3%

Volume EBIT -2 1 2 5 500k 250k EBIT margin Neg 7.9% 11.9% 18.2% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -2 1 2 5 Net earnings -2 1 2 4

Marketplace First North Stockholm Net margin Neg 7.9% 9.5% 14.5%

CEO Christer Fehrling Dividend/Share 0.00 0.02 0.03 0.06 Chairman Bo Redeborn EPS adj. -0.03 0.02 0.03 0.07

Share information P/E adj. -98.1 112.6 76.5 36.5 Share price (SEK) 2.7 EV/S 13.8 8.1 6.6 4.9

Number of shares (M) 56.5 EV/EBITDA 96.5 29.6 20.2 14.2 Market cap (MSEK) 152 Last updated: 2019-10-21 Net debt (MSEK) -12

Owner Equity Votes Analyst Avanza Pension 15.2% 6.9% Christer Fehrling 5.7% 8.9% Tomas Otterbeck [email protected] Christian Dahl 5.3% 2.4% Lars Lindberg 5.2% 17.6% Johnny Olsson 4.5% 12.1% Conflict of interests Mats Tonsjö 2.8% 2.0% Tomas Otterbeck owns shares in Avtech Sweden: Yes Lars Bäckvall 2.7% 3.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Saxo Bank A/S - Danish Client Asset 2.6% 1.2% Anders Gullander 1.8% 0.8% Lars Wahlund 1.7% 0.7%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 74 COMPANIES

Company description Catalyst types AVTECH is the current world-leader in software solutions for a full flight and Commercial launch of AVTECH's tablet app time-based operations. After years of significant research and The company currently awaits approval from EASA (European Union Aviation commercialization issues, the company has materialized contracts with Safety Agency). This enables AVTECH to launch a premium version of the app. Southwest Airlines, Easyjet, Norweigan, Eurowings, Lufthansa Cargo etcetera. It is always uncertain how well freemium-users convert to paying users. Before

Southwest Airlines (SWA) is one of the largest commercial airlines in the world we know when the premium version is ready for launch and how well users and AVTECH's biggest revenue contributor. convert at launch, we will have fairly low expectations on the commercial impact. Investment case New contracts within the Lufthansa Group • The partnership with Met Office creates a long term value in AVTECH. We expect AVTECH to sign 1-3 contracts with airlines within the Lufthansa The product Aventus Nowcast becomes more valuable on the market at Group during 2020. These events will most likely move the stock upward, but the same time as cost is reduced for AVTECH. This collaboration will we estimate the financial impact will occur earliest in H2 2020. There are also also create value in additional services to the Aventus Nowcast service. several other potential customers in the pipeline. For example, the medium- • The purpose of the so called "Gatwick project" in collaboration with Met sized European airline and other airlines focusing on Charter-flights. We Office and EasyJet is to improve the efficiency of arriving aircrafts using estimate at least one contract from these business possibilities during 2020 AVTECH’s product Aventus in time-based operations. It will also test driving the growth further. AVTECH's products in the eco-system between aircrafts and airports. • The most important catalyst for the AVTECH- stock is essentially its Extended service with SWA speed in securing new contracts to ensure a strong position in the AVTECH's biggest customer has shown an interest in an extension of market for full flight systems. AVTECH’s service offering over a long period of time. The next sales meeting has been postponed to the earliest Q1 2020. We estimate SWA will add some Risks features in the service offering and this will start to have a financial impact The company’s largest single risk is that of full flight planning system providers during H2 2020. This is according to us one of the most likely growth drivers searching for less competitive arenas and successfully developing equivalent during 2020. products, thereby bypassing the patent protection. This would significantly impair the projected intake of contracts and revenue estimates. Other significant risks include; prolonged procurement processes due to regulatory or organizational circumstances, risk of significant estimation deviation due to limited pricing transparency of current contracts, and the possibility of extended procurement processes due to priorities of cost-savings actions.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 75 1900400k90

AXIC A Company page Axichem https://www.redeye.se/company/axichem

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 83.0 Major Long Moderate Mid Minor Short 4 3 1 Bear Base Bull People Business Financials 18.0 60.0 145.0 Turn page for catalyst specifics

Snapshot Financials

Axichem Redeye Estimates OMXS30 2018 2019E 2020E 2021E 85 1800 Revenue, MSEK 0 5 88 195 80 1700

75 1600 Growth >100% >100% >100% >100%

70 1500 EBITDA -8 -7 15 57 65 1400 EBITDA margin Neg Neg 17.5% 29.4%

Volume EBIT -10 -9 13 54

200k EBIT margin Neg Neg 15.1% 27.7% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -10 -9 13 54 Net earnings -10 -9 10 43

Marketplace First North Stockholm Net margin Neg Neg 11.9% 22.0%

CEO Torsten Helsing Dividend/Share 0.00 0.00 0.00 0.00 Chairman Jan Gustavsson EPS adj. -0.66 -0.59 0.66 2.70

Share information P/E adj. -105.8 -121.3 108.7 26.5 Share price (SEK) 83.0 EV/S 2,685.9 204.6 12.7 5.7

Number of shares (M) 15.9 EV/EBITDA -125.6 -149.3 72.5 19.2 Market cap (MSEK) 1,335 Last updated: 2019-11-18 Net debt (MSEK) -19

Owner Equity Votes Analyst Manakin Ltd 11.8% 11.8% LMK-bolagen & Stiftelse 10.6% 10.6% Eddie Palmgren [email protected] Danica Pension 5.2% 5.2% Avanza Pension 4.8% 4.8% Nordnet Pensionsförsäkring 3.7% 3.7% Conflict of interests Redotem AB 2.3% 2.3% Eddie Palmgren owns shares in Axichem: No Hans Sköld 2.1% 2.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Rolf Kraft 1.9% 1.9% Per Vasilis 1.8% 1.8% Per Fladvad 1.2% 1.2%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 76 COMPANIES

Company description Counter Thesis aXichem’s business model is to develop, patent and market natural analogue Despite the potential of the product and the interesting results from the industrial compounds. The company primarily works with Phenylcapsaicin, a studies, there are uncertainties and risks with an investment in the company. synthetically produced and patented capsaicin. It has wide applications in a We have summarized the most obvious ones below in our counter thesis. variety of areas, such as feed supplements, nutraceuticals, marine anti-fouling paint, and pharmaceuticals. • Delay of regulatory approvals: The company has received Novel Food approval and a GRAS approval for food. It has also delivered a pilot order to Investment case Mexico where aXiphen® is included in chicken feed. Gras Feed approval is now the most important for the company • Product potential • 'Problems in the roll-out phase: aXichem has passed regulatory barriers and • Beneficial market trends proved the scale-up of its production. The next step is to start selling and • Promising study results implement the company's ingredient in various products. Unexpected issues • Regulatory agreements in place and more in sight could occur, although the study results are promising and we expect a successful launch. Investment Case Product potential. aXiphen® as an additive in animal feed has two main benefits. It inhibits salmonella and accelerates the growth of chickens. The fact Catalyst types that aXiphen® inhibits salmonella should mean that the product is particularly Progress with aXiphen-bio interesting for chicken breeders and pig farmers. A favorable outcome in the evaluation of aXichem's product would likely mean that Brynsløkken uses its right to commercialize aXiphen-bio. To begin with, the Beneficial market trends. The regulatory restrictions for antibiotics are market in Chile is interesting. In the long-term, other countries may also be becoming stricter, primarily in the EU. This increases the need for aXichem's relevant. The submission of a dossier for the EU BPR is also on the agenda. products. The high demand means that the company has pricing power and with benefits of scale, it can reach high earnings margins. Results from Mexico The ongoing tests in Mexico are important as it's the first order through the Promising study results. In 2016, the company focused on producing data partner Chr. Olesen. The evaluation has been delayed, but we expect results proving the effectiveness of its product as a component of chicken feed. A within the next six months. If the anticipated effect is reached, we find it likely comprehensive field study was conducted and the final report exceeded with a follow-up order. A negative outcome would create uncertainty regarding previous studies in the preventive effect of aXiphen® against salmonella and the potential of the product. the compound’s properties as a growth promoter for chickens. In addition, during the first half of 2017 aXichem announced positive results from tests by GRAS Feed approval the company together with feed manufacturers in Europe. In chicken breeding, The GRAS Feed approval has taken longer than we initially expected. Regulatory tests showed positive results on both the growth of chickens and as a processes are always difficult to assess and the company's latest estimate is salmonella inhibitor. In pigs, aXiphen® was used as a salmonella inhibitor, that it should come in H1 2020. With approval, aXichem can begin to process which also had a good effect. the US market for feed. The company received GRAS Food approval in April 2018 and the probability is very high for Feed. At the same time, this is Regulatory agreements in place and more in sight. During 2018, the company expected of the market, which has sharply increased the share price. Should it has taken several important steps towards commercialization. Above all, the not be approved, the downside is rather large. company has obtained a Novel Food approval for the EU and a GRAS approval for food in the USA. According to the company, approval according to the GRAS Commercial breakthrough feed can be achieved during the first half of 2020, which would open the large aXichem has delivered a first test order of aXiphen feed, and the awaited US market for feed. In addition, aXichem is working on a registration in Brazil, commercialization is approaching. When companies go from research phase which is another large feed market. to market and sales phase, large shareholder values can be created. At the same time, it's often hard to estimate the time it takes and the resources required. We have a positive view of the progress made by aXichem, the study data that exists and the customer problem that the company resolves. Demand is high and the product is unique in its kind. At the prevailing price levels, however, expectations are high for a successful launch. Should problems arise with the product, customer relationships, production, logistics or sales – a commercial breakthrough can be delayed or not materialize.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 77 19002M8019002M80

BELEBELE CompanyCompany page page BeijerBeijer Electronics Electronics GroupG... G... https://wwwhttps:/.r/wwwedeye.se/company/beijer-electr.redeye.se/company/beijer-electronics-gronics-group oup

RedeRedeye Ratingye Rating

COMPANYCOMP QUALITYANY QUALITY FAIR VALUEFAIR RANGE VALUE RANGE CATALYSTCA TPOTENTIALALYST POTENTIAL

Last priceLast price ImpactImpact TimeframeTimeframe 65.4 65.4 Major Major Long Long ModerateModerate Mid Mid Minor Minor Short Short 4 4 4 4 3 3 Bear Bear Base Base Bull Bull People PeopleBusinessBusinessFinancialsFinancials 33.0 33.0 57.0 57.0 78.0 78.0 Turn pageTurn for page catalyst for catalyst specifics specifics

SnapshotSnapshot FinancialsFinancials

Beijer ElectrBeijeronics Electr Gronicsoup Group RedeyeRede Estimatesye Estimates OMXS30OMXS30 2018 20182019E 2019E2020E 2020E 2021E 2021E 70 70 1800 1800 Revenue,Re MSEKvenue, MSEK 1,417 1,4171,554 1,5541,832 1,832 1,961 1,961 60 60 1700 1700

50 50 1600 1600GrowthGrowth 17.5% 17.5%9.6% 9.6% 17.9% 17.9% 7.1% 7.1%

40 40 1500 1500EBITDAEBITDA 151 151 237 237 315 315 353 353 30 30 1400 1400 EBITDAEBI marTDginA margin 10.6% 10.6%15.3% 15.3%17.2% 17.2% 18.0% 18.0%

VolumeVolume EBIT EBIT 74 74 114 114 180 180 210 210

1M 1M EBIT marEBIginT margin 5.2% 5.2%7.3% 7.3% 9.8% 9.8% 10.7% 10.7% 0 0 Mar Mar May May Jul Jul Sep Sep Nov Nov Jan JanPre-tax Prearningse-tax earnings 63 63 101 101 166 166 196 196 Net earningsNet earnings 44 44 73 73 129 129 153 153

MarketplaceMarketplace NASDANQASD StockholmAQ Stockholm Net marNetgin margin 3.1% 3.1%4.7% 4.7% 7.1% 7.1% 7.8% 7.8%

CEO CEO Per SamuelssonPer Samuelsson Dividend/SharDividend/Share e 0.50 0.50 0.50 0.50 0.75 0.75 1.00 1.00 ChairmanChairman Bo ElissonBo Elisson EPS adj.EPS adj. 1.52 1.52 2.55 2.55 4.49 4.49 5.30 5.30

Share informationShare information P/E adj.P/E adj. 23.8 23.8 21.3 21.3 12.1 12.1 10.3 10.3 Share priceShar e(SEK) price (SEK) 65.4 65.4 EV/S EV/S 1.0 1.0 1.4 1.4 1.1 1.1 1.0 1.0

NumberNumber of shar esof shar(M) es (M)28.8 28.8 EV/EBITDEV/EBIA TDA 9.7 9.7 8.9 8.9 6.4 6.4 5.3 5.3 Market Markcap (MSEK)et cap (MSEK)1,911 1,911 Last updated:Last updated: 2019-11-06 2019-11-06 Net debtNet (MSEK) debt (MSEK) 440 440

Owner Owner Equity Equity Votes Votes AnalystAnalyst Stena Stena 29.6% 29.6% 29.8% 29.8% SvolderSvolder 12.1% 12.1% 12.2% 12.2% Havan HannaHavan Hanna [email protected]@redeye.seedeye.se NordeaNor Fonderdea Fonder 10.4% 10.4% 10.5% 10.5% SEB FonderSEB Fonder 8.6% 8.6% 8.6% 8.6% Fjärde AP-fondenFjärde AP-fonden 6.1% 6.1% 6.2% 6.2% ConflictConflict of inter estsof interests Humle FHumleonder Fonder 3.1% 3.1% 3.1% 3.1% Havan HannaHavan ownsHanna shar ownses sharin Beijeres in Electr Beijeronics Electr Gronicsoup :GrNooup : No TorstenT Bjurmanorsten Bjurman 2.0% 2.0% 2.1% 2.1% RedeyeRede performs/haye performs/have performedve performed services ser forvices the Companyfor the Company and receiv andes/ha receivvees/have receivedreceiv compensationed compensation from the fr omCompany the Company in connection in connection with this. with this. Cliens FCliensonder Fonder 1.7% 1.7% 1.8% 1.8% Tredje AP-fondenTredje AP-fonden 1.7% 1.7% 1.7% 1.7% NicolasNicolas Hassbjer Hassbjer 1.3% 1.3% 1.3% 1.3%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 78 1900802M

Company page BELE COMPANIES Beijer Electronics G... https://www.redeye.se/company/beijer-electronics-group

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL Company description Counter Thesis (bear points) Last price Impact Timeframe Beijer Electronics was founded in 1981 as a distributor of automation products Cyclical business 65.4 A large share of the group’s revenues stems from industrial clients. Thus, there Major Long for the industry. Since then, the company has grown through acquisitions to become a global supplier of industrial automation, smart networking and is an inevitable risk that its sales will be negatively affected in a period of Moderate Mid connectivity solutions. Today, BELE consists of three business units; Beijer economic downturn. On the other hand, it becomes especially important to Minor Short 4 4 3 Electronics, Westermo, and Korenix, all of which exposed to the growing focus on investments in improved efficiency in such an environment. The latter Bear Base Bull industrial IoT market. pertains to the group’s value proposition, and this dynamic could thus dampen People Business Financials 33.0 57.0 78.0 Turn page for catalyst specifics negative effects. Investment case Looking back to 2009, sales dropped by 15% while EBIT decreased by 45%. Yet Snapshot Financials the company remained profitable with an operating margin of 6% and solid • Favorable profitability prospects: We see room for additional profitability positive cash flows, thus demonstrating that it could manoeuver in this improvements through higher sales volumes and improved gross Beijer Electronics Group Redeye Estimates environment before returning to growth and increased profitability in 2010. OMXS30 margins thanks to its updated product portfolios. 2018 2019E 2020E 2021E • Digitalization to drive growth: Industrial digitalization is a trend to which 70 1800 Failure to turn Korenix profitable Revenue, MSEK 1,417 1,554 1,832 1,961 all businesses are directly exposed. The group's target segments are In recent years, Korenix has been hit by management problems, high staff 60 1700 forecasted to grow at CAGR of between 7% and 15% over the coming turnover, and a strategic transformation. In 2018, the company negatively 50 1600 Growth 17.5% 9.6% 17.9% 7.1% years. affected the group’s EBIT by SEK -6m. Management claims that 2018 was a 40 1500 EBITDA 151 237 315 353 • Strengthened by recent acquisitions: The two latest additions to year of recovery and that Korenix should become profitable in 2019. The 30 1400 Westermo will enhance the entity's offering and the group's profitability. company is currently showing improvements, but there is still some work left EBITDA margin 10.6% 15.3% 17.2% 18.0% before reaching break-even on EBIT-level (SEK -0.7m in Q3’19). There is, An emerging Industrial IoT player with favorable profitability prospects. Over Volume EBIT 74 114 180 210 however, a risk that the turnaround could take longer time and that the the recent three years, Beijer Group has updated its product portfolio, increased 1M company continues to burden the group’s profitability. EBIT margin 5.2% 7.3% 9.8% 10.7% the share of proprietary products, and re-staffed its organization. When entering 0 2020, more than half of the company’s revenues should originate from products Mar May Jul Sep Nov Jan Pre-tax earnings 63 101 166 196 developed after 2016. Its updated product offering is also well reflected by Catalyst types Net earnings 44 73 129 153 Beijer Electronics’ recent launch of a licensed-based cloud platform. New acquisition Marketplace NASDAQ Stockholm Net margin 3.1% 4.7% 7.1% 7.8% BELE has a history of acquisitions and continuously evaluates new prospects. We expect this development to be reflected in continued profitability CEO Per Samuelsson As we deem its turnaround to be a fact and see a strengthened balance sheet, Dividend/Share 0.50 0.50 0.75 1.00 improvements that leverage on higher sales volumes and slightly improved there is an increased likelihood of an acquisition during the coming two years. Chairman Bo Elisson gross margins. We forecast that the company will reach its profitability target EPS adj. 1.52 2.55 4.49 5.30 Our view is that it will most likely be a business that complements Beijer (10% EBIT-margin) during H2’20, and expect it to expand margins additionally P/E adj. 23.8 21.3 12.1 10.3 Electronics or Westermo, or otherwise an acquisition making up a fourth Share information over the following years. Share price (SEK) 65.4 EV/S 1.0 1.4 1.1 1.0 business entity. We point out, however, that far from all of BELE’s previous Digitalization to drive growth. Industrial digitalization is a trend to which all EV/EBITDA 9.7 8.9 6.4 5.3 acquisitions have been successful. Number of shares (M) 28.8 businesses are directly exposed. BELE’s target markets are forecast to grow at

Market cap (MSEK) 1,911 Last updated: 2019-11-06 CAGR of between 7% and 15% over the next five years (financial target of Higher and faster profitability improvements Net debt (MSEK) 440 annual growth exceeding 7%). Beijer Electronics’ business is characterized by We argue that the most relevant share price drivers are reports showing greater long relationships, with solutions designed into customers’ systems, which profitability improvements in a shorter period. The group’s exceptional order Owner Equity Votes Analyst suggests a potentially durable competitive advantage due to switching costs. intake paves the way for high sales growth during the coming year which Stena 29.6% 29.8% Westermo, the group’s golden nugget, has grown revenues and EBIT at CAGR of should lead to continued profitability improvements. There is still a chance that Svolder 12.1% 12.2% Havan Hanna 9% and 10%, respectively, since the acquisition in 2008. Its current sales growth BELE succeeds in showing greater and more rapid profitability improvements, [email protected] Nordea Fonder 10.4% 10.5% is substantially higher, increasing by 21% so far in 2019. It operates in non reaching its financial target sooner than expected. SEB Fonder 8.6% 8.6% price-sensitive niche segments with long project deals, where it is positioned as Fjärde AP-fonden 6.1% 6.2% the most reliable provider of rugged connectivity equipment. We expect the Conflict of interests company to repeat its successful train networking efforts in rail trackside, Humle Fonder 3.1% 3.1% Havan Hanna owns shares in Beijer Electronics Group : No where several existing customers operate, and power distribution. Torsten Bjurman 2.0% 2.1% Redeye performs/have performed services for the Company and receives/have Strengthened by recent acquisitions. We have a positive view of the two recent received compensation from the Company in connection with this. Cliens Fonder 1.7% 1.8% additions, which are expected to support Westermo in its move towards the Tredje AP-fonden 1.7% 1.7% new market segments. The companies are further expected to add about SEK Nicolas Hassbjer 1.3% 1.3% 200m to the entity’s revenues while also enhancing the group’s profitability. After including the two acquisitions, we forecast the entity to generate revenues and EBIT of SEK 1012m and SEK 155m, respectively, by 2021. We remain believing that reports showing high growth, and especially, profitability improvements to be the most crucial share price drivers going forward.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 79 19001100 000k

BETCO Company page Better Collective https://www.redeye.se/company/better-collective

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 79.6 Major Long Moderate Mid Minor Short 5 4 3 Bear Base Bull People Business Financials 55.0 100.0 170.0 Turn page for catalyst specifics

Snapshot Financials

Better Collective Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 90 1800 Revenue, MEUR 40 66 85 106 126 80 1700

70 1600 Growth 54.2% 64.1% 28.7% 24.0% 19.0%

60 1500 EBITDA 12 28 38 50 58 50 1400 EBITDA margin 30.0% 41.8% 44.6% 47.4% 46.2%

Volume EBIT 9 22 32 43 50

500k EBIT margin 22.4% 32.9% 36.9% 40.7% 40.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 8 19 28 41 50 Net earnings 5 14 21 31 37

Marketplace NASDAQ Stockholm Net margin 13.5% 21.7% 24.2% 28.9% 29.5%

CEO Jesper Søgaard Dividend/Share 0.00 0.00 0.00 0.00 0.39 Chairman Jens Bager EPS adj. 0.28 0.33 0.46 0.66 0.78

Share information P/E adj. 19.4 22.2 16.0 11.2 9.4 Share price (SEK) 79.6 EV/S 4.4 5.0 3.6 2.7 2.0

Number of shares (M) 46.4 EV/EBITDA 14.6 12.0 8.2 5.6 4.2 Market cap (MSEK) 3,695 Last updated: 2020-01-08 Net debt (MEUR) -26

Owner Equity Votes Analyst Jesper Søgaard 23.4% 23.4% Christian Kirk Rasmussen 23.4% 23.4% Jonas Amnesten [email protected] Bumble Ventures 10.7% 10.7% Chr. Augustinus Fabrikker A/S 4.7% 4.7% Tredje AP-Fonden 3.0% 3.0% Conflict of interests Jens Bager 2.6% 2.6% Jonas Amnesten owns shares in Better Collective: Yes Öhman Bank 2.6% 2.6% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Andra AP-Fonden 2.4% 2.4% Knutsson Holdings 2.4% 2.4% Ribacka Group Holdings 1.7% 1.7%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 80 COMPANIES

Company description Better Collective is the No. 1 sports betting affiliate in the world and a leading Counter-Thesis - Bear Points developer of educational platforms in the online gambling industry. In total, the Google exposure group has a vast network of educational sites and several thousand content Better Collective is not as dependent on Google as many of its competitors. sites. Through its products, the company aims to make sports betting and Even so, the traffic from search engines, mainly Google, is still the largest gambling entertaining, transparent, and fair for the global network of online traffic source. Meaning, that changes to Google’s search algorithms might bettors. worsen Better Collective’s traffic volumes from Google, and in the end affecting the revenues. Since 2018, Better Collective has been listed on Nasdaq Stockholm. The group has more than 400 employees globally and more than 2,000 content sites that Regulatory threats receive over 10 million unique visits per month. Regulation and re-regulation could impact Better Collective negatively. Its B2B customers (operators) could be prevented from offering gambling and betting Investment case to their customers (players). As a result, Better Collective would not be able to lead players to the operators. Marketing restrictions enforced by regulators • Quality communities could also potentially limit the company´s scope to bring players to operators. • Strong vertical • Value-adding M&A Over-pro itability • ‘Skin in the game’ Most listed affiliates have EBIT margins of at least 40%. However, as operators’ gaming taxes, compliance expenses and competition increase, their profit Investment Thesis margins are under pressure. Over time, we can presume that, some of this Quality communities pressure will affect other parts of the value chain, such as affiliation. Through sites like bettingexpert.com that create real value for customers, Better Collective is building its affiliate network for the long term and attracting Valued at a premium revenue share-based partnership agreements. Its customers focus is The high investor expectations embedded in Better Collective’s premium generating strong organic growth and building a business that operators valuation will only be met if it outperforms its affiliate peers. Failure to do so cannot afford to neglect. will hurt the share price.

Its community sites are also creating a network effect. Their increasing size increases their value for users and creates barriers against new competitors. Catalyst types Moreover, much of their traffic to the sites is direct, leading to limited Improved multiples dependence on both Google and expensive paid media. Investors value the affiliate industry at very low multiples since they expect EPS to decline. If EPS is maintained or improved, however, we believe the multiples Strong vertical will increase. Better Collective’s focus on sports betting positions it in an area with significant potential. Sports betting is growing faster than the casino segment Acquisitions and is less challenging from a regulatory perspective. The main driver is the A large value-adding acquisition of a local brand in a new market at low shift from land-based to online and smartphones, that suites sports betting multiples will enable multiple expansion. very well. The sports betting vertical is also suitable for communities as tips and knowledge-sharing are beneficial for the users. Moreover, the US market is US market opening up and could exceed its European counterpart within 10 years. In Promisingly strong NDC intake in the US for Better Collective’s brands could be addition, several high potential markets are opening in South America too. a major long-term growth driver.

Value-adding M&A Bene icial regulator changes Better Collective´s good reputation within the industry and solid financial If the authorities, in a main market, prohibits conventional marketing, such as position enables it to acquire superior targets than competitors, in our view. To TV and radio, this could have major positive affect on Better Collective´s create long-term value Better Collective makes sure to integrate the employees operations in that market. and creators responsible for its acquisitions’ past success. Keeping them on board is key to maintaining high performance. In addition, Better Collective’s platform enables swift and smooth integration of the acquired site network.

‘Skin in the game’ Better Collective’s ownership structure involves almost all of senior management and the board having ‘skin in the game’. The CEO and COO control close to 60%, while the CFO also owns a substantial stake. The boardholds close to 5%. With this level of shareholder alignment in the business, we anticipate dedication and shareholder-friendly decisions.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 81 190040M1.4

BRE2 Company page Bredband2 https://www.redeye.se/company/bredband2

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 1.3 Major Long Moderate Mid Minor Short 5 4 4 Bear Base Bull People Business Financials 0.5 1.2 2.2 Turn page for catalyst specifics

Snapshot Financials

Bredband2 Redeye Estimates OMXS30 2018 2019E 2020E 2021E 1.3 1800 Revenue, MSEK 600 670 731 796 1.2 1700

1.1 1600 Growth 13.9% 11.7% 9.0% 9.0%

1 1500 EBITDA 65 73 81 87 0.9 1400 EBITDA margin 10.9% 10.9% 11.2% 10.9%

Volume EBIT 42 49 58 64

20M EBIT margin 7.0% 7.3% 8.0% 8.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 42 49 58 64 Net earnings 32 38 46 50

Marketplace First North Stockholm Net margin 5.4% 5.7% 6.2% 6.2%

CEO Daniel Krook Dividend/Share 0.05 0.06 0.07 0.07 Chairman Anders Lövgren EPS adj. 0.05 0.05 0.07 0.07

Share information P/E adj. 26.4 23.9 20.1 18.5 Share price (SEK) 1.3 EV/S 1.2 1.2 1.1 1.0

Number of shares (M) 701.0 EV/EBITDA 11.2 10.6 9.4 8.8 Market cap (MSEK) 920 Last updated: 2019-11-18 Net debt (MSEK) -150

Owner Equity Votes Analyst Anders Lövgren 16.6% 16.6% Dan Örjan Berglund 13.3% 13.3% Havan Hanna [email protected] Leif Danielsson 6.3% 6.3% JP Morgan Bank Luxembourg S.A. 5.0% 5.0% Ulf Östberg 4.7% 4.7% Conflict of interests State Street Bank & Trust, Boston 3.6% 3.6% Havan Hanna owns shares in Bredband2: No Daniel Krook 2.0% 2.0% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. SEB 1.8% 1.8% Nordnet Pensionsförsäkring AB 1.7% 1.7% Veralda (SEB Life Intl Assurance) 1.6% 1.6%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 82 COMPANIES

Company description Main risks Bredband2 supplies communication services to consumers and corporate • Increased network fees (COGS) would put gross margins at risk. customers throughout Sweden and offers internet, voice, data centres and Bredband2 has so far mitigated this trend due to scalability in other opex. mobile broadband. The company is Sweden’s third-largest provider of internet • A generic product that is difficult to differentiate, where customers access using fibre technology, with around 250,000 broadband customers. It's buying decision are based on price. Going forward we believe that the focused positioning in the fast-growing fibre market is a competitive advantage risk of pricing pressure is low as a result of industry consolidation and a for the company. However, Bredband2 is still a small player with the usual maturing fiber market. drawbacks arising from this, such as in terms of financial muscle. On the other hand, the company’s business model is based on leasing into the networks of Catalyst types other providers, which means Bredband2 avoids upfront investments in so- Revenue growth outperform estimates called passive infrastructure. Bredband2 has instead built up active Higher growth rates than estimates would mean that the company handles the infrastructure in more than 80 percent of the Swedish metropolitan networks new market dynamics (mature fiber market) better than expected. Higher sales that are open to the market. on the corporate side would also explain the higher growth rate.

Investment case Sector rotation (flight to defensive stocks) Bredband2’s non-cyclical recurring revenue is an attractive choice in a shaky • Surfing the fibre wave stock market. • Favourable risk/reward • Higher dividend Industry consolidation • Acquisition, an optionality The industry is consolidating. Bredband2’s strong position in fibre could make the company an attractive takeover candidate. Surfing the fibre wave Telecom operator Bredband2 is surfing the fibre wave in a telecom market where outdated broadband technology (generally coax and ADSL) is being rapidly replaced with fibre broadband. As the only operator with entirely fibre technology, Bredband2 is positioned to take great advantage of this change and grow sales at ~10% in the coming years.

Favourable risk/reward One of the significant advantages of the company’s business model is recurring advance payments. This results in strong cash flows, with positive working capital effects, where free cash flow (after investments) consistently exceeds earnings for the corresponding period. At present, Broadband2 is valued at 11x (EV / FCF LTM), an attractive valuation given the growth prospects, recurring revenues, strong cash flows and financial position.

Higher dividend With no interest-bearing liabilities and an increasing cash position, we argue that a higher dividend (0.05 SEK per share last year) appears as the only rational capital allocation decision to make. Total dividend amounted to SEK 35.1 million last year compared to the cash position of SEK 130 million at the end of Q3’19.

Acquisition, an optionality As the industry is consolidating, there is optionality in the form of acquisition. Bredband2’s customer base and the synergy opportunities a major player could realize make Bredband2 an attractive acquisition candidate.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 83 19002M32.5 190032.52M

CBTT B CBTTCompany B pageCompany page ChristianChristian Berner Berner TechTec... TradeTec... https://www.redehttps:/ye.se/company/christian-berner-tech-tr/www.redeye.se/company/christian-berner-tech-trade ade

Redeye RatingRedeye Rating

COMPANY QUALITYCOMPANY QUALITY FAIR VALUE RANGEFAIR VALUE RANGE CATALYST POTENTIALCATALYST POTENTIAL

Last price Last price Impact Impact Timeframe Timeframe 29.7 29.7 Major Major Long Long Moderate Moderate Mid Mid Minor Minor Short Short 4 4 4 3 4 3 Bear Bear Base Base Bull Bull People BusinessPeopleFinancialsBusiness Financials18.0 18.029.0 29.039.0 39.0 Turn page for catalystTurn page specifics for catalyst specifics

SnapshotSnapshot FinancialsFinancials

Christian BernerChristian Tech Tr Bernerade Tech Trade Redeye EstimatesRedeye Estimates OMXS30 OMXS30 2018 2019E2018 2020E2019E 2020E2021E 2021E 30 30 1800 1800 27.5 27.5 Revenue, MSEKRevenue, MSEK618 660618 750660 750727 727 1700 1700 25 25 1600 Growth1600 Growth 37.4% 6.8%37.4% 13.6%6.8% 13.6%-3.0% -3.0% 22.5 22.5 20 20 1500 EBITDA1500 EBITDA 55 70 55 8870 8886 86 17.5 17.5 1400 1400 EBITDA marginEBITDA mar8.9%gin 10.6%8.9% 11.7%10.6% 11.7%11.9% 11.9%

Volume Volume EBIT EBIT 50 50 50 6850 6864 64

1M 1M EBIT margin EBIT margin8.1% 7.5%8.1% 9.1%7.5% 9.1%8.8% 8.8% 0 0 Mar MayMar JulMay SepJul NovSep JanNov Pre-tax earningsJan Pre-tax earnings49 48 49 6748 6763 63 Net earnings Net earnings36 36 36 5236 5249 49

Marketplace MarketplaceNASDAQ StockholmNASDAQ Stockholm Net margin Net margin5.8% 5.5%5.8% 6.9%5.5% 6.9%6.8% 6.8%

CEO CEO Bo Söderqvist Bo Söderqvist Dividend/ShareDividend/Shar0.75e 0.770.75 1.110.77 1.111.05 1.05 Chairman Chairman Joachim BernerJoachim Berner EPS adj. EPS adj. 1.92 1.931.92 2.781.93 2.782.63 2.63

Share informationShare information P/E adj. P/E adj. 12.0 13.412.0 9.313.4 9.39.8 9.8 Share price (SEK)Share price 29.7(SEK) 29.7 EV/S EV/S 0.8 0.80.8 0.70.8 0.7 0.7

Number of sharNumberes (M) of shar18.8es (M) 18.8 EV/EBITDA EV/EBITDA8.9 7.78.9 5.77.7 5.75.5 5.5 Market cap (MSEK)Market cap 557(MSEK) 557 Last updated: 2019-10-22Last updated: 2019-10-22 Net debt (MSEK)Net debt (MSEK)20 20

Owner Owner Equity VEotesquity Votes Analyst Analyst Joachim BernerJoachim Berner 23.7% 52.3%23.7% 52.3% Ernström & C:oErnstr AB öm & C:o AB 10.3% 10.3%6.4% 6.4% Fredrik NilssonFredrik Nilsson [email protected]@redeye.se edeye.se Ksenia Berner Ksenia Berner 9.1% 5.7%9.1% 5.7% Isolde StensdotterIsolde Berner Stensdotter Berner 8.7% 5.4%8.7% 5.4% Lannebo FonderLannebo Fonder 8.4% 5.3%8.4% 5.3% Conflict of interConflictests of interests Ruby StensdotterRub Bernery Stensdotter Berner 8.3% 5.2%8.3% 5.2% Fredrik NilssonF ownsredrik shar Nilssones in owns Christian shar Berneres in Christian Tech Tr ade:BernerNo Tech Trade: No SEB Fonder SEB Fonder 6.0% 3.8%6.0% 3.8% Redeye performs/haRedeyvee perperforms/haformed servevices performed for the ser Companyvices for and the rCompanyeceives/ha andve receives/have received compensationreceived frcompensationom the Company from in the connection Company with in connection this. with this. Andra AP-fondenAndra AP-fonden 4.5% 2.8%4.5% 2.8% FörvaltningsaktiebolagetFörvaltningsaktiebolaget Zate Zate 2.0% 1.3%2.0% 1.3% Bo Söderqvist Bo Söderqvist 1.2% 0.7%1.2% 0.7%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 84 COMPANIES

Company description Christian Berner is a Swedish technology trading group, founded in 1897. • Through the subsidiary Zander & Ingeström, Christian Berner is market The company markets, processes and sells components, systems, and leading regarding electric boilers. The boilers are mainly in demand services with high technology content from leading suppliers to the Nordic where the variations in electricity prices are large, which renewable market. In addition, the company also has proprietary products, such as energy such as wind and hydropower tend to be. As the environmental Zander & Ingestström's electric boilers under the ZETA brand - which are focus is on the rise around the world, we see conditions for good growth. mainly exported. An essential part of Christian Berner's business model is the Recently, large orders have been won in China and Belarus. The boilers consultative sales, where the company's - usually engineer-trained - salesman are also a proprietary product, which usually provides solid margins. analyzes the customer's technical requirements and then recommends a Acquired lift, more to retrieve in original business solution. Since the listing in October 2014, Christian Berner has a mix track-record. Investment case Up until 2018, acquisitions were small and marginal increases were insufficient to reach the target - partly due to one-offs. In 2018, however, the A favorable hybrid business model company acquired Zander & Ingeström, a very successful acquisition so far. Christian Berner has a clear focus on consulting together with the products the However, this has not completely bypassed the market, as the share price company sells - like a hybrid between a technology consultant and a increased by 35% last year. However, Christian Berner, which is valued at technology trading company. A significant proportion of the sales personnel approximately 9x EBIT for the current and coming years, continues to trade at are engineers, and the value Christian Berner adds to the customer lies a discount -amounting to about 35% relative to similar companies. However, primarily in the consultation. For example, as a supplier, it is difficult to add any these companies are considerably larger than Christian Berner and in many significant value to the customer by selling only a ballast mat. If the supplier cases have a long history of frequent acquisitions. If the company can can also calculate and tell the customer what type of ballast mat should be improve its original operations, which we find reasonable, thanks to, among used, it is easier to add value and. We also see Christian Berner's focus on other things, a strong order intake. consulting as a competitive advantage, as it has led to the company building good relationships with suppliers and strong internal expertise. Two Counter-Thesis advantages we believe are difficult for new entrants to copy within a reasonable A decline in Nordic economic activity time. A significant proportion of Christian Berner's sales are dependent on Growth potential in most areas investments in increased production capacity. Although the exposure is Christian Berner is active in several areas where we identify solid growth spread out over several different industries, the company nevertheless has prospects: Rail-bound traffic, multi-story buildings in wood and electric boilers. some sensitivity to the Nordic business cycle. For example, the crisis in 2008 Common to these is that demand is largely driven by the transition to a more led to three subsequent loss years for the company and in 2009 net sales fell environmentally friendly society. by just over 8%.

• Large investments in rail-bound traffic await within the coming years, Loss of key suppliers primarily in Sweden but also in the other Nordic countries. In addition As a trading company, Christian Berner is dependent on good and close to ballast mats and noise boards for the tracks, we see potential for relationships with its suppliers. Should an important supplier choose to set up vibration dampening of nearby buildings. For example, some rail projects its own sales organization or switch to another trading company, it is likely to have a stated ambition to lead to increased building, structures that are result in lost sales for Christian Berner. However, the company has about 150 likely to end up in noisy areas. suppliers, of which the largest accounts for 11% of sales. Thus, we believe that • Even regarding multi-story houses in wood, there is reason to be Christian Berner is well placed to handle its supplier risk. optimistic about the future. In 2016, approximately 10% of the multi-story houses in Sweden were built of wood, a proportion that is expected to Catalyst types increase sharply in the coming years. Among the benefits are lower Further acquisitions of significant size environmental impact. For example, about 80-90% of all multi-story Since Christian Berner was listed in October 2014, the company has made houses in North America are built of wood, which indicates significant several smaller acquisitions, and in March 2018, a significantly larger potential in the long term. acquisition of Zander & Ingeström was made. If Christian Berner can continue to be active with acquisitions and add at least 5% in sales per year on average - in line with its goal - we see the potential for an acquisition premium in the company's valuation.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 85 190010M5

CIMCO Company page Cimco Marine https://www.redeye.se/company/cimco-marine

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 1.5 Major Long Moderate Mid Minor Short 3 3 1 BullBearBase People Business Financials 0.00.0 Turn page for catalyst specifics

Snapshot Financials

Cimco Marine Redeye Estimates OMXS30 2018 2019E 2020E 2021E 4 1800 Revenue, MSEK 41 139 329 518 3 1700

2 1600 Growth >100% >100% >100% 57.4%

1 1500 EBITDA -102 -71 -50 9 0 1400 EBITDA margin Neg Neg Neg 1.6%

Volume EBIT -116 -84 -67 -10

5M EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -137 -102 -90 -40 Net earnings -137 -102 -90 -40

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Myron Mahendra Dividend/Share 0.00 0.00 0.00 0.00 Chairman Anders Berg EPS adj. 0.00 -0.71 -0.62 -0.28

Share information P/E adj. 0.0 -2.2 -2.5 -5.5 Share price (SEK) 1.5 EV/S 2.5 3.2 1.8 1.3

Number of shares (M) 164.8 EV/EBITDA -1.0 -6.3 -12.0 77.0 Market cap (MSEK) 250 Last updated: 2019-09-24 Net debt (MSEK) 376

Owner Equity Votes Analyst Per Lindberg 19.1% 19.1% Avanza Pension 7.6% 7.6% Oskar Vilhelmsson [email protected] Theodor Jeansson 6.1% 6.1% Arne Andersson 5.1% 5.1% Jonas Wikström 5.0% 5.0% Conflict of interests Magnus Linderoth 4.7% 4.7% Oskar Vilhelmsson owns shares in Cimco Marine: No Prioritet Finans 4.5% 4.5% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Euroclear Bank S.A/N.V 3.0% 3.0% Weslan Holdings Pty Ltd, The McLaren Family 2.6% 2.6% Property Trust Cbldn-Saxo Bank A/S 2.4% 2.4%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 86 COMPANIES

Company description Cimco Marine is a Swedish developer of diesel outboard engines with a power Potential positive surprises range of 100-300 horsepower. It was the first company to commercially launch The share’s decline since last year is mainly explained by a 200 hp diesel-powered outboard engine. Cimco was founded in 2012 based operationalunderperformance versus Cimco’s communicated targets - both on technology spun off from Volvo Penta and VW. This included a combination for outboard sales and revenues. With limited expectations now embedded in of a belt propulsion technique, a horizontally mounted automotive engine, and a weakened investor sentiment, we see a number of potential positive hydraulic gearbox. At that time, around SEK 50m had already been spent on the surprises (securing the additional capital it needs, a strong H2 order book; technique. Cimco’s first diesel outboard was finalized in the autumn of 2016 substantial orders -possibly from US agencies). and was followed by small-scale production. Cimco has been listed on Nasdaq First North since July 2017 and employs around 30 staff, mainly within Catalyst types research and development. The company aims to be a global market leader in Possible major orders diesel outboard engines primarily for commercial use. Its strategy is to develop The US Coast Guard and Navy are both currently evaluating the OXE200 a strong product offering, backed up by sales via a global network of together with two competitor diesel outboards (the COX 300hp and a 175hp established distributors. spark-ignited Mercury). If either institution favors Cimco’s outboard, this could lead to substantial orders over a long period and the excellent marketing Investment case endorsement of highly selective clients. The country’s coast guard alone has • Cimco is well-positioned for significant growth thanks to its first-mover an installed base of more than 1,600 150-350hp outboards. advantage and favorable market drivers increasing demand for diesel outboards. • Strong value proposition Cimco targets its diesel outboard engines at governmental and commercial users able to justify its higher purchase price. Its outboards are superior in terms of i) usage costs ii) performance and iii) safety. • Market momentum Several drivers are increasing demand for diesel outboards. Firstly, NATO’s single fuel directive stipulates that all NATO equipment should be diesel-injected. Secondly, the marine industry is showing appetite for more environmentally-friendly alternatives.

Cimco is well-positioned for significant growth thanks to its first-mover advantage and favorable market drivers increasing demand for diesel outboards.

Strong value proposition Cimco targets its diesel outboard engines at governmental and commercial users able to justify its higher purchase price. Its outboards are superior in terms of i) usage costs (up to 40% cheaper due to lower fuel consumption); ii) performance (increased range, extended service intervals, increased durability (appreciated to 3x lifetime of a gasoline l outboard); and iii) safety (less flammable fuel leading to lighter restrictions on storage and handling). Cimco has currently no competitor below 300 horsepowers. At 300hp and above there is Cox Powertrain, also enters commercial scale in 2020.

Market momentum Several drivers are increasing demand for diesel outboards. Firstly, NATO’s single fuel directive stipulates that all NATO equipment should be diesel- injected (if a diesel alternative is available) because of combustion risks. This is confirmed by the US Coast Guard and Navy’s CRADA initiative to test Cimco’s OXE200 currently. Secondly, the marine industry is showing an appetite for more environmentally-friendly alternatives. Cimco’s diesel outboards produce 45% less CO2 than conventional best-in-class outboards.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 87 1900122.5 000k

CLAV Company page Clavister Holding https://www.redeye.se/company/clavister-holding

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 15.0 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 10.0 22.0 55.0 Turn page for catalyst specifics

Snapshot Financials

Clavister Holding Redeye Estimates OMXS30 2018 2019E 2020E 2021E 20 1800 Revenue, MSEK 112 126 202 301 17.5 1700

15 1600 Growth 11.3% 13.3% 59.8% 49.0%

12.5 1500 EBITDA -54 -28 25 111 10 1400 EBITDA margin Neg Neg 12.2% 36.8%

Volume EBIT -90 -70 -19 65

500k EBIT margin Neg Neg Neg 21.6% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -117 -110 -49 35 Net earnings -122 -110 -49 33

Marketplace First North Stockholm Net margin Neg Neg Neg 11.0%

CEO John Vestberg Dividend/Share 0.00 0.00 0.00 0.00 Chairman Viktor Kovacs EPS adj. -5.18 -3.63 -1.62 1.10

Share information P/E adj. -3.0 -5.2 -11.6 17.1 Share price (SEK) 15.0 EV/S 3.5 6.0 4.1 2.8

Number of shares (M) 25.7 EV/EBITDA -7.2 -26.6 33.8 7.5 Market cap (MSEK) 402 Last updated: 2019-11-21 Net debt (MSEK) 262

Owner Equity Votes Analyst Avanza Pension 9.5% 9.5% Duesseldorf, HSBC Trinkhaus And Burkhardt AG 6.1% 6.1% Havan Hanna [email protected] Goldman Sachs International LTD 4.8% 4.8% RGG Adm-Gruppen AB 4.3% 4.3% Danica Pension 4.2% 4.2% Conflict of interests Clearstream Banking S.A, W8IMY 3.5% 3.5% Havan Hanna owns shares in Clavister Holding: No Fondita 2000+ 2.9% 2.9% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Ålandsbanken 2.9% 2.9% AMF Aktiefond Småbolag 2.9% 2.9% Nordnet Pensionsförsäkring AB 2.7% 2.7%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 88 COMPANIES

Company description Clavister develops, manufactures and sells network security solutions for We believe the market is underestimating the long-term business value of the mobile network operators and enterprises. It is within the new segment ~20 commercial orders at place within CSP (and future orders). This is due to Communication Service Providers segment (CSP), which the potential for the 'multidimensional' business model. Another contributing factor is that the “game-changing” deals lies. Customers within the enterprise sector are “real value” of a business is 3-6 years away from the initial order, affecting municipalities, retailers, banks, service providers, etc. Within CSP, Clavister theshort-term negatively, but entailing high long-term growth. The market has targets telcos (partnerships) with mobile operators as final customers. not fully understood these dynamics and consequently undervaluing the Clavister has ~180 employees, with head office in Örndksöldsvik. company.

In 2015 Clavister entered a partnership with Nokia Networks. More specifically Our CAGR revenue forecast for the periods 2018-2022 and 2022-2028 results Clavisters security virtual network function (VNF) is an integral part of the in sales of SEK 367m by 2022 respectively SEK 740m by 2028. Average EBIT Nokia NetGuard Security portfolio that protects network infrastructure. margin during 2019-2027 amounts to 15 percent and terminal EBIT-margin Clavisters software is licensed primarily based on capacity, which means that reaches 19 percent. We use a WACC of 13.0%. revenues increase in parity with the data in the network. The business model is The biggest risks are coupled to the NFV adoption, dependence on Nokia based on the required total throughput and capacity, with an unlimited number (and other partnerships) and the fact that the business model and Clavisters of deployed security VNF (instead of capacity per single VNF compared to position in the ecosystem within CSP has yet to prove its sustainability other VNF business models). (still too early to draw any safe conclusions). A failure would jeopardize the investment case. Investment case

• Entering an industry with substantial growth opportunities Catalyst types • Well positioned in the industry transformation (NFV) New orders for the virtual CSP solution • The market underestimates the long-term business value Orders for the virtualized CSP solution will alter our valuation if they surprise us • Our DCF indicates a base case of SEK 22 per share and a fair value range positively/negatively. of SEK 10-55 per share Continued growth Even though Clavister has developed and provided security software with a If Clavister maintains consistent revenue growth, resulting in improved EBITDA, focus on firewalls to the enterprise sector for twenty years, the investment case and thus showing the way to profitability, a revaluation will follow. is strongly coupled to the new sector, Communication Service Provider (CSP).

Entering an industry with substantial growth opportunities. We still see NFV adoption potential in the enterprise sector, but it is within CSP, which the potential for Network function virtualization (NFV) adoption is the ‘enabler’for the whole “game-changing” deals lies. The market opportunity for network function case. Virtual adoption is forecasted to reach 80 percent 2020 (according to virtualization (NFV) and the commitments made across the industry to the 3rd part analysts). Data confirming/contradict these forecasts should impact network transformation is well documented. However, security is one of the Clavister positively/negatively. largest concerns impacting the broad adoption of NFV – representing a window of opportunity for Clavister.

The following factors indicate that Clavister will be one of the winners within this transformation; • The partnership with Nokia (integral part of Nokia NetGuard Security since June 2015), which is non-exclusive though; • Clavister's unique business model (based on the required total throughput and capacity instead of capacity per single VNF compared to competitors); and • The leading product (purpose-built for virtualization and highest performance on the market).

REDEYE NORDIC TECHNOLOGY REPORT - 2020 89 19002M55

DORO Company page Doro https://www.redeye.se/company/doro

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 50.1 Major Long Moderate Mid Minor Short 3 3 3 Bear Base Bull People Business Financials 38.0 61.0 84.0 Turn page for catalyst specifics

Snapshot Financials

Doro Redeye Estimates OMXS30 2018 2019E 2020E 2021E 50 1800 Revenue, MSEK 1,906 2,023 2,014 2,048 45 1700

40 1600 Growth -0.9% 6.1% -0.4% 1.7%

35 1500 EBITDA 194 210 247 274 30 1400 EBITDA margin 10.2% 10.4% 12.3% 13.4%

Volume EBIT 122 119 135 160

1M EBIT margin 6.4% 5.9% 6.7% 7.8% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 123 113 126 152 Net earnings 92 84 95 114

Marketplace NASDAQ Stockholm Net margin 4.8% 4.2% 4.7% 5.6%

CEO Carl-Johan Zetterberg Boudrie Dividend/Share 0.00 1.14 1.29 1.49 Chairman Lennart Jacobsen EPS adj. 3.78 3.47 3.91 4.51

Share information P/E adj. 9.0 11.3 10.0 8.7 Share price (SEK) 50.1 EV/S 0.5 0.6 0.6 0.5

Number of shares (M) 24.2 EV/EBITDA 5.4 5.5 4.5 3.6 Market cap (MSEK) 1,217 Last updated: 2019-10-27 Net debt (MSEK) 173

Owner Equity Votes Analyst Accendo Capital 15.5% 15.5% Rite Ventures 10.3% 10.3% Viktor Westman [email protected] Nordea Fonder 9.2% 9.2% Lazard Frères Gestion 5.7% 5.7% Dimensional Fund Advisors 2.9% 2.9% Conflict of interests Clearstream Banking S.A. W8imy 2.9% 2.9% Viktor Westman owns shares in Doro: Yes Nordea Bank Ab(Publ) Nordea Bank Abp 2.7% 2.7% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Avanza Pension 2.7% 2.7% Nordea Liv & Pension 2.6% 2.6%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 90 COMPANIES

Company description Doro is a Small Cap company, developing and manufacturing technology for require hardware but also software and services. The value proposition is seniors (people with the age of 65 or older) since year 2007. The products, obvious. Seniors can live home longer, free and independently. Relatives are typically traditional feature phones and smartphones, are sold in more than 30 sure that their loved ones are safe as everything can be monitored remotely: countries. Doro’s leading position is based on a wide and global distribution the current location, missed calls and battery life etc. Last, being able to network and a strong brand that the target group can trust. This has resulted in determine that everything is ok from a distance is also very cost efficient for a niche market share of some 50 percent in Western Europe, but Doro is the municipalities and the care providers. Doro has several unique and number one in several other markets as well. The major weakness in the important assets that will help it succeed in its quest: business model is that Doro sells hardware with short life cycles and is • Major confidence in the Doro brand from the target customers, dependent on constantly developing better products. However, Doro is as opposed to competing start-ups. increasingly focusing on growing the Care area, i.e. providing services in • A deep understanding of the users and their needs. telecare and mobile health, meaning recurring revenue. • Sales channels within about 50 countries and hardware logistics to handle 3+ million hardware units Investment case • A physical alarm button on every phone and an installed base of almost

• Growth in phones seems to be over 130 000 telecare alarm subscriptions as well as long-time experience • This is a telecare & mobile health play from the whole alarm chain • Reported growth is required to move the shares Reported growth is required to move the shares Growth in phones seems to be over In relation to our reasonably pessimistic scenario of SEK 38 per share and our Doro has not been able to reach underlying top line growth during the past base case of SEK 61, today’s share price provides a favourable risk/reward. years. The current depressed market valuation suggests that the perception is However, a narrower price/value gap requires earnings reports which clearly that Doro will never be able to grow again. This might be true for phones but shows that Doro has come back to growth. The stock market’s trust in Doro is there are, according to us, promising growth opportunities in the service low at the moment, meaning one good report alone may not be enough. segment within telecare and mobile health (see further below). This will eventually drive recurring revenue as well as higher margins and multiples. The Catalyst types main problem is that the services (Care) part at the moment is way too small Return to growth (about 20 % of the total) and will remain so until Doro makes a few more Following two years of zero growth for Doro we assume that the perception acquisitions similar to Welbeing. Thus, M&A is key. can only change when it is obvious for the stock market that Doro is back to This is a telecare & mobile health play growth, which would likely be in an earnings report. In the summer of 2018, Doro's US competitor GreatCall was acquired by Best Foreign expansion of Doro Care Buy for USD 800m (EV/S about 2.5x or USD 800-900 per subscriber). We argue The Care acquisitions are Doro's chance to build more sticky revenue and that Doro can, and will, pursue a similar care journey. Doro’s new Smart Care endurable competitive advantages. Doro's foreign care expansion will lead to box will function as a gateway to which all types of devices and sensors can be margin and multiple expansion. In UK, Doro now has important M&A expertise connected in order to detect unusual behavior. Doro will pre-program the alarm from its Welbeing acquisition. button on the phone and offer various services for a monthly fee, including making it possible for families, friends and caregivers etc. to monitor the user via an app and receive alarms. Relatives or caregivers can receive notifications that everything is ok alternatively not ok and in a more serious situation an alarm to an alarm centre can automatically go off and caregivers can be dispatched. Doro will open up the platform for all kinds of third party solutions such as e.g. portable heart scanners or bed sensors that can sense if a person is not in bed. The system can also detect unordinary events, e.g. if the refrigerator has not been opened during the past 24 hours, if someone has been in the bathroom for an hour or perhaps in the bathroom 30 times in one day. All this will create a moat, as copying Doro’s extensive offering will not only

REDEYE NORDIC TECHNOLOGY REPORT - 2020 91 190020M90

EMBRAC B Company page Embracer Group https://www.redeye.se/company/embracer-group

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 70.7 Major Long Moderate Mid Minor Short 5 4 4 Bear Base Bull People Business Financials 60.0 100.0 125.0 Turn page for catalyst specifics

Snapshot Financials

Embracer Group Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 1800 80 Revenue, MSEK 5,754 5,671 6,984 8,204 9,188 1700 70 1600 Growth >100% -1.5% 23.2% 17.5% 12.0% 60 1500 EBITDA 1,592 1,994 2,561 3,138 3,807 50 1400 EBITDA margin 27.7% 35.2% 36.7% 38.3% 41.4%

VolumeVolume EBIT 575 554 891 1,342 2,113

10M EBIT margin 10.0% 9.8% 12.8% 16.4% 23.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 542 532 856 1,302 2,069 Net earnings 359 408 656 998 1,587

Marketplace First North Stockholm Net margin 6.2% 7.2% 9.4% 12.2% 17.3%

CEO Lars Wingefors Dividend/Share 0.00 0.00 0.64 1.30 2.06 Chairman Kicki Wallje-Lund EPS adj. 3.50 1.33 2.13 3.24 5.16

Share information P/E adj. 59.9 55 34 22 13.7 Share price (SEK) 70.7 EV/S 3.2 3.5 2.8 2.4 2.1

Number of shares (M) 312.1 EV/EBITDA 11.7 11.6 8.7 7.3 6.9 Market cap (MSEK) 22,051 Last updated: 2020-01-08 Net debt (MSEK) -3,725

Owner Equity Votes Analyst Lars Wingefors 34.7% 51.1% Swedbank Robur Fonder 9.0% 5.0% Kristoffer Lindström [email protected] Erik Stenberg 7.5% 11.1% Handelsbanken Fonder 6.1% 3.4% Första AP-fonden 4.6% 2.6% Conflict of interests Didner & Gerge Fonder 3.4% 1.9% Kristoffer Lindström owns shares in Embracer Group: Yes CMB Holding AB 2.6% 3.8% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Familjen Olsson med stiftelse 1.7% 1.0% State Street Bank And Trust co 1.6% 0.9% Skandinaviska Enskilda Banken S.A 1.6% 0.9%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 92 COMPANIES

Company description Embracer Group (previously THQ Nordic) has since Lars Wingefors founded the Embracer's core strategy is to acquire IPs at depressed prices and then company in 2011, established a strong platform and product portfolio under enhancing their value. We view the Koch Media acquisition as a prime example high growth and profitability. The most important events in the company’s of this approach. This focus will continue to keep risks at low levels and create history are the acquisition of Austrian listed company JoWooD in 2011 and significant investment returns for shareholders going onwards the US-listed company THQ in 2013. Both of these businesses had incurred Many public companies suffer from a short-term quarterly focus; this could not financial insolvency, which in this case means that the firm made these be further from the case when it comes to Embracer. We find the long-term acquisitions out of their bankruptcy estate. This is also the simplest core of thinking as a distinct advantage; we also believe this way of business will Lars Wingefors’s entrepreneurial business, when he sees an opportunity in further increase following the Koch acquisition as the company will be less buying something cheaper than he can sell it, he most certainly is interested. dependent on single releases for cash flow. In 2018 Embracer acquired Koch Media wich added a Partner Publishing Our forecast, and therefore also our DCF valuation, does not factor in possible business and the developer/publisher brand of Deep Silver to the Group. future value-adding acquisitions of IPs or companies, but it is a fact that Today the collection is comprised of 120+ different game franchises, which in Embracer will continue to acquire, and will do so with bravura. the gaming industry is called intellectual property (IP). The game portfolio generates the lion share of the company’s revenue. Counterarguments (Bear-points) It is always sensible to develop some counterarguments to an investment Investment case thesis. Below, we present some bear-points that an investor should consider and have in mind if the future development is not favorable. • The company showed significant growth during 2017 but a large part of the IP portfolio is still not generating any income, this will change in the • Title risks of larger releases – Despite Embracer's extensive portfolio coming years there is always some title risk when releasing larger Disappointing • Embracer's IP portfolio grew significantly following acquiring Koch releases and/or reviews could dampen investors’ enthusiasm and hurt Media, the asset care possibilities and thus value enhancement is vast the company’s financials. • Owner operator with a highly skilled management team with the right • Rising competition in bidding for acquisitions – As the Group is entering focus on long-term value creation a new level as a company, so will the future acquisitions in terms of size • The core strategy is to acquire IPs at depressed prices and then and target reputation. Going from an unknown player to a more enhancing their value, Koch Media acquisition as a prime example established company might make it harder to find cheap deals. • Management is paramount – Just as much we love a strong and The acquisition of Koch Media is a prime example of Embracer Group's committed management team, it is also a fact that relying on a few key acquisition strategy and why we continue to be positive to the case. We believe individuals also poses a risk. that the market is still to fully grasp the underlying value and cash flow generating capabilities of Embracer's growing IP portfolio, which was enhanced Catalyst types to a significant degree following the purchase of the European publisher. More value adding acquisitions Embracer Group has a strong focus on acquiring IPs, franchises, and A large part of the asset value is still untapped companies at low prices. They can do this by utilizing one of the best The company showed significant growth during 2017, but a large part of the IP characteristics of a great investor; patience. Larger acquisitions of well-known portfolio is still not generating any income. Development projects including a IPs could and should enhance the valuation of the company. few AAA will be released in the years to come. This will take revenues and the profits to entirely new levels. AAA titles from Deep Silver and secret project announced Embracer's IP portfolio grew significantly following acquiring Koch Media. We Deep Silver was a part of the Koch Media acquisition. Two studios within Deep believe that the company will use its asset care expertise and unlock a lot of Silver is currently developing two AAA titles, one is a new Saints Row game and value from the long tail part o0f the game asset in the coming years. Some key the other one is unknown, but they will be released in FY21. The announcement franchises included in the IP portfolio are Darksiders, MX vs. ATV, Red Faction, of the unknown game would enhance the visibility of the IP portfolio and likely Delta Force, Titan Quest, SpellForce, Saints Row, Dead Island, Metro and 100+ increase the valuation. One of the large development projects from THQ Nordic more. remains undisclosed. This title has the same type of budget as Darksiders 3 have, which should imply a similar sales potential. Focus on long-term value and buying cheap Embracer Group is what we like to call an owner-operator company where the management team owns 50%+ of capital, has extensive experience from the industry and is highly committed to building “something big.” We believe there should be a premium on the valuation because of the strong shareholder focus

REDEYE NORDIC TECHNOLOGY REPORT - 2020 93 19001200 000k

ENEA Company page Enea https://www.redeye.se/company/enea

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 181.0 Major Long Moderate Mid Minor Short 4 4 3 Bear Base Bull People Business Financials 91.0 161.0 200.0 Turn page for catalyst specifics

Snapshot Financials

Enea Redeye Estimates OMXS30 2018 2019E 2020E 2021E 180 1800 Revenue, MSEK 842 1,021 1,083 1,170 160 1700

140 1600 Growth 42.9% 21.2% 6.2% 8.0%

120 1500 EBITDA 229 324 323 365 100 1400 EBITDA margin 27.2% 31.8% 29.8% 31.2%

Volume EBIT 189 262 252 293

500k EBIT margin 22.4% 25.6% 23.3% 25.1% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 161 216 243 287 Net earnings 142 180 200 235

Marketplace NASDAQ Stockholm Net margin 16.8% 17.7% 18.4% 20.1%

CEO Jan Häglund Dividend/Share 0.00 0.00 0.00 3.31 Chairman Anders Lidbeck EPS adj. 7.32 8.47 9.37 11.03

Share information P/E adj. 13.7 18.1 16.3 13.9 Share price (SEK) 180.5 EV/S 3.0 3.5 3.1 2.7

Number of shares (M) 21.6 EV/EBITDA 10.9 11.0 10.4 8.5 Market cap (MSEK) 3,891 Last updated: 2019-10-23 Net debt (MSEK) 87

Owner Equity Votes Analyst Per Lindberg 34.1% 34.1% Avanza Pension 11.6% 11.6% Viktor Westman [email protected] Swedbank Robur Fonder 9.4% 9.4% Handelsbanken Fonder 7.9% 7.9% C WorldWide Asset Management 4.9% 4.9% Conflict of interests JP Morgan Bank Luxembourg S.A. 4.9% 4.9% Viktor Westman owns shares in Enea: Yes HSBC Bank Plc 2.4% 2.4% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Canaccord Genuity Wealth Management 2.4% 2.4% TIN Fonder 1.6% 1.6% Enea AB 1.5% 1.5%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 94 COMPANIES

Company description Enea is a global, leading software company within realtime operating systems applications continuously expands it is becoming increasingly difficult to keep (RTOS), deep packet inspection (DPI) and mobile video optimization. Enea has pace with developments. Qosmos was early to identify this trend and was a a long experience in telecom. Over 5 billion calls per day are depending on pioneer in carving out its own niche in embedded DPI aimed at OEM Enea's technology since it is integrated in more than half of all base stations customers. Qosmos has maintained complete focus on this core competence across the World and over three thirds of the 4G base stations. Enea's main and now has 75 percent of a rapidly growing niche, which is gradually biting competitive disadvantage is related to its large key accounts exposure (~25% from today’s tiny total market penetration levels. Ericsson & Nokia), but this dependency has decreased over time, following larger acqusitions. Enea has completed a business model transition to SaaS, Earnings releases and further M&A drives the share price which has resulted in more stable recurring revenues - about 50% of total sales. We assume the share will be driven by more value-creating acquisitions and, The customers pay a license fee per engineer when developing its products above all, changed perception when it becomes obvious to the stock market in with Enea's technology. The company also in most cases earns royalty revenue conjunction with the interim report that the acquisitions and the smaller per sold unit with integrated Enea technology. Enea invests over 20% of sales in customers are outgrowing the decline in key account sales. R&D, within many future growth areas such as NFV, open source, DPI, mobile video and subscriber data management. Catalyst types The market discovers the growth in Qosmos, Openwave etc. Investment case As Qosmos, Openwave och Worldwide Software Sales continue to grow larger it should at some point be obvious for the stock market that the growth in the • New diversified customer base outgrowing decline of key accounts new areas and the smaller customers together can offset and outgrow the • The stock market is underestimating the acquisitions declining Key Accounts business. • Earnings releases and further M&A drives the share price

New diversified customer base outgrowing decline of key accounts Enea’s operating profit has increased by an average of around 18 percent annually since 2013, even though revenue from Ericsson and Nokia has decreased from 60 percent to about 20-25 percent. We argue that Qosmos, Openwave, Atos and the smaller customers will offset the decline in Key Accounts but that the stock market has not yet grasped this dynamic. Worldwide Software Sales, where most of the acquired, fast-growing businesses are included, is already more than twice the size of Key Accounts. One relevant counter argument is that the acquisitions were made to conceal a steeper decline in Ericsson revenues, but this does not take away from the fact that the acquired companies are of high quality. They represent new examples of Enea's long and successful track record in building billion-kronor software companies through acquisitions.

The stock market is underestimating the acquisitions Following , the acquisitions Enea is a brand new company. The acquisitions follow a clear agenda to grow upwards in the software stack, positioning Enea within virtualization and get the company closer to the end customers. Common to the Qosmos, Atos and Openwave acquisitions is that they are all critical components of the telecom networks of the future. Atos provides application software for policy and control in handling subscriber information, which is essential for the operators when it comes to building new business models and create tailor-made services. Openwave’s technology helps telecom operators handle the explosive growth in mobile video. 90% of the 5G traffic will be related to video. Qosmos conducts internet traffic flow analysis/deep packet inspection (DPI), which is predicted to grow by around 20 percent annually. OEMs previously conducted DPI in house, but as the number of protocols and

REDEYE NORDIC TECHNOLOGY REPORT - 2020 95 1900128 500k

NLAB Company page Enlabs https://www.redeye.se/company/enlabs

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 24.6 Major Long Moderate Mid Minor Short 4 4 4 Bear Base Bull People Business Financials 16.0 32.0 51.0 Turn page for catalyst specifics

Snapshot Financials

Enlabs Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 26 1800 Revenue, MEUR 31 40 52 66 81 24 1700

22 1600 Growth 30.2% 29.9% 29.7% 28.0% 22.0%

20 1500 EBITDA 9 12 17 24 25 18 1400 EBITDA margin 29.9% 30.1% 32.6% 36.2% 30.7%

Volume EBIT 7 10 14 21 22 1 000k 500k EBIT margin 22.9% 24.8% 28.0% 32.0% 27.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 7 10 14 21 22 Net earnings 7 10 14 21 21

Marketplace First North Stockholm Net margin 22.4% 24.9% 27.6% 31.6% 25.7%

CEO Robert Andersson Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Niklas Braathen EPS adj. 0.11 0.16 0.23 0.33 0.33

Share information P/E adj. 20.6 14.6 10.2 7.0 7.0 Share price (SEK) 24.6 EV/S 4.2 3.2 2.2 1.4 0.9

Number of shares (M) 62.8 EV/EBITDA 14.2 10.5 6.7 3.9 3.1 Market cap (MSEK) 1,527 Last updated: 2020-01-09 Net debt (MEUR) -31

Owner Equity Votes Analyst Erlinghundra AB (Niklas Braathen) 22.1% 22.1% EFG BANK / GENEVA 18.0% 18.0% Jonas Amnesten [email protected] Försäkringsbolaget Avanza Pension 9.9% 9.9% Anders Tangen med bolag 4.0% 4.0% Eric Leijonhufvud 3.2% 3.2% Conflict of interests Hans Isoz 2.5% 2.5% Jonas Amnesten owns shares in Enlabs: Yes Kjell och Michael Pettersson Fastigh 2.4% 2.4% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Skandinaviska Enskilda Banken S.A. 2.2% 2.2%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 96 COMPANIES

Company description Enlabs operates and invests in gambling and affiliate businesses. The company Counter-Thesis – Bear Points has a clear focus on regulated markets and the fast-growing Baltics in All-in on the Baltics particular. As a result, more than 90% of the gambling revenues are generated The Baltics is a rapidly growing market, but things can change fast. Changes in from regulated markets, meaning that the company is well positioned for the regulation, such as a more permitting view on gambling-marketing in Latvia or ongoing regulation of the industry. removing the requirement for land-based operations in Lithuania, might eradicate the strong market barriers. Leading to more competition about the Further, Enlabs’s business is divided into three areas: customers and lower profit levels. Gambling – including online gambling in addition to land-based betting. Media - primarily focusing on affiliation. B2B Solutions - is today a small business area Neglected market offering solutions to gambling companies. Enlabs today have a strong position on the Baltic market, and the competition is on low levels. However, if more operators enter the Baltic market by acquiring Investment case an existing operator to be able to launch its main brand, just as MRG has done.

• A big bet on rapid growth in the Baltics New markets and M&As • Strong market position We expect Enlabs to invest much in new markets and M&As the next few years • Already regulated to continue to drive growth at a high rate. However, it is important to choose • Own platform and strong financial position markets and acquisitions wisely. What works in one market may not work in another due to culture or/and regulations differences. The market entries and A big bet on rapid growth in the Baltics acquisitions may require much more resources than initially estimated. With Enlabs’s focus on the Baltics, it is essential that the underlying online gambling market continues to grow at a high rate. H2GC forecasts a CAGR of about 10% for the period 2018-23. This is much lower than the actual growth Catalyst types rate in Estonia and Latvia in 2018, which is not sustainable over the long term Peak-season beyond expectations but shows the growth potential of the Baltic market. As noted, Enlabs is also Peak-season together with product improvements can fuel growth and profit expanding its market in the Baltics by entering Lithuania. margins beyond the market expectation during H2 2019

Strong market position An acquisition target We believe Enlabs has a very strong position with the current setup in both In the light of the MRG bid from William Hill, ENLABS could be a potential target Latvia and Lithuania. In the Latvian market, there are clear marketing for the larger operators that want to obtain a strong position in the Baltic. limitations that make it difficult to spend much and at the same time, achieve healthy ROI. License holders also need to hold at least EUR 1.4m in share Entering new markets capital and pay a license fee of EUR 0.4m. In the Lithuanian market, companies Entering or obtaining a license in a new market with good marketing size and are required to operate at least 20 licensed betting shops to obtain an online growth potential. This is one of the major long-term growth drivers and gambling license. This makes it difficult for new competitors to enter the successfully entering new markets is a clear catalyst potential. market. We believe Enlabs has deep knowledge about the market from its long presence and has well-established brands with strong brand awareness. M&A ENLABS has a successful history of M&A and divestments and, according to Already regulated the company, they will continue to be active in the consolidation of the industry. Over 90% of Enlabs’s sales come from regulated markets. As it will not be Therefore, we consider the management’s value-creating acquisition history affected by the regulation in Sweden and increased tax expenses, it should be should be valued as a potential option. valued at a higher EV/EBIT multiple than its peers. For sure, a regulated online gambling market always has the risk of re-regulation. But we believe that the Successful online launch in Lithuania downside of any re-regulation will most likely not be on the same “magnitude” In Lithuania, licensees are required to hold land-based supply for providing as an initial online regulation. online gambling, which creates barriers to entry. Therefore, a successful online launch would most likely lead to a solid, sustainable and profitable growth for Own platform and strong financial position Having an own platform and a strong financial position is the perfect combo the company. for future growth; you can´t get a more obvious sign. The proprietary platform gives Enlabs very strong incitements to grow, and the strong financial position gives them the means to do it. With the own platform, the growth can be realized both organically and through acquisitions.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 97 1900100M100

ERIC B Company page Ericsson https://www.redeye.se/company/ericsson

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 83.2 Major Long Moderate Mid Minor Short 4 4 4 Bear Base Bull People Business Financials 75.0 91.0 100.0 Turn page for catalyst specifics

Snapshot Financials

Ericsson Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 95 1800 90 Revenue, MSEK 210,838 226,749 235,788 242,250 247,100 1700 85 1600 Growth 2.7% 7.5% 4.0% 2.7% 2.0% 80 75 1500 EBITDA 9,560 17,041 31,857 35,170 37,947 70 1400 EBITDA margin 4.5% 7.5% 13.5% 14.5% 15.4%

Volume EBIT 1,242 10,576 26,407 30,129 32,554

50M EBIT margin 0.6% 4.7% 11.2% 12.4% 13.2% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -1,463 8,545 25,606 29,628 32,103 Net earnings -6,530 1,804 17,880 21,032 22,975

Marketplace NASDAQ Stockholm Net margin Neg 0.8% 7.6% 8.7% 9.3%

CEO Börje Ekholm Dividend/Share 1.00 1.25 1.60 2.25 3.00 Chairman Ronnie Leten EPS adj. 1.39 1.21 5.87 6.73 7.27

Share information P/E adj. 55.0 68.8 14.1 12.3 11.4 Share price (SEK) 83.2 EV/S 1.1 1.1 1.0 0.9 0.8

Number of shares (M) 3,334.2 EV/EBITDA 25.2 14.6 7.2 6.1 5.3 Market cap (MSEK) 275,201 Last updated: 2020-01-07 Net debt (MSEK) -41,550

Owner Equity Votes Analyst Deutsche Bank Trust co America 9.7% 5.7% State Street Bank And Trust co 9.0% 5.4% Greger Johansson [email protected] Cevian Capital 8.4% 5.0% Investor 7.2% 22.5% Swedbank Robur Fonder 3.9% 2.3% Conflict of interests UBS AG London Branch 3.5% 2.1% Greger Johansson owns shares in Ericsson: No PRIMECAP 3.5% 2.0% Nqi Jpmorgan Prime Nominees LTD 3.2% 1.9% BNY Mellon NA (Former Mellon) 3.1% 1.8% Vanguard 3.1% 1.9%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 98 COMPANIES

Company description Ericsson, with a history of over 140 years and operations in 180 countries, is The market going forward will open up the tightly closed traditional telecom one of three large global players in the mobile networks market. Ericsson’s sector with new technologies, such as 5G, SDN/NFV and Cloud. This means main business areas are Networks (mainly mobile), Digital Services, Managed that players like IBM, Intel, Juniper, Cisco and HP may now have a shot at this Services and Emerging Business/Other, with the first two areas responsible for huge potential. Ericsson has a challenge to hinder these new competitors while the majority of revenues. Ericsson had a turnover in 2018 of roughly SEK 211 still investing wisely and utilizing its core expertise. Ericsson’s edge is in the billion and an adjusted EBIT margin of around 6%. radio interface and Systems which, together with an offer in Services (recurring and rather stable revenues but slightly lower operating margin and one offs), Ericsson has faced a tough market in recent years, with negative growth should be enough to deliver a much better margin going forward. triggering major cost cutting, divestment of Sony Mobile and EMP/modems, and changes in senior management. This has also activated investments in …and higher expectations but some growth lights new growth areas such as Cloud Services, IP Networks, TV/Media, OSS/BSS After a rough 2016 and 2017, the share has tumbled and confidence in both the and Industry/Society. However, these new areas have not performed well. management team and the Ericsson share have been low. However, after the Moreover, in 2018 the mobile network market has started to turn around. good reports during 2018/2019, the valuation (P/S multiple around 1.2x)

Ericsson is headquartered in Kista (Stockholm), Sweden, and has roughly indicates that the confidence in the company is back. If we examine estimates 95887 employees. The company’s share is listed on NASDAQ. for a few years forward, we believe the market now is expecting fairly much. Although we do not expect any significant growth (a few percent) going Investment case forward, we still estimate that Ericsson can return to a 11-13% operating margin (in 2020-2021) and a decent dividend. In addition, Ericsson most • Ericsson has under delivered during 2016/2017 and the market has been imortant segment, Networks, showed growth in Q1'18-Q3'19 which was very in decline during these years. However with the strong reports in most positive. quarters in 2018 and in 2019 and a turning market, the expectations on the company have increased somewhat Bear Points • Ericsson is still top 3 in the world (in telecommunication equipment) with There are naturally some major risks in this investerment scenario, such as: a solid customer base • continued weak/low revenue growth • We expect more effect from the cost cutting program announced and • cost cutting taking too long or even more cost cutting has to be made this will increase the margin going forward. On the other hand, the • intense competition (Huawei, Nokia, Samsung, ZTE) valuation of EV/S 1.1x indicates that the valuation is rather fair • Our DCF-model generates an upside and our fair value of SEK 91 is slightly higher than the share price is trading Catalyst types Large contracts/business deals A recovering company in a tough market… Deals in billion USD for 4G, 5G, services etc. Ericsson has faced a very tough market in the past couple of years, with its key customers (operators) holding back their investment due to slow growth and Cutting cost/improved operational e iciencies sliding margins. The markets for mobile communication and mobile networks Ericsson cost cutting program proceed better than expected and/or they have contracted in recent years, while Ericsson still believed there would be a announce further cost cutting lot of growth. The company started several new initiatives (Cloud Services,

Media etc.) and was very late in adjusting its organization. We are now seeing Growth long term, returns in the telecom industry (from 2018) that the company is starting to achieve a reasonable cost base. The underlying growth returns in the industry. Some growth has returned This should take the company back to a more realistic EBIT margin of 9–10% during 2018/2019. during 2019. Ericsson has also a fairly new CEO, Börje Ekholm, and the new major Cisco buy Ericsson shareholder, Christer Gardell, who have taken a new grip on the company and This would be a fairly good match between the two companies. started to execute the new strategy. In additon, the CEO has limited experience of leading a large global company in crisis but he has performed well during 2018/2019.

…but still top 3 in the world… Ericsson is still one of the world’s three largest mobile network players, with a market share of around 30%. In addition, the other two players, Chinese Huawei and Finnish/French Nokia/Alcatel each have market shares of around 30-35% but have their own problems. Huawei is still facing difficulties getting into America, Japan and some other markets, while Nokia Alcatel is in now emerging from the merger.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 99 1900190010M30010M300

Company page EVEVOO Company page EvolutionEvolution GamingGaming GroupGro...Gro... https:/https://www/www.r.redeedeyye.se/company/ee.se/company/evvolution-gaming-grolution-gaming-groupoup

RedeRedeyyee Rating Rating

COMPCOMPANYANY QUALITY QUALITY FFAIRAIR V VALUEALUE RANGE RANGE CACATTALALYSTYST POTENTIAL POTENTIAL

LastLast price price ImpactImpact TimefrTimeframeame 292.0292.0 MajorMajor LongLong ModerModerateate MidMid MinorMinor ShorShortt 55 55 44 BearBear BaseBase BullBull PPeopleeople BusinessBusiness FinancialsFinancials 175.0175.0 280.0280.0 440.0440.0 TTurnurn page page for for catalyst catalyst specifics specifics

SnapshotSnapshot FinancialsFinancials

EEvvolutionolution Gaming Gaming Gr Groupoup RedeRedeyyee Estimates Estimates OMOMXS30XS30 20182018 2019E2019E 2020E2020E 2021E2021E 2022E2022E 18001800 250250 ReRevvenue,enue, MEUR MEUR 245245 364364 483483 598598 721721 17001700 200 200 Growth 37.6% 48.3% 32.7% 23.7% 20.7% 16001600 Growth 37.6% 48.3% 32.7% 23.7% 20.7% 150 150 1500 1500 EBIEBITDTDAA 108108 181181 250250 309309 345345 100100 14001400 EBIEBITDTDAA mar margingin 43.9%43.9% 49.7%49.7% 51.8%51.8% 51.8%51.8% 47.8%47.8%

Volume Volume EBIEBITT 8989 156156 223223 278278 310310 5M 5M EBIEBITT mar margingin 36.5%36.5% 42.8%42.8% 46.1%46.1% 46.5%46.5% 43.0%43.0% 00 Pre-tax earnings 89 155 222 277 310 MarMar MayMay JulJul SepSep NovNov JanJan Pre-tax earnings 89 155 222 277 310 NetNet earnings earnings 8383 147147 208208 260260 290290 Net margin 34.0% 40.4% 43.2% 43.5% 40.2% MarkMarketplaceetplace NNASDASDAAQQ St Stockholmockholm Net margin 34.0% 40.4% 43.2% 43.5% 40.2%

CEOCEO MarMartintin Carlesund Carlesund Dividend/SharDividend/Sharee 0.180.18 0.240.24 0.340.34 0.500.50 0.630.63 ChairmanChairman JensJens V Vonon Bahr Bahr EPSEPS adj. adj. 0.460.46 0.820.82 1.151.15 1.421.42 1.581.58 P/E adj. 20.9 33.6 23.9 19.3 17.4 SharSharee information information P/E adj. 20.9 33.6 23.9 19.3 17.4 EV/S 6.8 13.1 9.6 7.5 5.9 SharSharee price price (SEK) (SEK) 292.0292.0 EV/S 6.8 13.1 9.6 7.5 5.9 EV/EBITDA 15.5 26.3 18.5 14.4 12.4 NumberNumber of of shar shareses (M) (M) 181.6181.6 EV/EBITDA 15.5 26.3 18.5 14.4 12.4 MarkMarketet cap cap (MSEK) (MSEK) 52,12652,126 LastLast updated: updated: 2020-01-07 2020-01-07 NetNet debt debt (MEUR) (MEUR) -331-331

OwnerOwner EEquityquity VVotesotes AAnalystnalyst RicharRichardd Livingst Livingstoneone 16.4%16.4% 16.4%16.4% ÖsterbahrÖsterbahr V Venturentureses AB AB 15.0%15.0% 15.0%15.0% JonasJonas A Amnestenmnesten Capital Group 7.9% 7.9% [email protected]@redeedeyye.see.se Capital Group 7.9% 7.9% SwedbankSwedbank Robur Robur F Fonderonder 5.7%5.7% 5.7%5.7% VVanguaranguardd 1.9%1.9% 1.9%1.9% ConflictConflict ofof inter interestsests NorNorgesges Bank Bank 1.7%1.7% 1.7%1.7% JonasJonas Amnesten Amnesten owns owns shar shareses in in E Evvolutionolution Gaming Gaming Gr Group:oup:NoNo LivLivförsäkringsbolagetförsäkringsbolaget Skandia Skandia 1.6%1.6% 1.6%1.6% AAvvanzaanza P Pensionension 1.4%1.4% 1.4%1.4% 18321832 Asset Asset Management Management 1.3%1.3% 1.3%1.3% HenricHenric Wiman Wiman 1.3%1.3% 1.3%1.3%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 100 COMPANIES

Company description Evolution Gaming Group (Evolution) is the market-leading Live Casino provider, distribution capacity should enable Evolution to achieve synergies with other offering its top-notch solution to operators across the world. The company was gambling content players. After discussions with the management, Evolution founded in 2006 and has been an important part of the Live Casino revolution seems to have an opportunistic approach to M&As. ever since. Bear points Today the company offers a wide range of Live Casino products - both classics Domination downside like Blackjack, Roulette and Baccarat and new game inventions such as Evolution’s huge success is reflected in its 70-80% market share in Europe. As a MONOPOLY, Deal Or No Deal Live and Lightning Roulette. The company has result, Evolution has more or less become the Live Casino market and has to about 7 000 employees. It operates offices/studios in Belgium, Canada, attract new players to the segment. This will be more challenging than just Georgia, Latvia, Malta, Netherlands, Romania, Sweden, Spain, the UK and the gaining market share by attracting existing Live Casino players. From an 80% US. market share, the likeliest direction of travel is down.

Success attracting competition Investment case Evolution’s success is attracting competition from both existing players • Market leader in the DNA increasing their investments and new competitors. This will not only lead to • Living up to its name competitors offering more and better products but also increases the risk of • Strong momentum Evolution losing talent with Live Casino know-how. • M&A opportunities Regulatory pressure We expect the regulatory trend to continue with several countries likely to Investment thesis regulate their online gambling markets in the coming years. This will mean Market leader in the DNA increased margin pressure due to gaming tax, as well as other restrictions that Evolution Gaming Group (Evolution) is undeniably the No.1 Live Casino provider, might limit growth opportunities. We expect these pressures to eventually spill globally. It is highly focused on maintaining this lead, with the drive to stay over to suppliers too, affecting Evolution in the longer term. ahead of the competition a vital part of its corporate DNA. We are confident that the company’s skilled founders and management will enable it to maintain High expectations Evolution is currently trading around EV/EBITDA 27x and P/E 33x on 2019 its leadership position for the foreseeable future. We also believe that the forecasts, which indicates that the market has high expectations on Evolution´s moats Economic of scale, Brand, Switching cost, Lock-in effects and Product future growth possibilities. We believe the high expectations makes the stock quality & range protects the market-leading position price-sensitive for any negative news and this sensitivity has previously been Living up to its name demonstrated during the last couple of years. Evolution is living up to its name by evolving the gambling experience. Not only is it pushing the Live Casino experience into new territory, with games like Lightning Roulette, but it is also adding new types of games such as the game Catalyst types New game verticals show MONOPOLY. Its capability to evolve the gambling experience and attract Investors should welcome new games that broaden the company´s targetable new players is key to Evolution’s success and will be a vital growth driver for it market. Evolution may reveal some new exciting titles at ICE London. in the years to come, we believe. Moreover, the highly scalable new games could improve that operating margins further. New games performance Strong momentum In our view, investors underestimate the new games’ long-term potential. As a While Evolution faces some challenges due to its large market share, we expect result, more information about how new games like MONOPOLY and DEAL or the company’s very strong underlying momentum to continue driving growth in NO DEAL are performing should boost long-term growth expectations. all game types over the coming years. The underlying market growth together with new B2B agreements, new markets and increased player activity should M&A continue to fuel this performance. Moreover, the company’s scalability should We believe that Evolution Gaming’s strong financial position and distribution translate strong momentum into improved margins and continued rapid EPS network will enable it to make major value-adding acquisitions. growth.

M&A opportunities Rapid US expansion We view the company’s strong financial position and vast distribution network Evolution has a very strong market position in the US, where we see huge as a perfect mix for making the most of M&A opportunities. The cash position, potential for its games. Accordingly, more rapid legalization of gambling in together with strong cash flows and limited risk, should enable the company to more states should benefit the company. obtain low-interest debt to leverage its return on equity. Moreover, its

REDEYE NORDIC TECHNOLOGY REPORT - 2020 101 1900400M22.5

FING B Company page Fingerprint Cards https://www.redeye.se/company/fingerprint-cards

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 20.8 Major Long Moderate Mid Minor Short 3 2 2 Bear Base Bull People Business Financials 5.0 9.0 20.0 Turn page for catalyst specifics

Snapshot Financials

Fingerprint Cards Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 20 1800 Revenue, MSEK 1,535 1,414 1,895 2,722 3,901 17.5 1700

15 1600 Growth -48.2% -7.9% 34.0% 43.6% 43.3%

12.5 1500 EBITDA -646 127 229 325 552 10 1400 EBITDA margin Neg 9.0% 12.1% 11.9% 14.2%

Volume EBIT -772 -4 96 209 413

200M EBIT margin Neg Neg 5.1% 7.7% 10.6% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -797 11 100 213 418 Net earnings -631 2 78 166 326

Marketplace NASDAQ Stockholm Net margin Neg 0.1% 4.1% 6.1% 8.4%

CEO Christian Fredrikson Dividend/Share 0.00 0.00 0.00 0.16 0.31 Chairman Johan Carlström EPS adj. -2.01 0.00 0.25 0.53 1.04

Share information P/E adj. -3.0 4,347.6 84.1 39.4 20.1 Share price (SEK) 20.8 EV/S 0.9 4.3 3.2 2.2 1.5

Number of shares (M) 314.0 EV/EBITDA -2.1 48.3 26.7 18.7 10.7 Market cap (MSEK) 6,487 Last updated: 2020-01-09 Net debt (MSEK) -460

Owner Equity Votes Analyst Johan Carlström med bolag 6.5% 20.3% The Bank of New York Mellon SA/NV 5.8% 5.0% Viktor Westman [email protected] Avanza Pension 5.0% 4.3% GO ETF Solutions LLP 4.5% 3.9% SIX SIS AG 3.2% 2.7% Conflict of interests Svenska Handelsbanken AB for PB 1.4% 1.2% Viktor Westman owns shares in Fingerprint Cards: No Hongkong & Shanghai Banking co LTD 1.4% 1.2% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. UBS Switzerland AG 1.3% 1.1% BlackRock 1.3% 1.1%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 102 COMPANIES

Company description Fingerprint Cards (FPC) develops and sells biometric solutions as it is Smart card news is driving the shares transitioning from selling just components like fingerprint sensors to being Our base case is SEK 9 per share while our bear and bull case respectively more of a provider of biometric systems. It has a global reach and multiple amounts to SEK 5 and SEK 20. In our view, smart card news is what is driving geographical locations as one of the World’s largest fingerprint sensor supplier. and will drive the share. It seems that all negative news about the legacy The fingerprint sensors are at the moment sold to distributors or module business in phones is water of a duck’s back. manufacturers that sells the fingerprint modules to primarily smartphone OEMs but the next big thing is selling modules to card manufacturers for Catalyst types payment applications, but there are other card use cases as well. Growth from Customers adopt face recognition other, coming verticals will include e.g. PCs, tablets, automotive, and IoT. If Apple's Face ID becomes a success it could make FPC's customers prone to Besides selling the hardware FPC also provides various software solutions quickly also move over to face recognition and thus scrap their fingerprint across the value chain. FPC attributes its competitive advantages to proven sensors. volume capacity (previously shipping 1 million sensors a day), low power consumption and cost effieient production costs. Commercial success/considerable volumes from smartcards If the market sees that the smart card segment is taking off, for example due to Investment case a major deal with IDEAMIA or Gemalto (Thales) it would have a major impact on the share. Not only would it contribute financially, but also make FPC less • Contactless cards will happen & biometrics is the key to security dependent on the mobile device segment. We expect to hear about further • FPC poised to win a large chunk of the smart card market progress in 2020 and guess there is a change for volumes to pick up in 2021 • Smart card news is driving the shares (at the earliest)

Contactless cards will happen & biometrics is the key to convenient security At this stage, it is hard to know the future size of the biometric smart card market or the roll-out pace. What we do know is that all smart cards will be contactless around 2023 due to requests from Visa and Mastercard. Already in 2019, the contactless penetration was expected to have reached 60 %. There is no other alternative than fingerprint biometrics for secure contactless card payments, unless PIN codes are kept (which would remove the point in going contactless). Hacking a contactless card is super easy. Fraud rates are estimated to increase during the coming years due to contactless. However, fraud costs are growing rouglhy in line with transactions, meaning there is no incentives to push biometrics cards for the sake of decreasing fraud. What is important, however, is the customers' peace of mind. The eco system does not want users to doubt contactless payments.

FPC poised to win a large chunk of the smart card market Delays in the card market and problems in FPC’s traditional business have overshadowed FPC’s solid first mover position in the new fast-growing verticals, most notably smart cards. Cards as well as other new segments might be delayed, but it does not take away from the fact that FPC has a strong positioning, an appropriate product offering with higher ASP (the T-shape module) and the partnerships necessary etc. to put up a solid growth. We assume initial volumes will be low as the market is a lot more slow moving than consumer electronics. Nevertheless, coming quarters should give good leads on who will be the winner of the smart card market. Our belief is that FPC is poised to capture a large portion of the smart card market via Idemia, Gemalto (Thales) and G&D who together hold about 70% of the smart card market. Since competition is limited and far behind in terms of power consumption, we do not find it unreasonable that FPC initially could win 50% of the volumes.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 103 1900750k17.5

FLEXM Company page Flexion Mobile https://www.redeye.se/company/flexion-mobile

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 8.0 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 5.0 14.0 50.0 Turn page for catalyst specifics

Snapshot Financials

Flexion Mobile Redeye Estimates OMXS30 2018 2019E 2020E 2021E 15 1800 Revenue, MGBP 6 11 19 30 12.5 1700

10 1600 Growth >100% 62.7% 79.0% 57.1%

7.5 1500 EBITDA 0 -2 0 1 5 1400 EBITDA margin Neg Neg Neg 4.5%

Volume EBIT 0 -2 -1 0 500k 250k EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings 0 -2 -1 0 Net earnings 0 -2 -1 0

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Jens Lauritzson Dividend/Share 0.00 0.00 0.00 0.00 Chairman Carl Palmstierna EPS adj. -0.01 -0.04 -0.02 0.00

Share information P/E adj. -91.2 -16.0 -31.0 -650.1 Share price (SEK) 8.0 EV/S 5.0 2.6 1.5 0.9

Number of shares (M) 41.5 EV/EBITDA -69.9 -13.8 -217.2 20.7 Market cap (MSEK) 332 Last updated: 2019-12-04 Net debt (MGBP) -1

Owner Equity Votes Analyst Mobile Sensations Ltd 28.2% 28.2% Carl Palmstierna 9.1% 9.1% Tomas Otterbeck [email protected] Zallaz SA 8.1% 8.1% Sjätte AP-fonden 4.6% 4.6% Claes Kalborg 0.3% 0.3% Conflict of interests Andreas Mac Mahon 0.2% 0.2% Tomas Otterbeck owns shares in Flexion Mobile: Yes Niklas Koresaar 0.1% 0.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 104 COMPANIES

Company description Flexion offers a technology-driven distribution service for free-to-play Android market is becoming more fragmented, but in the longer term it is likely that 3-4 games that allows game developers to distribute their products with ease big players will dominate. In this scenario, Flexion’s value to developers might through multiple channels, such as Amazon, Samsung, and OneStore, and via decline. leading regional distribution channels. Flexion’s cloud-based service platform is Cost of growth - In some of Flexion’s latest agreements with top grossing used to manage functionality – user experience, authentication, authorisation, mobile games the company has offered a minimum guarantee, which adds payments, and store independence features – in distributed games. Flexion risk. Even with proven success on the dominant app stores, it could still operates in the alternative distribution market for Android games. It targets underperform in other channels. growing distribution channels outside Google Play and China. Its base is the top 400 grossing games globally. Catalyst types Investment case Channels Signing more channels (mobile app stores). • Content is king – Like all platform companies, Flexion needs blockbuster content. During the last year the company has signed contracts with Games some of the global market’s highest grossing games. Their network Signing more games. effects are most important – strengthening Flexion’s future market position. • Duopoly in doubt – With content giants such as Netflix, Spotify and Epic Games neglecting Apple’s and Google’s mobile marketplaces, a major change is under way. As Flexion is particularly suited to a more fragmented market, this shift could create new opportunities such as strategic partnerships. • Diversified portfolio with leverage – Unlike other companies in mobile gaming, Flexion is able to control its risk – for example, by choosing games with proven monetization and replacing those that do not perform. Moreover, its primary strategy is organic growth, not user acquisition. • Game of scale – While Flexion is a first mover, dominance of its area is likely be settled over the next 2-3 years. Flexion’s business model has many similarities to Spotify’s. If Flexion succeeds in gaining a market position with a sustainable competitive advantage the reward could be notable.

Flexion is a potential Spotify of gaming. With contracts with leading mobile games newly in place and its service platform now fully established, the company is set for explosive growth in the coming years.

Valuation – Going forward, revenue growth will be most important for the stock’s valuation. Our base case anticipates explosive growth over the next three years with a CAGR of more than 50%. This reflects Flexion’s first-mover opportunity and its growth from a low base.

Challenges Small player - Flexion has an attractive first mover advantage in a niche where no major player sees a sufficiently large opportunity. If western app distribution markets become as fragmented as those in Asia it will benefit Flexion. In the longer term, though, the company is likely to either lose its market position or be acquired.

Consolidation - For the last 10 years Apple and Google have had a duopoly in western markets, where Flexion generates most of its revenues (84%). The

REDEYE NORDIC TECHNOLOGY REPORT - 2020 105 19002M25

FPIP Company page Formpipe Software https://www.redeye.se/company/formpipe-software

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 22.0 Major Long Moderate Mid Minor Short 4 5 3 Bear Base Bull People Business Financials 12.0 18.0 25.0 Turn page for catalyst specifics

Snapshot Financials

Formpipe Software Redeye Estimates OMXS30 24 2018 2019E 2020E 2021E 1800 23 Revenue, MSEK 406 395 409 430 22 1700 21 1600 Growth 4.1% -2.9% 3.6% 5.3% 20 1500 19 EBITDA 100 92 103 110 18 1400 EBITDA margin 24.5% 23.4% 25.2% 25.6%

Volume EBIT 53 44 53 57

1M EBIT margin 13.1% 11.3% 12.9% 13.3% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 51 42 50 54 Net earnings 40 32 39 42

Marketplace NASDAQ Stockholm Net margin 9.8% 8.1% 9.5% 9.9%

CEO Christian Sundin Dividend/Share 0.50 0.36 0.44 0.48 Chairman Bo Nordlander EPS adj. 0.75 0.60 0.73 0.79

Share information P/E adj. 23.7 33.2 27.3 25.1 Share price (SEK) 22.0 EV/S 2.2 2.7 2.6 2.4

Number of shares (M) 53.2 EV/EBITDA 9.0 11.6 10.2 9.4 Market cap (MSEK) 1,167 Last updated: 2019-10-29 Net debt (MSEK) -15

Owner Equity Votes Analyst Martin Gren (Grenspecialisten) 10.3% 10.3% Swedbank Robur Fonder 7.6% 7.6% Fredrik Nilsson [email protected] UBS Switzerland AG 6.7% 6.7% Martin Bjäringer 5.8% 5.8% Humle Fonder 5.5% 5.5% Conflict of interests Nordea Fonder 5.1% 5.1% Fredrik Nilsson owns shares in Formpipe Software: No Thomas Wernhoff 4.9% 4.9% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Andra AP-fonden 4.4% 4.4% Avanza Pension 3.7% 3.7% Carnegie Fonder 3.3% 3.3%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 106 COMPANIES

Company description Formpipe Software provides ECM (Enterprise Content Management) solutions client relationships. While the biggest focus is on public services clients, the to public sector clients in Sweden and Denmark as well as the global Life different products offered to different public, and private sector customer Science industry.The company is since 2010 listed on the OMX Small Cap groups mean that the company has a diversified product and market portfolio, stock exchange. As of early 2016, Formpipe has around 240 employees and is and is not a "one-trick pony". headquartered in Stockholm, but also has a big part of its workforce in High scalability in the business makes us optimistic about the future. In Denmark. The company has a turnover of over 350 MSEK with an EBIT-margin summary, we consider Formpipe as a stable company due to its steady growth of around 6-8% the last years, which is well below historical averages and in recurring revenues. As a result of the high scalability, we believe the productivity software peers. company to increase its margin on a mid-term basis. Also, Formpipe’s solid The ECM market comprises systems that capture, process, store, archive and market position of many of its products, long contracts and the increasing deliver information in a systematic way. This allows companies, organizations trend towards cloud-based software usage, makes us even more optimistic and public authorities to manage the continuously increasing flow of about Formpipe’s future. information in a connected, digital world. Through using ECM solutions, they can therefore increase their productivity, efficiency and even reduce risks in Counter-Thesis - Bear Points Increased competition: Formpipe may face increased competition from both their business.Formpipe's key market segments, the Swedish and Danish public local players as well as international firms, and players from consulting and sector, are regarded as relatively advanced in their use of ECM solutions. They product backgrounds joining forces, like Tieto. are ahead of the private sector, mostly due to regulatory pressure.

Formpipe's key competitors in the Nordics are Software Innovation (NO, part of Lower investment interest: The public sector might face reduced budgets over Tieto Group), Ida Infront (SE, part of Addnode Group), KMD (DK), SBYS (DK) and time and therefore might have the less economic freedom to invest in systems Essvision. We see Formpipe however in a leading position in their key customer such as Formpipe’s. and product segments. Lack of profitability improvement: According to the sensitivity analysis, the Investment case market expects a profitability improvement on a mid-term basis. Therefore, it is important that Formpipe continue to improve its EBIT margin. • Stable customer base and a high proportion of recurring revenues • Software-as-a-Service (SaaS) sales are increasing rapidly • Diversified product portfolio Catalyst types • High scalability in the business makes us optimistic about the future Increase in SaaS orders The shift towards more SaaS orders may affect sales and earnings negatively Investment Case in the short run. However, we believe that the shift will have a positive impact Stable customer base and a high proportion of recurring revenues. Formpipe’s on profitability in the long term. solutions help its clients to manage an ever-increasing flow of information, which is a strong underlying driver for the business. The firm has a stable New acquisitions for geographic and/or product expansion customer base which primarily consists of public sector actors in Sweden and FPIP historically used M&A to grow. Net debt is at levels again allowing for new Denmark, with a strong base of recurring revenues creating stability in the M&A, which can boost geo and/or product based growth. business. Growth opportunities exist both in existing as well as new markets, such as the Life Science sector.

Software-as-a-Service sales are increasing rapidly. For example, today around 50% of the Lasernet orders are sold as SaaS, and Formpipe believes that this trend will continue in the coming years. A SaaS order is accrued over the contract period, meaning that sales and profitability will be more stable compared to if the product is sold as a traditional license. However, during the migration phase from traditional license to SaaS, both profitability and sales are affected negatively in the short term. On the positive side, this indicates that Formpipe’s underlying profitability is better than what it may look like at first glance. Looking beyond the migration phase and into 2019/2020, we believe Formpipe has the potential to increase its profitability substantially.

Diversified product portfolio. The company has a history of both developing own software products, as well as acquiring products, market expertise, and

REDEYE NORDIC TECHNOLOGY REPORT - 2020 107 19002M200

FNOX Company page Fortnox https://www.redeye.se/company/fortnox

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 170.6 Major Long Moderate Mid Minor Short 4 5 5 Bear Base Bull People Business Financials 94.0 200.0 317.0 Turn page for catalyst specifics

Snapshot Financials

Fortnox Redeye Estimates OMXS30 2018 2019E 2020E 2021E 175 1800 150 Revenue, MSEK 374 525 664 883 1700 125 1600 Growth 37.5% 40.3% 26.5% 32.9% 100 75 1500 EBITDA 127 200 245 322 50 1400 EBITDA margin 33.9% 38.1% 36.8% 36.5%

Volume EBIT 102 168 209 284

1M EBIT margin 27.3% 32.0% 31.4% 32.2% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 102 168 209 284 Net earnings 79 131 163 222

Marketplace Nordic MTF Net margin 21.1% 25.0% 24.5% 25.1%

CEO Tommy Eklund Dividend/Share 0.46 0.66 0.82 1.11 Chairman Trond Dale EPS adj. 1.32 2.20 2.73 3.71

Share information P/E adj. 50.6 77.7 62.7 46.1 Share price (SEK) 170.6 EV/S 10.1 18.8 14.6 10.8

Number of shares (M) 59.8 EV/EBITDA 29.9 49.3 39.7 29.5 Market cap (MSEK) 10,247 Last updated: 2019-10-28 Net debt (MSEK) -492

Owner Equity Votes Analyst Olof Hallrup 21.0% 21.0% State Street Bank And Trust co 12.0% 12.0% Fredrik Nilsson [email protected] Capital Group 7.6% 7.6% Swedbank Robur Fonder 5.6% 5.6% The Bank of New York Mellon SA/NV 3.9% 3.9% Conflict of interests Spiltan Fonder 2.7% 2.7% Fredrik Nilsson owns shares in Fortnox: No Peder Klas-Åke Bengtsson 2.6% 2.6% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Avanza Pension 2.5% 2.5% Morgan Stanley & co Intl Plc 2.4% 2.4% Wasatch Advisors Inc. 2.1% 2.1%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 108 COMPANIES

Company description Fortnox is a Växjö-based provider of software as a service (SaaS) enterprise However, just a slight increase in penetration would cause a substantial rise in resource planning (ERP) systems for micro and small-sized enterprises, ARPC contribution. Looking forward, we believe that Fortnox will strengthen its including accounting, invoicing, customer relationship management (CRM) and competitive edge through the data it can access. Several financial services – quotation & order. The company was founded in 2001 by Jan Älmeby, who also such as loans and factoring – can be price more efficiently by using not only founded Scandinavia PC Systems or Visma SPCS as it was renamed after the customers’ data but also the customers’ customers’ data. Additionally, being acquired by Visma. In addition to its software offering, Fortnox also marketing can be targeted towards businesses base on their accounting data. offers financial services through its subsidiaries Fortnox Finance and The newly started Fortnox Insurance can similarly benefit from the accounting insurances through the newly started Fortnox Insurance. With over 240 000 data. The data will tell if a business has insurance or not and detect any actions customers, Fortnox can count almost 1/4 of all Swedish micro and small-sized that could require insurance, such as a purchase of machinery. businesses as its clients, making it the market leader in Sweden. Significant barriers to enter Investment case As the market leader regarding SaaS in Sweden, we believe that Fortnox has significant advantages that are hard to break; business schools are teaching it, • Riding the SaaS-migration a few more years: We believe there is still a ~1/4 of all Swedish micro and small-sized businesses are customers, ~15 000 possibility to gain a substantial number of new customers due to the accountants are using the software regularly, and central deals are in place with migration to SaaS, which is expected to reach a penetration rate of 90% all major accounting offices, whereof some – including Aspia – have based in 2022. their solution on Fortnox’ software. Although it is easy to transfer data from one • Exploit the data: Currently, Fortnox Finance has just scratch the surface, accounting software to another, many accounting offices, accountants and with a penetration rate of ~2% of Fortnox’s customer. Looking forward, business owners have invested significant time in learning and integrating we believe that Fortnox will strengthen its competitive edge through the Fortnox’ software. Thus, a monthly fee of SEK ~100 is likely insignificant data it can access. compared to the cost of spending several hours learning a new system. • Significant barriers to enter: As the market leader regarding SaaS in Sweden Fortnox has advantages as; ~1/4 of all Swedish micro and Counter-thesis – Bear Points small-sized businesses are customers, ~15 000 accountants are using Underestimating the current SaaS-penetration the software regularly, and central deals are in place with all major As mentioned, the actual SaaS-penetration is unknown. If significantly more accounting offices than 55% of all Swedish micro- and small-sized businesses were to use SaaS at the end of 2018, our estimates regarding future net customer intake are likely Investment case too optimistic. Riding the SaaS-migration a few more years The migration towards SaaS acts as a trigger for micro and small-sized The death of the accounting offices businesses to reevaluate their accounting software. It has been going on for Most of the new entrants either want to eliminate the accounting offices or take many years and has served Fortnox well – the number of customers has grown over their role, while Fortnox, on the other hand, cooperates with them. Thus, if to 244 000 since the company was founded in 2001. However, we believe there the accounting offices would become marginalized, Fortnox will lose one of its are still several years to come before the migration is finished. The share of most important competitive edges. Swedish micro- and small-sized businesses which are using SaaS is unknown. Based on the input we have got from Fortnox and others, combined with the A major accounting office leaving Fortnox reported number of customers for several competitors, we assume that 55% Some major accounting offices – Aspia for example – currently have solutions will be using SaaS at the end of 2018. Thus, there is still possible to gain a based on Fortnox' software. These deals are significant regarding customers, substantial number of new customers due to the migration to SaaS, which is but the ARPC is low. The main risk, according to us, however, is that other expected to reach a penetration rate of 90% in 2022. Given our assumptions, offices might question Fortnox, as a major player is leaving. Fortnox has a SaaS market share of 59% and if it were to persist – which we find reasonable – the number of customers would increase to 425 000 in 2022. Absence of significant ARPC increases Our estimates of continuously increasing ARPC might be too optimistic. Fewer Exploiting data companies than expected may need additional modules, financial services, and Thanks to its software offering, Fortnox has access to its customers’ insurance, for several reasons. For example, most businesses are tiny and have accounting data. Thus, with ~1/4 of all Swedish micro- and small-sized zero employees and may, thus, only need accounting and invoicing software. businesses as customers and growing, we believe there is a vast potential waiting to be utilized going forward. Currently, Fortnox Finance has just scratch the surface, with a penetration rate of ~2% of Fortnox’ customer base and an Catalyst types ARPC of SEK ~950. Consequently, the ARPC contribution is merely SEK ~19. Increased penetration rates in the subsidiaries The penetration rate for both Fortnox Finance and Fortnox Insurance is currently at below 3%. However, the ARPC of those customers are much higher than for the group. Thus, slight increases in penetration rate has a large impact in overall sales growth.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 109 190040M20

FUNCOM Company page Funcom https://www.redeye.se/company/funcom

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 13.2 Major Long Moderate Mid Minor Short 4 3 4 Bear Base Bull People Business Financials 9.0 20.0 35.0 Turn page for catalyst specifics

Snapshot Financials

Funcom Redeye Estimates OMXS30 2018 2019E 2020E 2021E 1800 18 Revenue, MUSD 34 27 31 57 1700 16 1600 Growth 46.0% -19.7% 14.3% 84.4% 14 1500 EBITDA 14 12 19 38 12 1400 EBITDA margin 42.5% 45.4% 61.1% 65.8%

Volume EBIT 10 0 5 15

20M EBIT margin 30.0% 1.1% 14.8% 27.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 9 -1 5 15 Net earnings 7 -1 4 12

Marketplace Oslo Børs Net margin 20.0% Neg 11.8% 21.6%

CEO Rui Casais Dividend/Share 0.00 0.00 0.00 0.00 Chairman Ole Gladhaug EPS adj. 0.09 -0.01 0.05 0.16

Share information P/E adj. 19.4 -145.8 28.8 8.5 Share price (NOK) 13.2 EV/S 3.3 3.4 3.2 1.7

Number of shares (M) 77.3 EV/EBITDA 7.7 7.4 5.2 2.5 Market cap (MNOK) 1,016 Last updated: 2019-11-27 Net debt (MUSD) -6

Owner Equity Votes Analyst Tencent 28.9% 28.9% Swedbank Robur Fonder 9.6% 9.6% Tomas Otterbeck [email protected] Avanza Pension 7.3% 7.3% Nordnet Pensionsförsäkring 4.6% 4.6% Fredrik Malmberg 2.9% 2.9% Conflict of interests TIN Fonder 2.6% 2.6% Tomas Otterbeck owns shares in Funcom: No Regents of the University of Michigan 1.4% 1.4% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Nordnet Livsforsikring AS 1.3% 1.3% Egil Pettersen 0.9% 0.9% Atle Pedersen 0.8% 0.8%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 110 COMPANIES

Company description Founded in 1993, Funcom developed console games until 1999, when the CEO key to continued success –Rui Casias brings two key strengths to his role. company released its first PC game. Funcom became one of the pioneers of Besides a consciousness of costs that is on a par with Lars Wingefors (THQ massively multiplayer online role-playing games (MMORPG) when the company Nordic), he also exhibits the same understanding of games as Fredrik Wester achieved success with Anarchy Online when it was released in 2001. In 2008, (Paradox Interactive). Funcom released its biggest game production ever, an MMORPG game called Age of Conan. The game was profitable and had over 4 million players. The Catalyst types game was the second biggest PC-game and the number one online game Active players and sales worldwide that year. Since the majority of the company's revenues come from ‘Conan Exiles’, data Rui Casais, a former programmer who had risen to chief technical officer at on this game will be notable for the stock. In particular, the number of active Funcom was entrusted with shouldering the job of CEO and getting the players (CCUs), free weekends and the release of new content (DLC) will be company back on track. Funcom finally managed to find a backer and Conan important for mapping Funcom’s probable cash flow. Exiles, an open-world survival was created on a shoestring in less than twelve months. Needless to say, it is a huge feat to create a relatively playable role- Takeover target playing game in this genre in so little time. The game was a profitable project The share of institutional investors has increased after Tencent became the and sold 480,000 units in 28 days with a development budget of less than USD largest shareholder, implying Tencent’s investment decision has helped validate 5 million. Since that success, Funcom has continued to run the business cost- the share for professional investors. Funcom should also be considered a effectively while improving its cash flows and profitability by enhancing the possible takeover target as the ownership is somewhat fragmented with no gameplay of Conan Exiles while releasing additional content according to the strong owners except Tencent. Swedbank Robur is the second-largest “Games as a Service” business model. shareholder with almost 10% of the shares.

Funcom owns 50% of Heroic Signatures, which has the gaming rights to ‘Conan Major catalyst 2020 The Barbarian’ and other similar brands. Half of Funcom’s employees are developing a co-op shooter from the company’s US offices. The game is based on a brand from the partly-owned Investment case Heroic Signatures IP portfolio called Mutant Chronicles. We believe more • Powerful leverage - With an EBIT margin of around 30 % in 2018 Funcom information about this game will impact the stock. has already proved that it can achieve significant profitability. Its strongest earnings come from games developed in-house: the online The next level open world survival game due in 2021 could lift the company’s The game that will most likely take Funcom to the next level is the new online performance to the next level. open-world survival game based on the sci-fi classic DUNE. The game is • Diversification under way - Currently we estimate approximately 30% of developed by Funcom Norway and we expect a release during 2021. A motion revenue comes from Funcom's publishing business. In 2020 we believe picture with blockbuster potential will be released on December 18, 2020. the self-developed game "Mutant Chronicles" will diversify the portfolio further. • Focus on cost and risk - Despite Funcom’s big ambitions, the CEO focuses on keeping costs small. Almost all aspects of game production are handled internally, within very small and streamlined teams. Developing games that can show profitability at an early stage is a top priority.

Funcom has now entered a new growth phase, having completed its turnaround in 2017. We expect the company’s rebound to bring both decent earnings and lower risk – particularly in 2021, when the take-off could be explosive. This reflects the likely launch of at least five games over the next two years, with the new Open World Survival game based on the Dune-franchise being the biggest potential value driver among them.

Attractive valuation - Funcom trades at attractive multiples, especially its EV/ EBIT of 7 on our 2021 forecast. Its strategy and business model position Funcom for high growth in the coming years without sacrificing its good cost control.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 111 19004M180

G5EN Company page G5 Entertainment https://www.redeye.se/company/g5-entertainment

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 103.0 Major Long Moderate Mid Minor Short 4 3 4 Bear Base Bull People Business Financials 70.0 160.0 600.0 Turn page for catalyst specifics

Snapshot Financials

G5 Entertainment Redeye Estimates OMXS30 2018 2019E 2020E 2021E 160 1800 Revenue, MSEK 1,450 1,232 1,403 1,571 140 1700

120 1600 Growth 27.7% -15.0% 13.9% 12.0%

100 1500 EBITDA 244 164 189 261 80 1400 EBITDA margin 16.9% 13.3% 13.5% 16.6%

Volume EBIT 143 51 80 122

2M EBIT margin 9.9% 4.2% 5.7% 7.8% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 143 51 80 122 Net earnings 122 43 68 104

Marketplace NASDAQ Stockholm Net margin 8.4% 3.5% 4.8% 6.6%

CEO Vladislav Suglobov Dividend/Share 2.50 2.50 2.50 3.00 Chairman Petter Nylander EPS adj. 13.82 4.90 7.68 11.80

Share information P/E adj. 9.4 19.7 12.6 8.2 Share price (SEK) 103.0 EV/S 0.7 0.6 0.5 0.5

Number of shares (M) 9.3 EV/EBITDA 4.2 4.7 4.1 2.9 Market cap (MSEK) 956 Last updated: 2019-11-14 Net debt (MSEK) -79

Owner Equity Votes Analyst Öhman Bank S.A. 16.5% 16.9% Wide Development Ltd 6.6% 6.8% Tomas Otterbeck [email protected] Purple Wolf Ltd 5.7% 5.9% Avanza Pension 5.4% 5.5% Proxima Ltd 4.9% 5.0% Conflict of interests Swedbank Robur Fonder 4.5% 4.6% Tomas Otterbeck owns shares in G5 Entertainment: Yes Aktia Asset Management 4.5% 4.6% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Tommy Svensk 4.4% 4.5% Nordnet Pensionsförsäkring 3.4% 3.5% G5 Entertainment AB 2.8% 0.3%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 112 COMPANIES

Company description G5 Entertainment was founded in 2001 and is a developer and publisher of Investment risks casual free-to-play games for smartphones and tablets with loyal players all Due to the low diversification in the games portfolio, the potential impact over the world. The company has its headquarter in Stockholm, Sweden, with of the highly successful Hidden City’s decline would affect total revenues development offices in Moscow and Kharkov, Ukraine. There is also a dramatically.Mobile games have limited life cycles. It is therefore important procurement and licensing office in Malta and a small sales and marketing to a gaming developer/publisher to deliver new attractive content when old office in San Francisco, USA. In total, G5 has 520 employees.G5 has developed titles reach maturity. a business model that is both successful and scalable, which is reflected in the company's history. Together with the underlying driving forces and current Catalyst types trends in the mobile games industry the company will likely continue to develop Jewels of Rome its strong position with mobile casual free-to-play games. We believe the new game Jewels of Rome have a good potential to be G5's third highest grossing game during 2020. Investment case

• We expect G5 to show a CAGR of 13% in 2020-2022. The mobile games Promising pipeline industry as a whole is expected to grow with a CAGR of 10-20 percent With 2-3 new games in development, which are planned to be released this year during the same period according to Newzoo. and two re-launches of old games in the pipeline we believe G5 will continue to • G5 earns a majority of total revenues in Hidden Object games. G5 has invest in UA. We still believe the company will manage to create new stars in found its niche within the target group of women aged 35 years and the games portfolio and will start to exceed expectations the upcoming 6-12 older. According to research, this target group is loyal, affluent and months period. women usually make more in-app purchases than men. EBIT-margin gradually goes up • Around 50% of total revenue comes from North America and nearly 25% EBIT-expansion driven by investments in in-house developed games with lower comes from Japan. Japan is a country where the Average Revenue per royalty cost. User (ARPU) is the highest in the world. We believe a higher market share in Asia is one of G5's major growth driver the coming years.

EBIT margin increases The company has begun to focus on self-developed games. One of the benefits with fully owned games is that the company does not have to pay any royalties to the developer, which means that the profitability will increase when the proportion of revenue from fully owned gaming increases. Today the only licensed game in the portfolio is Hidden City, its highest-grossing game. With 6 million monthly active users in total from its game portfolio, the company has a golden opportunity to cross-promote similar proprietary games.

Increased market share In the past, the majority of the revenue from G5's games has come from the iPad (Thinkgaming). In order to grow in the segment of the mobile phone, the company has increased its efforts in the past years and optimized their content better for a smaller screen. The company’s efforts have paid off when the mobile phones share of revenue has increased. Part of the success for "Hidden City" can, therefore, be explained by the company´s adjustments of content to be better suited for the mobile phone. As self-developed games to a certain degree will take over the coming years, they have also been enhanced for playing on the mobile phone. For this reason, we believe that the share of revenues from the mobile phone will increase the coming years, which likely will be a major part of the company's overall growth.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 113 190019004M25 4M25

Company page GIGSGIGSEK EK Company page GamingGaming InnovationInnova Innovationtion GroupGr... Gr... https:/https://www/www.rede.ryedee.se/company/gaming-innoye.se/company/gaming-innovation-grvation-group oup

RedeRedeye yRatinge Rating

COMPCOMPANY QUALITYANY QUALITY FAIR FVAIRALUE VALUE RANGE RANGE CATALCAYSTTAL POTENTIALYST POTENTIAL

Last priceLast price ImpactImpact TimefrTimeframeame 8.1 8.1 MajorMajor LongLong ModerModerate ate Mid Mid MinorMinor ShorShort t 3 3 3 3 1 1 Bear Bear Base Base Bull Bull PeoplePeopleBusinessBusinessFinancialsFinancials 4.0 4.0 13.013.0 29.029.0 Turn Tpageurn page for catalyst for catalyst specifics specifics

SnapshotSnapshot FinancialsFinancials

GamingGaming Inno vInnoationvation Group Group RedeRedeye Estimatesye Estimates OMXS30OMXS30 20182018 2019E2019E 2020E2020E 2021E2021E 2022E2022E 20 20 18001800 Revenue,Revenue, MEUR MEUR 151 151 125 125 131 131 145 145 158 158 15 15 17001700 Growth 25.7% -17.6% 4.8% 10.7% 9.0% 10 10 16001600Growth 25.7% -17.6% 4.8% 10.7% 9.0%

5 1500 5 1500 EBITDEBIA TDA 16 16 13 13 22 22 29 29 28 28 0 0 14001400 EBITDEBIA TDmarAgin margin 10.6%10.6%10.1%10.1% 16.8%16.8% 19.8%19.8% 17.8%17.8%

Volume Volume EBITEBIT -18 -18 -17 -17 6 6 16 16 17 17 2M 2M EBITEBI marTgin margin Neg Neg Neg Neg 4.6%4.6% 10.9%10.9% 11.0%11.0% 0 0 Pre-tax earnings -22 -23 -2 10 12 Mar Mar May May Jul Jul Sep Sep Nov Nov Jan JanPre-tax earnings -22 -23 -2 10 12 Net earningsNet earnings -23 -23 -24 -24 -2 -2 9 9 11 11 Net margin Neg Neg Neg 6.5% 7.0% MarkMarketplaceetplace NASDNAASDQ StAockholmQ Stockholm Net margin Neg Neg Neg 6.5% 7.0%

CEO CEO RicharRichard Brownd Brown Dividend/SharDividend/Share e 0.000.00 0.000.00 0.000.00 0.000.00 0.000.00 ChairmanChairman PetterPetter Nylander Nylander EPS adj.EPS adj. -0.25-0.25 -0.26-0.26 -0.02-0.02 0.100.10 0.120.12 P/E adj. -83.9 -2.9 -35.2 7.5 6.3 SharShare informatione information P/E adj. -83.9 -2.9 -35.2 7.5 6.3 EV/S 13.0 1.1 1.0 0.8 0.7 SharShare pricee price (SEK) (SEK) 8.1 8.1 EV/S 13.0 1.1 1.0 0.8 0.7 EV/EBITDA 121.9 10.9 5.7 4.0 3.8 NumberNumber of shar of esshar (M)es (M)90.090.0 EV/EBITDA 121.9 10.9 5.7 4.0 3.8 MarkMarket capet (MSEK)cap (MSEK) 728 728 Last Lastupdated: updated: 2020-01-09 2020-01-09 Net debtNet debt(MEUR) (MEUR) 56 56

OwnerOwner EquityEquity VotesVotes AnalystAnalyst SwedbankSwedbank Robur Robur Fonder Fonder 9.2%9.2% 9.2%9.2% AndrAe ndrLaveold Lavold 8.4%8.4% 8.4%8.4% JonasJonas Amnesten Amnesten Henrik Persson Ekdahl 5.2% 5.2% [email protected]@redeyedee.seye.se Henrik Persson Ekdahl 5.2% 5.2% SEB SEBS.A. S.A.nom. nom. 4.9%4.9% 4.9%4.9% MyrlidMyrlid AS AS 4.9%4.9% 4.9%4.9% ConflictConflict of inter of estsinterests HansHans Mikael Mikael Hansen Hansen 4.8%4.8% 4.8%4.8% JonasJonas Amnesten Amnesten owns owns shar esshar ines Gaming in Gaming Inno vInnoationvation Group: Group:No No MortenMor Hillestadten Hillestad Holding Holding AS AS 4.3%4.3% 4.3%4.3% RedeRedeye peryeforms/ha performs/have perveformed performed services services for the for Company the Company and randeceiv receives/haes/have ve Frode Fagerli 4.0% 4.0% receivreceived compensationed compensation from fr theom Company the Company in connection in connection with withthis. this. Frode Fagerli 4.0% 4.0% SaxoSax Banko Bank A/S nom.A/S nom. 2.8%2.8% 2.8%2.8% StenshagenStenshagen Invest Inv ASest AS 2.8%2.8% 2.8%2.8%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 114 COMPANIES

Company description Counter-Thesis – Bear Points Gaming Innovation Group Inc. (GiG) is a technology company within the Negative momentum iGaming industry. GiG. was incorporated in Malta 2008 as Donkr International GiG’s momentum is negative, with declining B2B and B2C revenues. Although Ltd which was the holding company of Innovation Labs Ltd., known as the the company has the prerequisites to turn this around, it often takes longer company operating the online poker forum Donkr.com. Robin Reed and Frode than estimated. Fagerli, which were two of the founders of Donkr.com became the sole owners Organisational changes in 2012 and then named the company as Gaming Innovation Group Ltd. In 2015 The company has made several management and board changes. Moreover, the company conducted a reverse IPO through Nio Inc and listed on the Oslo we anticipate more changes further down in the organisation given the Stock Exchange. GiG has developed from a poker room, sole affiliate to a relatively large head-count. This could reduce its efficiency for a while, hurting business with B2C and B2B offerings and now have 600+ FTE’s. The road has operations and increasing negative momentum further. not been without speed-bumps, and during 2019 GiG has divested some of their B2C brands to focus on the most profitable ones. Debt burden GiG has substantial net debt and weak cash flow. Moreover, the new bond Investment case increases the interest rate to 9% from 7% and the company’s EBITDA is not trailing far from the covenants leverage ratio limits. This exposes it to further • Attractive SOTP valuation operational negatives, as well as limiting its ability to take advantage of M&A • Platform and omnichannel opportunities. • Potential turnaround

Investment Thesis Catalyst types Attractive SOTP valuation Divestments Based on our sum-of-the-parts valuation, GiG is undervalued. On our 2020 GiG divested the Highroller brand at an impressive 2.5x sales multiple. We estimates, GiG Core, Media, and Rizk and other B2C brands offer significant believe further divestments will show the true value of GiG´s assets. upside to the fair value. We assign no value to GiG Sports as its revenue is limited and its loss-making, but we see long-term potential in GiG Sports. Omnichannel GiG has sign interesting partnerships with the land-based giants Hard Rock and Platform and omnichannel SkyCity. Additional and extended deals like these together will clear effects on The GiG Core business area will be one of the company’s main long-term the revenue levels should take the valuation to a new level. growth drivers going forward, in combination of B2C expansion and solid media business. Improving its platform will add value to the whole business. Improved EPS Moreover, GiG´s partnerships and land-based operator niche could become a GiG is amortizing much on its acquired affiliate assets, and when the major market for it. While the vast majority of gambling is still conducted amortizations start to decrease during 2020 we will see a large improvement of offline, many land-based operators would like to participate in the industry’s the EPS. More efficient use of resources should also increase the EPS further. digitalization. We believe that GiG has the potential to achieve decent market Turnaround share here. Its partnership with SkyCity in New Zealand and Hard Rock Casino We believe that GiG has all the prerequisites for turning around its business. in several US states underscores this potential and has positioned GiG well in However, in the end, we believe that market wants to see it black on white. the huge US market.

Potential turnaround Increased multiples We believe GiG´s main issue in recent years has been a lack of focus. The The valuation multiples within the online gambling segment has been company has tried to realize its vision of becoming a diversified global player pressured very much during the last year. The current levels indicate a very active in all gambling verticals. However, we see several signs that the gloomy future, especially for the affiliate segment. This can change swiftly. company is moving to increase focus on its core business to achieve profitable growth.

• It has made changes in both the board and management. We believe this signals the start of a new direction and vision for GiG. • Divesting Highroller.com indicates that the company will focus more on the flagship brand Rizk. The company has also announced that it will enter several new markets with Rizk.com. • We see room to slim other operating expenses and use resources more efficiently. • Betting Service is reducing its burn rate and target breakeven in H1’20. • The company has decided to halt the investments in GiG Games. • Third-party data also indicates a trend towards fewer new employees

REDEYE NORDIC TECHNOLOGY REPORT - 2020 115 19002M40

GAPW B Company page Gapwaves https://www.redeye.se/company/gapwaves

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 26.5 Major Long Moderate Mid Minor Short 3 3 2 Bear Base Bull People Business Financials 9.0 30.0 67.0 Turn page for catalyst specifics

Snapshot Financials

Gapwaves Redeye Estimates OMXS30 2018 2019E 2020E 2021E 35 1800 30 Revenue, MSEK 2 15 26 50 1700 25 1600 Growth >100% >100% 68.4% 92.3% 20 15 1500 EBITDA -34 -27 -21 -15 10 1400 EBITDA margin Neg Neg Neg Neg

Volume EBIT -44 -32 -26 -20

1M EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -44 -32 -26 -21 Net earnings -44 -32 -26 -21

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Lars-Inge Sjöqvist Dividend/Share 0.00 0.00 0.00 0.00 Chairman Jonas Ehinger EPS adj. -1.80 -1.20 -0.98 -0.76

Share information P/E adj. -9.8 -25.0 -32.3 -39.2 Share price (SEK) 26.5 EV/S 159.8 45.1 28.5 15.5

Number of shares (M) 26.9 EV/EBITDA -10.5 -25.7 -35.1 -52.7 Market cap (MSEK) 720 Last updated: 2019-11-13 Net debt (MSEK) -63

Owner Equity Votes Analyst Cécile Schilliger 24.6% 56.6% Avanza Pension 4.4% 1.2% Erika Madebrink [email protected] Lars-Inge Sjöqvist 4.3% 8.7% Leif Hagne 3.1% 0.8% Nordnet Pensionsförsäkring 2.6% 0.7% Conflict of interests Jian Yang 2.3% 6.2% Erika Madebrink owns shares in Gapwaves: No Bright Peter Leo Ebenezer 1.8% 0.5% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Alfred Berg Fonder 1.8% 0.5% BNP Paribas Sec Serv Luxembourg 1.8% 0.5% Chalmers Tekniska Högskola 1.1% 0.3%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 116 COMPANIES

Company description Counter Points Gapwaves offers wireless communication solutions based on the GAP Competitors catching up waveguide technology, which stems from the research of the late founder Per- Technological development moves fast in this industry, and the risk of Simon Kildal. The company’s great potential is found in the millimeter wave competitors developing similar, and perhaps superior, products should not be antennas that can be applied in expansions of current radio link networks, underestimated. We believe that the potential customers with in-house automotive radars and eventually 5G deployments. capabilities to develop similar products, such as the large system integrators, like Ericsson and Nokia, pose perhaps the most serious threat.

Investment case Uncertainties regarding 5G networks and the telecom opportunity • Attractive application areas within both automotive and telecom for Even though the 5G transformation is starting to happen, there is still Gapwaves' 4-10x more power-efficient antennas. significant uncertainty regarding how the next generation networks will look • Contracts with two automotive customers with potential to yield around like and how rapid the deployment will be, especially in the higher frequencies. SEK 300m in annual sales. There is a risk that the deployment of higher frequencies in 5G will be limited, • The trends towards self-driving cars and increased safety regulations as and it is not yet clear that Gapwaves product is the go-to antenna choice for well as the coming 5G transformation creates huge market potential. potential customers within telecom.

Two promising application areas for Gapwaves’ differentiated technology Rapid technological development There are several benefits to Gapwaves technology. One of them is that the The technological development moves quickly in the industries that Gapwaves antennas become 4-10x more power-efficient, and the power losses are focus on, as noted above. The life cycle of Gapwaves’ product offering is thereby reduced. The technology also increases the output power and the limited, and the company must address this issue with product development to antenna directivity, i.e., the capability to concentrate the radiation in one have a sustainable business. direction. These characteristics are especially interesting in the coming 5G transformation of the telecom networks. Catalyst types So far, there has been limited interest in the product technology from potential New automotive customers telecom customers, leading us to believe that in the near term, the case is more The attention that Gapwaves has attracted from the Tier 1 customer mentioned about the automotive opportunity. The company currently has contracts with above, we believe, will help open doors to other players in the same industry. two automotive customers, an undisclosed so-called Tier-1 player, and also a Volume orders from this customer would establish Gapwaves’ technology and royalty agreement with Veoneer. We believe that the deal with Veoneer could may aid in convincing other automotive suppliers that it is both a commercially result in annual sales of around SEK 15m in 2024 and beyond, whereas the and technically viable technology. The result could be several additional Tier-1 customer could give SEK 280m annually. customers within the automotive segment, and that would also be a potential

Huge market potential both in automotive and telecom catalyst for the stock. In the coming years, strong growth is expected in both primary application areas for Gapwaves’ technology, which are antennas for automotive and 5G Large orders from announced automotive customer telecom applications. Within automotive, the growth is in the short term driven In November last year, Gapwaves announced that they had signed a by increased regulation to improve safety and, in the long term, the trend development agreement with a Tier 1 automotive supplier. Since then, two towards self-driving cars, which increases the need for sensors drastically. In smaller orders have been placed by the customer. Going forward, the most this segment, Gapwaves has already attracted two customers within this important catalyst for Gapwaves stock would be that the Tier 1 customer segment, further strengthening the case. The coming shift within the telecom moves forward with volume production and places large follow-up orders. sector to 5G technology will lead to a surge in demand for suitable equipment 5G market take-off & telecom customers for the denser networks that the new technology will require. The transformation of the telecom industry, moving from 4G to 5G technology, We value Gapwaves to SEK 30 per share in our base case scenario is expected to take place in the coming years, and this shift has partially The progress and positive signals from the two current customers have both already begun. When the market for 5G telecom equipment in the higher increased our confidence in the estimates and the long-term sales forecasts. frequencies takes off, Gapwaves has a good chance of attracting customers We have thus increased our base case to SEK 30 per share, with a fair value from this segment in addition to automotive, meaning a significant upside range of SEK 9 – 67. For there to be further upside in the share, Gapwaves potential in the stock. must gain several additional customers on the automotive side and/or make a home-run within the telecom segment, acquiring large telco customers in the coming 5G deployment.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 117 190020M40

GLOBAL Company page Global Gaming 555 https://www.redeye.se/company/global-gaming-555

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 6.4 Major Long Moderate Mid Minor Short 2 2 2 Bear Base Bull People Business Financials 3.0 6.0 12.0 Turn page for catalyst specifics

Snapshot Financials

Global Gaming 555 Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 1800 30 Revenue, MSEK 916 420 333 423 457 1700 20 1600 Growth 100.0% -54.1% -20.8% 27.0% 8.0% 10 1500 EBITDA 150 -102 13 19 31 0 1400 EBITDA margin 16.4% Neg 3.8% 4.5% 6.8%

Volume EBIT 149 -122 5 11 23

10M EBIT margin 16.2% Neg 1.5% 2.6% 5.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 149 -122 5 11 23 Net earnings 125 -120 5 10 20

Marketplace First North Stockholm Net margin 13.7% Neg 1.5% 2.3% 4.5%

CEO Tobias Fagerlund Dividend/Share 0.00 0.00 0.00 0.12 0.24 Chairman Peter Eidensjö EPS adj. 3.06 -2.93 0.12 0.24 0.49

Share information P/E adj. 11.8 -2.2 53.5 27.5 13.2 Share price (SEK) 6.4 EV/S 1.3 0.3 0.4 0.3 0.3

Number of shares (M) 40.9 EV/EBITDA 8.1 -1.3 10.6 6.7 3.7 Market cap (MSEK) 251 Last updated: 2020-01-09 Net debt (MSEK) -130

Owner Equity Votes Analyst DANSKE BANK INTERNATIONAL 16.4% 16.4% CBLDN-POHJOLA BANK PLC CLIENT A/C 7.5% 7.5% Jonas Amnesten [email protected] Leoville AS 5.8% 5.8% Gimle Invest AS 5.6% 5.6% Middelborg Invest AS 5.4% 5.4% Conflict of interests Skandinaviska Enskilda Banken AB, Oslo Branch 3.6% 3.6% Jonas Amnesten owns shares in Global Gaming 555: No FÖRSÄKRINGSAKTIEBOLAGET, AVANZA 3.3% 3.3% Redeye performs/have performed services for the Company and receives/have PENSION received compensation from the Company in connection with this. HAMBERG FÖRVALTNING AKTIEBOLAG 2.0% 2.0% Ålandsbanken i Ägares ställe 1.7% 1.7% BNY Mellon NA (Former Mellon), W9 1.7% 1.7%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 118 COMPANIES

Company description Counter-Thesis - Bear Points Global Gaming is an online gambling operator with several brands and the Losing ground company mainly focus on the casino vertical. Global Gaming revolutionized the With the flagship brand, Ninja Casino, closed the brand is losing value for each online gaming industry with its Pay’n’Play solution on its proprietary platform, day as brand awareness decreases. Meanwhile the competitors can focus on offering players a safe and seamless gaming experience. Global Gaming long-term goals and improving its products. A re-launch of the Ninja Casino launched the Pay’n’Play focused flagship brand Ninja Casino in 2016, and the brand in Sweden is crucial for Global Gaming. brand has since then grown to become one of the best-known brands in Low transparency Sweden. In 2018, Global Gaming´s sales were mainly generated from Sweden Global Gaming does not report player KPIs such as active players and FTDs. as well as Finland, and the group launched Ninja Casino on the Estonian market For us these are very important KPIs to understand and monitor the underlying in November 2018. The company´s Swedish license was revoked in Q2 2019. performance of the business. The reason for not reporting them, according to Global Gaming, is that the company does not want to give competitors too Investment case much insight into its business. We worry that the numbers would show low • Valuable flagship brand retention and too high ARPU which indicates “problem” players and/or a large • Pay’n’Play focus number of high rollers creating high volatility and risk. Until Global Gaming • Strong financial position reports these player KPIs this uncertainty will remain.

Valuable flagship brand Fast-changing environment for Pay’n’Play Since the launch at the end of 2016 Global Gaming´s flagship brand Ninja Pay’n’Play has changed the gambling industry and we expect that new ideas Casino has grown to become one of the Swedish online gambling market’s will continue to change the environment. These changes might make Global largest brands. Its strong growth, during 2017 and 2018, was mainly the result Gaming´s solution redundant. Moreover, perception and acceptance of of its first mover advantage with the disruptive Pay’n’Play concept. Since the gambling, as well as different solutions connected to gambling, can also Swedish license was revoked the brand has been closed in Sweden. However, it change very quickly. If the public or authorities’ perception and acceptance of still has large potential in other markets and the brand awareness is still strong Pay’n’Play changes for the worse, this could be a major negative for Global in the Swedish market, which will boost revenues when it goes live again. Gaming.

Pay’n’Play focus The Pay’n’Play concept has been a huge success since the launch in Sweden Catalyst types two years ago, and it has spread to more markets since then. However, it has Acquisition target only been introduced to a very small part of the total online gambling market. If In the light of the MRG bid from William Hill, Global Gaming could be a potential it could work in larger gambling markets such as the UK, Italy, Japan or the US, target for larger operators that want to obtain a strong position in Sweden. the Pay’n’Play market could grow many times larger. If developments go in this direction, Global Gaming is very strongly positioned. Swedish license Regain its Swedish license in the legal dispute with the Swedish Gambling Strong financial position Authority. With SEK 160m in cash the company can handle the losses in the coming quarters and focus on the long-term goals. It also opens up for several different Expands geographically options, such as acquisitions and aggressive marketing campaigns, if the ROI Entering into a new market with good conditions for the Pay’n’Play concept as is strong. well as reasonable size on the online gambling market.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 119 19004M8

HELIO Company page Heliospectra https://www.redeye.se/company/heliospectra

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 7.0 Major Long Moderate Mid Minor Short 3 3 2 Bear Base Bull People Business Financials 2.0 7.0 12.0 Turn page for catalyst specifics

Snapshot Financials

Heliospectra Redeye Estimates OMXS30 2018 2019E 2020E 2021E 1800 7 Revenue, MSEK 45 32 115 160 1700 6 1600 Growth 25.9% -29.5% >100% 40.0% 5 1500 EBITDA -31 -44 -28 -12 4 1400 EBITDA margin Neg Neg Neg Neg

Volume EBIT -33 -48 -31 -16

2M EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -33 -48 -31 -16 Net earnings -33 -48 -31 -16

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Ali Ahmadian Dividend/Share 0.00 0.00 0.00 0.00 Chairman Andreas Gunnarsson EPS adj. -0.95 -0.86 -0.56 -0.28

Share information P/E adj. -7.4 -7.1 -10.9 -21.9 Share price (SEK) 7.0 EV/S 5.2 8.0 2.8 2.0

Number of shares (M) 56.2 EV/EBITDA -7.7 -5.8 -11.5 -27.6 Market cap (MSEK) 387 Last updated: 2019-11-12 Net debt (MSEK) -26

Owner Equity Votes Analyst Gösta Welandson med bolag 39.0% 39.0% Mohammed Al Amoudi 11.5% 11.5% Oskar Vilhelmsson [email protected] Greg Dingizian 10.3% 10.3% Avanza Pension 4.1% 4.1% Corporation The Bank Of New York Mellon 2.9% 2.9% Conflict of interests Magowny Invest AB 1.0% 1.0% Oskar Vilhelmsson owns shares in Heliospectra: No Piba AB 0.8% 0.8% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Nordnet Pensionsförsäkring 0.8% 0.8% Rolf Johansson 0.6% 0.6% Chrilotte AB 0.6% 0.6%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 120 COMPANIES

Company description Heliospectra specializes in intelligent lighting systems for plant research, Bear points (counter-thesis) greenhouse cultivation and controlled environment agriculture. The company is • Failure to scale up operations and improve margin a global leader in LED grow lights for advanced research applications and has One of Heliospectra’s greatest challenges is to improve its gross margin as it patented technology. requires significant sales to reach break-even. The company is currently undertaking efforts in increasing its operational efficiency but there is a risk Investment case of delayed break-even if the company fails in scaling up its operations.

• At the inflection point: The focus on attracting larger growers has paid • Failure to grow sales in a competitive market off, and Heliospectra has secured significant orders laying the ground for Although Heliospectra is regarded as one of the leading companies in the substantial growth in 2020. market for LED grow lighting solutions, it must continue improving its offering • Rapid market growth driven by global trends: The market for LED grow to remain competitive. The company also has to succeed in convincing light is projected to grow rapidly. Heliospectra is well-positioned to growers that its solutions truly add greater value than alternative solutions. harvest from this booming market. There is also a risk that larger competitors could try to bleed out smaller actors • Strong technological offering: Heliospectra possess a strong offering by dropping prices. which add significant value to customers' cultivations. The strength of the company's offering is proven by the recently introduced control system HelioCORE. Catalyst types Follow-up order from Nectar Farms At the inflection point. Heliospectra has transitioned from a research company In October 2019 Heliospectra received its largest order to date from Nectar to become a leading player in the growing market for intelligent lighting Farms of SEK 72m for the first of 10 hectares in the Stawell project. In phase solutions. The focus on attracting larger growers of food has paid off, and two, the greenhouse grower will expand by another 30 hectares. If Nectar is Heliospectra has now validated the significant opportunities arising within the satisfied in the first phase we see a large likelihood of Heliospectra being segment by securing the significant order worth SEK 72m from Nectar Farms. selected in the second phase as well, with the potential of generating additional We expect the average order size to continue to increase following an inflow revenues about SEK 75-150m. In that case, we believe it could occur in the next of substantially larger orders from large commercial growers of food and 12-24 months. cannabis. Additional orders Rapid market growth driven by global trends. The use of LED grow lights We see good potential for further follow-up orders in the range above SEK 10 address global issues of environmental impact from agriculture and fresh million+ from undisclosed AgTech players and marijuana growers who have food supply for the urban population. There is a growing interest in control previously placed large orders, for example The Grove. Moreover, utilizing and automation for agriculture to raise productivity. LED grow lights are Nectar Farms as a high profiled reference project, we see good opportunities more energy efficient than traditional HID/HPS lamps traditionally used in of landing additional order from the commercial greenhouse segment. greenhouses and growers increasingly replace traditional lighting solutions in commercial greenhouse operations.

The LED grow light market is expected to grow at a CAGR of 27% and through its leading grow light systems that provide growers benefits of increased automation, higher crop quality and shortened grow cycles, Heliospectra should be able to grow faster than the market, we argue.

Besides establishing itself as a well-renowned player in the legal marijuana segment, Heliospectra has now proven to land large orders from food growers on the MITRA system. After the launch of MITRA, Heliospectra’s value proposition is even stronger. Its LED grow lights provide short payback times on investment for growers who can increase productivity and quality of its plants while also reducing operational costs. While benefiting from a shift towards industrialization amongst food growers and a growing medical plant market, we see high growth in prospect. We expect a sales CAGR of 89% 2019-2022, followed by long-term growth of 14.8%, motivating a valuation of SEK 7.0 per share. (Upside potential of 17%).

REDEYE NORDIC TECHNOLOGY REPORT - 2020 121 1900170 500k

HTRO Company page Hexatronic Group https://www.redeye.se/company/hexatronic-group

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 59.9 Major Long Moderate Mid Minor Short 5 4 3 Bear Base Bull People Business Financials 31.0 73.0 120.0 Turn page for catalyst specifics

Snapshot Financials

Hexatronic Group Redeye Estimates OMXS30 2018 2019E 2020E 2021E 65 1800 Revenue, MSEK 1,598 1,846 2,235 2,786 60 1700

55 1600 Growth 23.0% 15.6% 21.0% 24.7%

50 1500 EBITDA 138 208 286 343 45 1400 EBITDA margin 8.7% 11.3% 12.8% 12.3%

Volume EBIT 93 113 161 223 1 000k 500k EBIT margin 5.8% 6.1% 7.2% 8.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 82 96 139 202 Net earnings 59 70 101 147

Marketplace NASDAQ Stockholm Net margin 3.7% 3.8% 4.5% 5.3%

CEO Henrik Larsson Lyon Dividend/Share 0.39 0.39 0.44 0.49 Chairman Anders Persson EPS adj. 1.59 1.86 2.70 3.92

Share information P/E adj. 27.1 33.3 22.8 15.7 Share price (SEK) 59.9 EV/S 1.2 1.4 1.2 0.9

Number of shares (M) 37.5 EV/EBITDA 13.6 12.7 9.0 7.4 Market cap (MSEK) 2,234 Last updated: 2019-11-17 Net debt (MSEK) 318

Owner Equity Votes Analyst Accendo Capital 10.9% 10.9% Handelsbanken Funds 8.2% 8.2% Havan Hanna [email protected] Jonas Nordlund, privately and corporately 8.1% 8.1% Chirp AB 4.8% 4.8% Fondita Nordic Micro Cap 4.7% 4.7% Conflict of interests Swedbank Robur, West Fund 3.4% 3.4% Havan Hanna owns shares in Hexatronic Group: Yes Länsförsäkringar Funds 3.2% 3.2% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. AMF Insurance & Funds 2.9% 2.9% Göran Nordlund, privately and corporately 2.9% 2.9% Avanza Pension - Insurance Company 2.6% 2.6%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 122 COMPANIES

Company description Bear-points (counter-arguments to our Thesis): Hexatronic is a technology group which specializes in fiber communications • A dampened economy could lead to less investments in the fiber and is listed on Mid Cap Stockholm. The company supply fibre optic products infrastructure. and solutions and provide a complete range of passive infrastructure for • Low price Chinese supplier still has a focus on their domestic market; telecom companies. The Group consists of 16 companies with a total of this could shift over the coming years as the large Asian market matures. around 570 employees with headquarters in Gothenburg. • A hard Brexit.

Hexatronic develops and manufactures its own products and services, as well • No traction in the US/Germany. as sell and manufacture solutions based on products from leading manufacturers worldwide. The business has developed to provide more own Catalyst types products and complete system deliveries - this will provide higher margins and M&A longer customer agreements. Growth has and will be driven organically and by Hexatronic has a clearly stated acquisition strategy and the company acquisitions in its international markets. continuously evaluates new targets. We assume that more value-adding M&A deals will come. Investment case International orders • Hexatronic is establishing themselves in new growth regions Breakthrough deals in Hexatronics international markets should raise the • Structural forces will drive long-term growth valuation. The company has already shown its competitive position in the UK • Increased profitability with a deal worth SEK 500 million. Two other important deals have been signed • Valuation does not reflect a growth company in the UK (SEK 30 million) and on the German market (SEK 40 million). We see it as likely with further orders, especially in the UK and the US, in the coming Hexatronic is establishing themselves in new growth regions year. Even though Hexatronic has successfully repositioned themselves towards international growth markets (UK, North America and Germany), it is penalised due to concerns around Brexit and Hexatronics historical main market, Sweden. The Q2'19 report should be viewed as the definitive proof point of Hexatronics international journey as the region ‘Rest of Europe’ is now its biggest geographical market. Brexit represents a significant risk in the short-term but should have limited effects on the investment case over the long-term. We argue that the market is underestimating the structural growth of the international markets - the market for fiber optic/broadband products is and will remain a growth market for many years to come (2025-2030).

Structural forces will drive long-term growth An essential part of our Investment Thesis is the fact that structural forces drive the growth of Hexatronic. These significant and ongoing thematic trends are the increased digital consumption, i.e., enhanced usage of data.

Increased profitability Long-term margins should improve as capacity utilisation increases and system-seeling gains further traction - in international regions Hexatronic focus on selling their system of fiber products called Matrix with higher margins. More mature Prysmian Telecom has about 20% EBITDA margin (compared to Hexatronics 10-12%).

Valuation does not reflect a growth company Overall we find that Hexatronic is a growth business but not valued as one. We believe the valuation will increase as the uncertainty around Brexit and the Swedish market diminishes. This will allow the market to appreciate the long- term structural forces.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 123 19003M90

ITECH Company page I-Tech https://www.redeye.se/company/i-tech

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 68.0 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 40.0 80.0 140.0 Turn page for catalyst specifics

Snapshot Financials

I-Tech Redeye Estimates OMXS30 2018 2019E 2020E 2021E 80 1800 70 Revenue, MSEK 29 44 76 125 1700 60 1600 Growth 62.2% 52.0% 72.8% 64.5% 50 40 1500 EBITDA -6 1 15 33 30 1400 EBITDA margin Neg 2.1% 19.1% 26.4%

Volume EBIT -14 -7 7 25 2M 1M EBIT margin Neg Neg 9.5% 20.1% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -14 -7 7 25 Net earnings -14 -7 6 20

Marketplace First North Stockholm Net margin Neg Neg 8.2% 15.8%

CEO Philip Chaabane Dividend/Share 0.00 0.00 0.00 0.00 Chairman Stefan Sedersten EPS adj. -1.36 -0.60 0.52 1.66

Share information P/E adj. -48.5 -91.7 106.1 33.4 Share price (SEK) 68.0 EV/S 22.1 14.2 8.1 4.7

Number of shares (M) 11.9 EV/EBITDA -100.2 691.4 42.3 17.9 Market cap (MSEK) 810 Last updated: 2019-11-20 Net debt (MSEK) -45

Owner Equity Votes Analyst Pomona-gruppen AB 11.4% 11.4% Swedbank Robur Fonder 9.5% 9.5% Oskar Vilhelmsson [email protected] ALMI Invest 8.8% 8.8% Länsförsäkringar Fonder 6.3% 6.3% Handelsbanken Fonder 4.6% 4.6% Conflict of interests Göran Wessman 3.8% 3.8% Oskar Vilhelmsson owns shares in I-Tech: No Stefan Sedersten 3.8% 3.8% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Unionen 3.8% 3.8% Avanza Pension 3.1% 3.1% Fontenelles Holding AB (Aquamarine Ltd) 3.1% 3.1%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 124 COMPANIES

Company description Catalyst types I-Tech is a biotechnology company founded in the year 2000, as a result of Bottom line profitability research at the University of Gothenburg. It offers an active antifouling I-Tech is on the brink of sustained profitability, a vital inflection point that we ingredient, Selektope®, used in coating for large commercial ships. I-Tech’s believe will boost the investor sentiment. Scalability is the key to this catalyst; direct customers are the large, international paint manufacturers that I-Tech only needs to service a handful of customers and has passed the key incorporate the molecule in their coatings that are then sold to ship owners and R&D and regulatory barriers. boat makers, the end customers. The company has currently signed two customers among the 6 largest; Chugoku Marine Paints (CMP) and Hempel. The pace of CMP scale-up I-Tech entered Nasdaq First North in May 2018, has net sales of SEK 42m LTM CMP’s first major commitment of SEK 50m was fulfilled one quarter earlier, and today employs 9 people. with a follow-up order of SEK 57m for 2020 – around 60 % higher than for 2019. We view the pace of CMP’s scale-up as a key driver for I-Tech’s stock price in Investment case the near term. For 2020, we conservatively have not modeled with sales to CMP of more than SEK 57m in our base case. • Commercially proven – set to capture market share • Moats protecting the business New customer agreement • High earnings growth potential CMP is currently I-Tech’s main customer, accounting for about 80% of sales in • Strong owner base Q3’19. The partnership has proved symbiotic and successful. I-Tech now is in the evaluation phase with several of the other top six players in the marine Commercially proven – set to capture market share paint market. In our base case, we estimate it to win one large customer in I-Tech has collaborated 10+ years with a leading company in the marine paint 2019 and another one in 2020. We believe significant sales growth and market. The relation has resulted in ever-larger orders, the latest in August improved customer diversification would close the existing valuation gap. 2019 of SEK 57m. Other top six market players are currently evaluating I-Tech’s innovative antifouling solution. We believe the company’s strong reference customers improve the odds of winning new major contracts.

Moats protecting the business Selektope is approved in the EU and is used at hundreds of ships worldwide, while: 1) The antifouling market is shielded by high regulatory barriers; to register a new biocidal active substance and reach market is costly and takes about ten years, 2) The shipping and marine paint industry is conservative; new coatings must be strictly tested, causing switching costs, 3) The company’s key customer is promoting I-Tech’s solution as “Powered by Selektope”, potentially creating brand recognition.

High earnings growth potential With 1) attractive sales growth opportunities, 2) a strong competitive offering, and 3) a scalable business model, we view I-Tech as well-positioned for high profitability. The record gross margin of 48% in Q3’19 underlines the potential. We believe limited OPEX and CAPEX with a sales CAGR of 44% 2019-2024, enables 34% EBIT margin 2024, in our base case.

Strong owner base I-Tech is at the inflection point of profitability but has already attracted well- renowned owners. Seven institutions represent 47% of the capital, visualizing the high interest in the company. Stock price appreciation is common as institutions enter a stock, but as there have also been large sellers (ALMI, Cambrex), we do not view the stock as over-crowded.

Counter thesis In our view, the case in I-Tech faces certain challenges increasing the risk; i) high customer dependency ii) possible threats from new solutions iii) risk of slow market adoption due to a conservative market and limited incentives among shipowners.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 125 19004M2.2

IS Company page Image Systems https://www.redeye.se/company/image-systems

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 1.5 Major Long Moderate Mid Minor Short 4 4 2 Bear Base Bull People Business Financials 1.0 2.2 4.0 Turn page for catalyst specifics

Snapshot Financials

Image Systems Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 2 1800 Revenue, MSEK 161 215 211 228 246 1.8 1700

1.6 1600 Growth 20.4% 33.6% -1.8% 8.1% 7.9%

1.4 1500 EBITDA 8 16 20 27 34 1.2 1400 EBITDA margin 5.2% 7.6% 9.3% 12.0% 13.9%

Volume EBIT -2 -1 2 9 15

2M EBIT margin Neg Neg 0.9% 4.2% 6.3% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -4 -4 -1 7 14 Net earnings 6 -4 -1 7 14

Marketplace NASDAQ Stockholm Net margin 3.4% Neg Neg 3.2% 5.8%

CEO Johan Friberg Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Thomas Wernhoff EPS adj. 0.06 -0.04 -0.01 0.08 0.16

Share information P/E adj. 24.3 -39.3 -187.5 18.9 9.7 Share price (SEK) 1.5 EV/S 1.0 0.8 0.8 0.7 0.5

Number of shares (M) 89.2 EV/EBITDA 18.8 10.3 8.7 5.7 3.9 Market cap (MSEK) 137 Last updated: 2020-01-08 Net debt (MSEK) 33

Owner Equity Votes Analyst Tibia Konsult AB 32.0% 32.0% Thomas Wernhoff 13.0% 13.0% Henrik Alveskog [email protected] Hans Malm 8.5% 8.5% LMK-bolagen & Stiftelse 6.5% 6.5% Avanza Pension 4.3% 4.3% Conflict of interests Gunvald Berger 1.8% 1.8% Henrik Alveskog owns shares in Image Systems: No Ålandsbanken I Ägares Ställe 1.8% 1.8% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Gay Stävhammar 0.9% 0.9% Promea System AB 0.9% 0.9%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 126 COMPANIES

Company description Image Systems was founded 1954 by Carl Petterson under the name Rema Turnkey provider in Motion Analysis to increase sales. Motion Analysis has Control. In 1964, the company developed a measuring tool that without contact in the past relied on partners to sell its software alone. This is about to could measure the diameter of a log, which was of great importance to the change as Motion Analysis will sell both hardware and software through development of Image Systems. Image Systems develops and sells modern partners, thereby, becoming a turnkey provider. It will be easier for the automation systems to sawmills (RemaSawco) and contactless measurement partners to sell fullsystems with a standardized training program, which is software to the aerospace, defence, paper and car industries (Motion Analysis). essential as lack of experienced operators has been a major hurdle in the In 1999, Image Systems went public under the name Digital Vision and has industry. since acquired three companies, with Image Systems acquired in 2011. Digital Vision were in 2014 sold for SEK 6m because of weak profitability. The sawmill Bear points (counter-thesis) industry has historically been the core business for Image Systems, but lately Sales growth necessary for turn-around Motion Analysis has shown stable growth and an impressive gross margin. Image Systems is currently struggling to become profitable and needs further Image Systems has a history of losses, and in 2012 decided to scale down growth within RemaSawco in order to show black numbers on the bottom line unprofitable businesses and focus on core areas in which it could deliver at group level. Hence continued good order intake is required. shareholder value. New markets tough to penetrate Selling to sawmills is often down to business contacts, making it very difficult Investment case for suppliers to enter new markets without the regional contacts. The industry

• Smart sawmills – structural growth with high gross margin dynamics mean that once a system has been sold to a sawmill, it will likely • On the verge of expansion in North America and Russia continue to buy from the same supplier. This behavior is seen throughout the • Turnkey provider in Motion Analysis to increase sales industry and acts as a hurdle for companies looking abroad, which is why we emphasize the importance of Raptor’s (RemaSawco’s partner in North Smart sawmills – structural growth with high gross margin. The sawmill America) senior sales team, who we believe hold the right contacts. If industry is highly competitive. Therefore, the sawmills have an ongoing need to RemaSawco establishes itself in Russia without an experienced sales team invest in new technology to maintain their position. RemaSawco’s product with the right business contacts, we believe it will be difficult to succeed. portfolio fits perfectly into this category as it both increases output per log Heavily reliant on one partner in North America while decreasing OPEX for the sawmills. Also, their product portfolio is unique Image Systems is very exposed to a single partner in North America, Raptor as its systems allow board tracing from delivery to the finished product, which Integration. If Raptor decides to sell other systems instead of RemaSawco’s other systems cannot match. RemaSawco has a strong market presence in BoardScannerFX 85, this will delay Image Systems’ expansion in North Sweden, making it tough for competitors to take market share. Moreover, in America. Q2’18 Image System acquired the Finnish company Limab (now RemaSawco Oy), which has shown solid margins in the last years. Going forward, we expect Changing business model is difficult the acquisition to strengthen RemaSawco’s product portfolio as well as the Motion Analysis is in a state where they are changing their business model. company’s market presence in Finland. This could be both time consuming and difficult.

On the verge of expansion in North America and Russia. Image Systems Catalyst types recently entered a partnership with Raptor Integration as part of its Entering Russia (0-12 months) establishment in the North American market. We expect that RemaSawco will Establishment in Russia would indicate that Image Systems will be a part of be able to sell further systems in North America, especially now since it has the most rapidly growing sawn wood market. established a reference customer (Trinity). Also, we believe that RemaSawco is focusing on the Russian market as it has already sold a major system Breakthrough order from USA (12-24 months) (BoardScanner) to a Russian company. Establishment in Russia would mean US sawmills are major players that have the potential to implement several that RemaSawco has entered the fastest growing sawn wood market in the BoardScanner systems in a large order. The potential value of one of these world. Russia and America produce around 36 % of the world’s sawn wood, contracts could be approximately SEK 40-60m. indicating an interesting growth potential Large agreement in Motion Analysis (0-24 months) Motion Analysis has the potential to enter large development agreements worth around SEK 2-3m annually.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 127 1900300k22.51900300k22.5

IMINTIMINT CompanyCompany page page IMINTIMINTIMINT ImageImag Image IntelligenceIntellig...e Intellig... https://wwwhttps:/.rede/wwwye.se/company/imint-image-intelligence.redeye.se/company/imint-image-intelligence

RedeRedeye Ratingye Rating

COMPANYCOMP QUALITYANY QUALITY FAIR VALUEFAIR RANGE VALUE RANGE CATALYSTCA TPOTENTIALALYST POTENTIAL

Last priceLast price ImpactImpact TimeframeTimeframe 9.9 9.9 Major Major Long Long ModerateModerate Mid Mid Minor Minor Short Short 3 3 3 3 3 3 Bear Bear Base Base Bull Bull People PeopleBusinessBusinessFinancialsFinancials 10.0 10.0 18.0 18.0 40.0 40.0 Turn pageTurn for page catalyst for catalyst specifics specifics

SnapshotSnapshot FinancialsFinancials

IMINT ImageIMINT IntelligenceImage Intelligence RedeyeRede Estimatesye Estimates OMXS30OMXS30 2018 20182019E 2019E2020E 2020E 2021E 2021E 20 20 1800 1800 17.5 17.5 Revenue,Re MSEKvenue, MSEK 34 34 41 41 51 51 68 68 1700 1700 15 15 1600 1600GrowthGrowth 82.1% 82.1%21.4% 21.4%23.9% 23.9% 32.5% 32.5% 12.5 12.5 10 10 1500 1500EBITDAEBITDA 8 8 10 10 15 15 19 19 7.5 7.5 1400 1400 EBITDAEBI marTDginA margin 22.1% 22.1%24.6% 24.6%29.3% 29.3% 27.5% 27.5%

VolumeVolume EBIT EBIT -4 -4 -5 -5 -1 -1 6 6 200k 200k 100k 100k EBIT marEBIginT margin Neg Neg Neg Neg Neg Neg 9.5% 9.5% 0 0 Mar Mar May May Jul Jul Sep Sep Nov Nov Jan JanPre-tax Prearningse-tax earnings -3 -3 -5 -5 -1 -1 6 6 Net earningsNet earnings -3 -3 -5 -5 -1 -1 6 6

MarketplaceMarketplace SpotlightSpotlight Stock Mark Stocket Market Net marNetgin margin Neg Neg Neg Neg Neg Neg 9.5% 9.5%

CEO CEO AndreasAndr Lifveasendahl Lifvendahl Dividend/SharDividend/Share e 0.00 0.000.00 0.00 0.00 0.00 0.00 0.00 ChairmanChairman KatarinaKatarina Bonde Bonde EPS adj.EPS adj. -0.35 -0.35-0.52 -0.52 -0.13 -0.13 0.73 0.73

Share informationShare information P/E adj.P/E adj. -38.4 -38.4-22.6 -22.6 -88.9 -88.9 16.3 16.3 Share priceShar e(SEK) price (SEK) 9.9 9.9 EV/S EV/S 2.4 2.4 1.8 1.8 1.4 1.4 0.9 0.9

NumberNumber of shar esof shar(M) es (M)8.9 8.9 EV/EBITDEV/EBIA TDA 10.8 10.87.2 7.2 4.7 4.7 3.4 3.4 Market Markcap (MSEK)et cap (MSEK)91 91 Last updated:Last updated: 2019-11-26 2019-11-26 Net debtNet (MSEK) debt (MSEK) -36 -36

Owner Owner Equity Equity Votes Votes AnalystAnalyst AvanzaA Pvensionanza Pension 11.6% 11.6% 11.6% 11.6% Öjvind NorberÖjvind gNorberg 3.4% 3.4% 3.4% 3.4% MagnusMagnus Skog Skog [email protected]@redeye.seedeye.se Hans ThomsenHans Thomsen 3.2% 3.2% 3.2% 3.2% NordnetNor Pensionsförsäkringdnet Pensionsförsäkring 3.0% 3.0% 3.0% 3.0% Peter EkPerlingeter Ekerling 2.2% 2.2% 2.2% 2.2% ConflictConflict of interests of interests AndreasA ndrLifveasendahl Lifvendahl 1.8% 1.8% 1.8% 1.8% MagnusMagnus Skog owns Skog shar ownses inshar IMINes Tin Image IMINT Intelligence:Image Intelligence:No No SwedbankSwedbank Försäkring Försäkring 1.5% 1.5% 1.5% 1.5% Redeye Redeperforms/haye performs/have performedve per formedservices ser forvices the Companyfor the Company and receiv andes/ha receivvees/have receivedreceiv compensationed compensation from the fr omCompany the Company in connection in connection with this. with this. Pierre AlexanderPierre Alexander Willihar Willihard Ullmand Ullman 1.2% 1.2% 1.2% 1.2% Jan PetterssonJan Pettersson 1.1% 1.1% 1.1% 1.1% ÅlandsbankÅlandsbanken I Ägarenes I ÄgarStällees Ställe 1.0% 1.0% 1.0% 1.0%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 128 COMPANIES

Company description Imint Image Intelligence is a software company based in Uppsala Sweden. The China may close itself from foreign technological influence – In the wake of company provides software for analyzing, optimizing and enhancing video in the trade war, China has become more reluctant to let foreign influence dictate real-time. The company is primarily targeting mobile device OEMs in Asia and its technological development. This means that it is not only the deals with has license agreements with a number of customers. Huawei that are in danger, but also the deals with the other smartphone giants.

Investment case New technology –20 years ago, normal video cameras were the standard, but today they have been replaced almost entirely for the average person by • Operating in a growing segment: smartphone videos are continually smartphone cameras. Just as smartphone cameras became a disruptive growing. This increases the importance of Imint´s product and the technology that changed the market, there can come new technology that very likelihood for companies to pay for better software. fast will erase the need for Imint´s products. • Normally, more phones sold by Imint renders no additional marginal cost

and thus pure profit. This paves the way for high margins. Royalty decline- There is a possibility that the lack of pricing power will further • Imint recently signed its largest commercial deal outside of the decline the average compensation per phone sold in the future. More smartphone market. With a product of Vidhance´s quality, we expect this agreements could become capped, and thus lower Imint´s profitability. journey to continue.

Imint is operating in a growing segment as smartphone videos have become Catalyst types a part of daily life for many people. Influencers, Instagram and snapchat are Additional deals with leading smartphone OEMs among a few of the drivers behind the rapid growth in usage of smartphone Additional deals with leading smartphone OEMs will have positive impacts on cameras. This increases the importance for smartphone vendors to improve the share price. We find additional agreements also covering use of more the quality of their cameras. features outside the traditional video stabilization offering to be of particular

As Imint operates in a high-end segment of camera quality, the full effect importance as it strengthens the case for long term growth. of this development is yet to be seen. Today’s premium software will be Deals within new business segments tomorrow's standard as the technology trickles down to cheaper models. Imint is continuously examining new business opportunities, illustrated by the When this happens, Imint will be included in substantially more smartphone increased efforts in standardizing the Vidhance offering. Examples of areas of models than today. application outside smartphones are found in the announced agreement with

There is a potential for high margins because normally when Imint has a Kontigo Care, Hytera, it´s business with SAAB and the earlier Samsung contract with a company, it is royalty-based, and there is no additional cost to development project. receive additional revenue. Even though Imint sometimes only receives a one- time fee, and sometimes the agreement is capped, additional phones sold by a customer normally means additional pure profit. This renders a potential for high margins for Imint.

Imint has a very good technology, which has been proven by the signing of contracts with 6 of the 10 largest smartphone vendors in the world. Huawei even made a commercial comparing the video stabilizing feature of their phone with that of Apple, to show how much better Huawei’s(Imint’s) technology is. Imint is now expanding into new industries, and as they have a very good software, the possibility of success is high.

The newly won contract with Hytera for body-worn cameras shows that the expansion to new industries is possible. What remains to see is if Imint can succeed with this in a large and profitable fashion. We believe it will.

Counter thesis Huawei - Imint is presumably in a stage of renegotiating their contract with Huawei. As Huawei are developing their own in-house OS, they may develop the camera technology in-house as well. If Imint manages to keep Huawei as a customer, it is also possible that the former capped agreement, which rendered a lower revenue per sold smartphone for Imint, will repeat itself.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 129 190010M17.5

IMPC Company page Impact Coatings https://www.redeye.se/company/impact-coatings

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 13.0 Major Long Moderate Mid Minor Short 4 2 2 Bear Base Bull People Business Financials 3.5 13.0 34.0 Turn page for catalyst specifics

Snapshot Financials

Impact Coatings Redeye Estimates OMXS30 2018 2019E 2020E 2021E 15 1800 12.5 Revenue, MSEK 20 51 50 75 1700 10 1600 Growth -19.4% >100% -1.0% 50.0% 7.5 5 1500 EBITDA -35 -23 -25 -13 2.5 1400 EBITDA margin Neg Neg Neg Neg

Volume EBIT -38 -26 -28 -16

5M EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -38 -26 -28 -16 Net earnings -38 -26 -28 -16

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Torbjörn Sandberg Dividend/Share 0.00 0.00 0.00 0.00 Chairman Mark H. Shay EPS adj. -0.88 -0.51 -0.54 -0.31

Share information P/E adj. -4.8 -21.0 -19.7 -34.6 Share price (SEK) 13.0 EV/S 6.6 9.5 10.0 6.8

Number of shares (M) 51.8 EV/EBITDA -3.8 -20.9 -20.3 -39.1 Market cap (MSEK) 674 Last updated: 2019-11-06 Net debt (MSEK) -56

Owner Equity Votes Analyst Avanza Pension 14.6% 14.6% Accendo Capital 12.0% 12.0% Havan Hanna [email protected] Hyundai Motor Company 10.4% 10.4% Nordnet Pensionsförsäkring 5.9% 5.9% Henrik Ljungcrantz 3.1% 3.1% Conflict of interests Torsten Rosell 2.5% 2.5% Havan Hanna owns shares in Impact Coatings: No Svenska Handelsbanken AB for PB 2.1% 2.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Alexander Hultgren 1.7% 1.7% Hans Österberg 1.5% 1.5% Birgitta Svensson 0.9% 0.9%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 130 COMPANIES

Company description The new strategy - not just fuel cells Impact Coatings was founded in 1997 as a spin-off from Linköping University The notable change is the new strategy, where more resources will be allocated and develop technology for Physical Vapor Deposition (PVD) surface to the core business of D/M/R to complement the future potential in FC. treatment. PVD is a method for vacuum coating of thin films of metals or According to Impact Coatings, unexploited potential in the core business has ceramics on different materials. The main value propositions are protection, been overlooked due to the heavy focus on FC. D/M/R is key to building a performance enhancement and beautification of customer’s end-products. profitable business with existing customers, whereas FC has substantial long- The use of PVD in the coating industry is increasing to replace less term upside potential. environment-friendly chemical and galvanic methods (a green technology). Impact Coatings has 31 employees with head office in Linköping, revenues Counter-Thesis amounted to SEK 20.2m in 2018. Strategic failure and need for further capital The most obvious risk is that the new strategy (and agreement with Hyundai) Investment case does not deliver the desired result. Failure to deliver would mean another capital injection. • The entrance of Hyundai Motor Company • Rewriting its history • New strategy - not just fuel cells Catalyst types Improved order flow Machine sales are the key metric investors should follow. Multiple large orders The entrance of Hyundai Motor Company would strengthen investors’ confidence in Impact Coatings’ strategy. Current In October 2019, Impact Coatings entered into a Joint Development Agreement capacity is estimated at 10 machines/year. (JDA) with Hyundai Motor Company. First, it is evidence of Impact Coatings leading technology for fuel cells (FC) – Hyundai, as one of the frontrunners in Fuel cell progress the field, should, if anyone, have the skills to assess the technology. Also, the Our expectations of the FC segment are low. If the industry solves its current agreement raises the probability of Impact Coatings reaching commercial challenges faster than anticipated, our base case valuation would be low success and capturing a more significant share of the long-term potential relative to long-term potential. within the FC segment. Lastly, the related share issue to Hyundai (and Accendo) means that Impact Coatings gets an industrial owner with invaluable knowledge and distribution channels.

Although there is still a long way to go before the partnership with Hyundai reaches commercial phase, the fact remains that Impact Coatings has secured a strategic alliance with one of the leading players in the field. Even in the face of several uncertain variables, the conditions for Impact Coatings (and its shareholders) has improved significantly and reduced the uncertainty concerning the FC vertical. The agreement raises the probability of Impact Coatings capturing a bigger share of the long-term potential within the FC segment – which is now reflected in our valuation.

Rewriting its history The company's history is characterized by hefty promises met with minimal success. These failures have led to the loss of the investment community’s trust and regular capital injections – of which one, in December 2017, brought in Accendo Capital (12.0 percent ownership). As an owner, Accendo practices ‘collaborative activism’ – its agenda and initiatives are driving Impact Coatings’ turnaround. In this regard, the agreement with Hyundai shows that the management team and the board have the capacity and expertise enough to drive through complex commercial business. Investors’ confidence in Impact Coatings ability to realise future opportunities (either sales, partnerships, M&A etc.) should increase significantly.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 131 190019007.5M1407.5M140

Company page IVIVSOSO Company page InvisioInvisio CommunicationsCommunicaCommunicatio...tio... https:/https://www/www.r.redeedeyye.se/company/invisio-communicationse.se/company/invisio-communications

RedeRedeyyee RatingRating

COMPCOMPANYANY QUALITYQUALITY FFAIRAIR VVALUEALUE RANGERANGE CACATTALALYSTYST POTENTIALPOTENTIAL

LastLast priceprice ImpactImpact TimefrTimeframeame 126.0126.0 MajorMajor LongLong ModerModerateate MidMid MinorMinor ShorShortt 44 55 55 BearBear BaseBase BullBull PPeopleeople BusinessBusiness FinancialsFinancials 62.062.0 130.0130.0 224.0224.0 TTurnurn pagepage forfor catalystcatalyst specificsspecifics

SnapshotSnapshot FinancialsFinancials

InvisioInvisio CommunicationsCommunications RedeRedeyyee EstimatesEstimates OMOMXS30XS30 20182018 2019E2019E 2020E2020E 2021E2021E 2022E2022E 120120 18001800 ReRevvenue,enue, MSEKMSEK 355355 508508 627627 771771 960960 100100 17001700 Growth -3.1% 43.4% 23.3% 23.0% 24.5% 8080 16001600 Growth -3.1% 43.4% 23.3% 23.0% 24.5%

60 1500 60 1500 EBIEBITDTDAA 6868 140140 202202 264264 356356 4040 14001400 EBIEBITDTDAA marmargingin 19.1%19.1% 27.4%27.4% 32.3%32.3% 34.2%34.2% 37.1%37.1%

Volume Volume EBIEBITT 6464 129129 181181 238238 326326 5M5M EBIT margin 17.9% 25.4% 28.9% 30.9% 33.9% 2.5M2.5M EBIT margin 17.9% 25.4% 28.9% 30.9% 33.9% 00 Pre-tax earnings 64 133 181 238 326 MarMar MayMay JulJul SepSep NovNov JanJan Pre-tax earnings 64 133 181 238 326 NetNet earningsearnings 4848 101101 141141 186186 254254 Net margin 13.6% 20.0% 22.5% 24.1% 26.5% MarkMarketplaceetplace NNASDASDAAQQ StStockholmockholm Net margin 13.6% 20.0% 22.5% 24.1% 26.5%

CEOCEO LarsLars HøjgårHøjgårdd HansenHansen Dividend/SharDividend/Sharee 0.700.70 1.151.15 1.601.60 2.102.10 2.882.88 ChairmanChairman AnnikaAnnika AnderssonAndersson EPSEPS adj.adj. 1.091.09 2.302.30 3.203.20 4.214.21 5.765.76 P/E adj. 66.8 51.4 36.9 28.1 20.5 SharSharee informationinformation P/E adj. 66.8 51.4 36.9 28.1 20.5 EV/S 8.9 10.0 8.0 6.4 5.0 SharSharee priceprice (SEK)(SEK) 126.0126.0 EV/S 8.9 10.0 8.0 6.4 5.0 EV/EBITDA 46.6 36.6 24.9 18.8 13.4 NumberNumber ofof sharshareses (M)(M) 44.144.1 EV/EBITDA 46.6 36.6 24.9 18.8 13.4 MarkMarketet capcap (MSEK)(MSEK) 5,5925,592 LastLast updated:updated: 2020-01-062020-01-06 NetNet debtdebt (MSEK)(MSEK) -177-177

OwnerOwner EEquityquity VVotesotes AAnalystnalyst NoNovvoo HoldingsHoldings A/SA/S 10.5%10.5% 10.5%10.5% SwedbankSwedbank RoburRobur FFonderonder 9.4%9.4% 9.4%9.4% ViktViktoror WWestmanestman Arbejdsmarkedets Tillægspension (ATP) 9.0% 9.0% [email protected]@redeedeyye.see.se Arbejdsmarkedets Tillægspension (ATP) 9.0% 9.0% HandelsbankHandelsbankenen FFonderonder 8.1%8.1% 8.1%8.1% LageLage JonasonJonason 6.9%6.9% 6.9%6.9% ConflictConflict ofof interinterestsests FjärFjärdede AP-fondenAP-fonden 6.1%6.1% 6.1%6.1% ViktViktoror WWestmanestman ownsowns sharshareses inin InvisioInvisio Communications:Communications:YYeses SEBSEB FFonderonder 5.1%5.1% 5.1%5.1% RedeRedeyyee perperforms/haforms/havvee perperformedformed serservicesvices forfor thethe CompanyCompany andand rreceiveceives/haes/havvee Erik Åfors 4.7% 4.7% rreceiveceiveded compensationcompensation frfromom thethe CompanyCompany inin connectionconnection withwith this.this. Erik Åfors 4.7% 4.7% CC WWorldWideorldWide AssetAsset ManagementManagement 4.7%4.7% 4.7%4.7%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 132 TECHNOLOGY

Company description The next growth wave is materializing out of several new billion markets Since 2007, Invisio has developed and sold communication equipment for Invisio has entered several new billion-value markets that are now gaining professional users, mainly the military. Its strategic realignment away from the momentum. These are: 1) new regions (Asia, Middle East, South America); 2) consumer market has resulted in strong growth. Invisio’s scalable business new users (police); and 3) new products (intercom solution). The procurement model is based on the company selling hardware and adaptations to local activity is more intense than ever before, not least from the new regions. The military conditions through its distribution partners. However, its manufacturing police market is a billion-dollar market, and important breakthrough deals have is outsourced. Invisio’s customers are special forces and regular armies. been won in Sweden and Germany. Finally, the intercom for vehicles is a game Orders from special forces take place on an ongoing basis while regular armies changer. Invisio Intercom is a unique solution that is significantly more cost order through procurement processes. Invisio’s existing customers are around effective than traditional competing products. All this means that Invisio, ten Western nations, usually in NATO. The company intends to win according to our calculations, should be able to charge a price seven times procurements in the approximately 50 military modernisation programmes higher than the company’s traditional hearing protection, which means that only ongoing worldwide. A competitive advantage is its understanding of military minimal volumes of 3,000 units could lead to sales in excess of SEK 200m. needs along with its proximity to the world- leading Danish hearing aid industry, which means good knowledge of how the equipment should fit for the user to Major procurements can be settled overnight want to have it on for long periods. Invisio’s reference customers are also an Of the approximately 50 procurements that Invisio is involved in, we estimate important parameter. Since autumn 2013 the company has been selling to the that a number are major procurements worth in excess of SEK 100m, and that US Army, but for a long time prior to that it has sold to special forces like Delta some of these (given the secrecy) could be announced more or less overnight, Force and the Navy Seals. One disadvantage is that Invisio has no patent which, in our interpretation, could drive the share price towards our base case protection that would prevent competitors from developing equivalent of SEK 130 per share. offerings, but the barriers are high since both procurements and contracts stretch over many years. Catalyst types Investment case Order related to the new intercom solution Invisio launched a new product category in Septembre 2017 following tight • A top class business on all parameters development together with customers. We expect volume orders in the • The next growth wave is materializing out of several new billion markets end of 2018. • Major procurements can be settled overnight Order from the 50 modernization programs A top class business on all parameters Since several years back, Invisio is participating in procurement processes in Invisio’s business basically meets all the quality requirements you could wish about 50 military modernization programs in various sizes across the World. for. The company dominates a niche market with high barriers that is growing Our belief is that a few of these contracts are at a stage where they could be structurally from greater awareness of the costs of hearing loss, amounting to settled over night. several billion USD per year in the US alone, and increased radio penetration. There is extensive confidentiality, but we are not aware of Invisio having lost any procurement since 2007. The many and large deals that the company is regularly winning, most recently the high-profile US Marines procurement, indicate that Invisio has an attractive overall offering that no one can match at present. The procurement processes generally last several years, but happily so do the contracts once they are won. The protracted and tough procurements also mean it is difficult to be subsequently rejected provided things are done correctly. Since it is not possible to join the 40-50 procurements retrospectively, we believe that Invisio will own the military market over the next few years, and will do everything to strengthen this position. Creating an equivalent offering would require a long-term focus and major investment, while the order intake is volatile.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 133 19004M17.5

JDT Company page JonDeTech Sensors https://www.redeye.se/company/jondetech-sensors

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 15.0 Major Long Moderate Mid Minor Short 2 1 2 Bear Base Bull People Business Financials 3.0 8.0 50.0 Turn page for catalyst specifics

Snapshot Financials

JonDeTech Sensors Redeye Estimates OMXS30 2018 2019E 2020E 2021E 15 1800 12.5 Revenue, MSEK 0 0 4 18 1700 10 1600 Growth >100% >100% >100% >100% 7.5 5 1500 EBITDA -15 -18 -21 -18 2.5 1400 EBITDA margin Neg Neg Neg Neg

Volume EBIT -16 -19 -24 -20

2M EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -16 -19 -24 -20 Net earnings -16 -19 -24 -20

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Per Lindeberg Dividend/Share 0.00 0.00 0.00 0.00 Chairman Micheal Olsson EPS adj. -0.95 -1.03 -1.31 -1.10

Share information P/E adj. -4.3 -11.6 -9.1 -10.9 Share price (SEK) 15.0 EV/S 3,033.4 3,334.2 56.6 15.5

Number of shares (M) 18.1 EV/EBITDA -2.9 -12.1 -11.4 -15.2 Market cap (MSEK) 271 Last updated: 2019-09-12 Net debt (MSEK) 26

Owner Equity Votes Analyst Mikael Lindeberg 13.7% 13.7% Patrik Lundström 9.3% 9.3% Viktor Westman [email protected] Didier Pineau-Valencienne 7.9% 7.9% Bengt Lindblad 7.5% 7.5% Nordnet Pensionsförsäkring 6.0% 6.0% Conflict of interests Staffan Salén 4.6% 4.6% Viktor Westman owns shares in JonDeTech Sensors: No Elis Hirvonen 4.4% 4.4% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Per Nordström 3.9% 3.9% Without Bank Julius Baer & co LTD 3.6% 3.6%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 134 COMPANIES

Company description Jondetech is a nanotechnology company that started out in 2003 as a research Share performance should require deals project at Uppsala University. In 2008, it was spun off into a commercial Partly due to hopes of an inflection point the stock has rallied. However, shares company. After filing for bankruptcy in 2012, however, the IP assets were sold remain below the May 2018 IPO price of SEK 16, reflecting deteriorating and Jondetech was effectively relaunched in 2013. The company has now investor confidence as a result of the company (and its previous management) reached the face of seeking to commercialize its thermopile IR sensor not delivering on the plans and targets promised. A sustained share technology, zooming in on the presence detection use case (see further our performance requires execution and sizeable orders. We see a chance for such investment case). the sensor also enables measurement of heat flow and orders from laptop manufactures, but Investors should also note that we contactless temperature. The fabless business model mirrors Fingerprint estimate a probable need for more capital raising before profitability. Cards as Jondetech is looking to partner with major, Asian module manufacturers. Jondetech's sensor has several exciting, important advantages. Catalyst types The cost is 20% of the traditional, competing IR sensors. The sensors has Capital raising several unique characteristics, e.g. being bendable and robust, without need for We see a remaining need for raising new capital in 2020, which could weigh on encapsulation due to the plastic material (as opposed to silicon or ceramics in the share price. competing sensors). It is easy to integrate due to 0.17 mm thickness. The disdvantages is related to the typical small supplier credibility issues in Order related to a laptop OEM addition to being unproven; the company has so far only received one order of If Jondetech receives a large ODM contract related to a big laptop OEM (HP, SEK 19 000. Lenovo, Dell, Acer or Asus) it could cement the share price above our base case and move it closer to bull case. Investment case

• Highly scalable production & disruptive technology • We detect presence of prerequisites similar to Fingerprint ahead of its breakthrough • Share performance should require deals

Highly scalable production & disruptive technology Jondetech (JDT) benefits from an exciting, disruptive nanotechnology, but has yet to make a commercial breakthrough. The go-to-market strategy is uncertain at this point as it needs to add channel partners. Nonetheless, JDT provides a sensor with unique advantages at cost levels we believe are several times lower than traditional IR sensor alternatives on the market. As opposed to competition, JDT’s product has a minimal footprint, can be bent and does not require encapsulation or calibration. Together with JDT’s highly scalable fabless production model, this allows for high gross margins of 60% (Redeye’s estimate).

We detect presence of prerequisites similar to Fingerprint ahead of its breakthrough Strongly growing demand for sensors supports the story. JDT has zoomed in on presence detection as Intel’s Athena initiative is seeking to make this standard in all laptops. Since five of the six largest manufacturers (~80% of the market) participate in Athena, the potential here is notable - Intel chips are in around 120m new laptops a year (excl. PCs). There are several other potential application areas, even if some of the use cases suggested are somewhat gimmicky. Overall, there are clear opportunities for JDT whose scalable model means that it would not take much traction for it to break through. To sum it up, we recognize several of JDT’s prerequisites from Fingerprint Cards ahead of its breakthrough.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 135 19001160 000k

LAGR B Company page Lagercrantz Group https://www.redeye.se/company/lagercrantz-group

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 146.8 Major Long Moderate Mid Minor Short 5 5 4 Bear Base Bull People Business Financials 75.0 116.0 140.0 Turn page for catalyst specifics

Snapshot Financials

Lagercrantz Group Redeye Estimates OMXS30 2018 2019E 2020E 2021E 1800 140 Revenue, MSEK 3,932 4,215 4,735 5,239 1700 120 1600 Growth 15.3% 7.2% 12.3% 10.6% 100 1500 EBITDA 575 636 712 804 80 1400 EBITDA margin 14.6% 15.1% 15.0% 15.3%

Volume EBIT 451 501 586 668

500k EBIT margin 11.5% 11.9% 12.4% 12.8% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 431 477 551 632 Net earnings 342 372 425 487

Marketplace NASDAQ Stockholm Net margin 8.7% 8.8% 9.0% 9.3%

CEO Jörgen Wigh Dividend/Share 2.50 2.75 3.00 3.22 Chairman Anders Börjesson EPS adj. 5.02 5.47 6.23 7.15

Share information P/E adj. 22.9 22.7 19.9 17.3 Share price (SEK) 146.8 EV/S 2.2 2.2 2.0 1.8

Number of shares (M) 69.5 EV/EBITDA 15.4 14.8 13.2 11.7 Market cap (MSEK) 10,206 Last updated: 2019-10-27 Net debt (MSEK) 976

Owner Equity Votes Analyst SEB Fonder 13.5% 9.5% Swedbank Robur Fonder 10.3% 7.3% Fredrik Nilsson [email protected] Didner & Gerge Fonder 8.8% 6.2% Lannebo Fonder 7.2% 5.1% Anders Börjesson & Tisenhult-Gruppen 5.6% 28.8% Conflict of interests Fidelity Investments (FMR) 5.0% 3.5% Fredrik Nilsson owns shares in Lagercrantz Group: No Handelsbanken Fonder 4.6% 3.2% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. ODIN Fonder 3.9% 2.8% Lagercrantz Group AB 2.6% 1.8% State Street Bank And Trust co 2.1% 1.5%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 136 COMPANIES

Company description Lagercrantz has a long history together with two other listed companies: B&B This stock offers good exposure to successful Nordic small caps. To some Tools (previously Bergman & Beving) and Addtech. Lagercrantz started in 1938 extent, it can therefore be regarded as a very interesting alternative to mutual and was acquired by Bergman & Beving in 1967. Lagercrantz and Addtech were funds, and the share has clearly outperformed the stock market index in recent spun off in 2001 and have since been listed on Nasdaq Stockholms main years. Lagercrantz has a good proven ability to buy and develop companies, market. Lagercrantz got the businesses within electronics, IT and and provides good potential to generate high returns over time, particularly Communication. given that its dividends are also generous and have risen in line with profits over a prolonged period. The share has traded up to new peak levels, and The strategic focus during the last decade is characterized by the changes that deservedly so. In the short term, the share could possibly make further gains if took place in the wake of the IT- and telecom crisis, during the first years of the the company announces any major acquisitions. In the longer term, we also new millennium. The product life cycles of electronic components became envisage that improved profitability and organic growth could drive the shorter and production was moving east. Lagercrantz new strategy is oriented valuation. towards higher value added products and an expansion into new market niches. Acquisitions have always been a natural part of the groups’ evolution Bear points: and focus is primarily on proprietary products rather than trading companies. • Big bad acquisitions. If Lagercrantz were to acquire a big company that runs into severe problems it would cost money as well as management Investment case resources. The organization is rather streamlined and if there is a need • Long and strong track record in acquiring small companies and gradually for restructuring it may have consequenses for the rest of the group. And improving profitability. With Lagercrantz as the new owner the companies obviously also the stock markets confidence. have better opportunities to expand into new markets and grow their • In the trading business there is always a risk for loosing a supplier, even if business. your relationsship has been excellent. Suppliers can for example find new • The companies are normally purchased at around 5x EBIT and since market channels through acquisitions. Lagercrantz is trading substantially higher each acquisition triggers a revaluation of the the share. Catalyst types • At the moment we do not foresee any major revaluation. However the More of the same (acquisitions) share offers a good exposure to successful nordic small caps and is an Focus on buying relatively small companies with proprietary products and good interesting alternative to savings in mutual funds. profitability at fairly low multiples has been successful. More acquisitions like this are likely and will continue to drive value. Lagercrantz is able to showcase an impressively long track record of improving profitability and continuous growth. Its growth is certainly driven mainly by Organic growth will drive margins acquisitions, but with good cash flows and stable revenues all its acquisitions Several subsidiaries with proprietary products have a good potential to expand have been self-financed and its balance sheet gives further room for into new markets. Lagercrantz organic growth and margins should benefit from expansion. The company’s financial target is to achieve average annual profit this since these companies are more profitable than group average. growth of 15 percent, which it has managed to deliver over the past ten years.

Its acquisition strategy is based on buying smaller companies with a strong position in their specific niches. These typically have sales of around SEK 50-100 million, and are well managed and profitable with limited risk. Its aim is to continue to build up a large portfolio of successful companies, and Lagercrantz has undoubtedly succeeded in this in recent years. All the companies, as far as we can tell, have had stable and really good profitability. Operating margins are on around 15-20 percent. The acquisitions have also been made at clearly reasonable prices, equivalent to approximately five times operating profit.

It has been possible to buy these companies cheaply due to their relatively small size and dependence on personnel. The operations are then valued at a higher mutiple once they are part of Lagercrantz. However, these higher valuations once they are part of the Lagercrantz group are not just sleight of hand since the companies have greater opportunity to develop with their new owners. This applies particularly to the smaller product companies, which have often lacked the knowledge, capital or, in some cases, the courage to expand into new markets.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 137 190010M200

MYCR Company page Mycronic https://www.redeye.se/company/mycronic

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 184.3 Major Long Moderate Mid Minor Short 4 4 4 Bear Base Bull People Business Financials 67.0 152.0 187.0 Turn page for catalyst specifics

Snapshot Financials

Mycronic Redeye Estimates OMXS30 2018 2019E 2020E 2021E 180 1800 Revenue, MSEK 3,781 4,025 4,326 4,672 160 1700

140 1600 Growth 26.0% 6.5% 7.5% 8.0%

120 1500 EBITDA 1,094 990 959 1,057 100 1400 EBITDA margin 28.9% 24.6% 22.2% 22.6%

Volume EBIT 1,020 970 931 1,003

5M EBIT margin 27.0% 24.1% 21.5% 21.5% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 1,011 967 927 996 Net earnings 792 744 714 767

Marketplace NASDAQ Stockholm Net margin 21.0% 18.5% 16.5% 16.4%

CEO Anders Lindqvist Dividend/Share 2.50 3.00 3.65 3.92 Chairman Patrik Tigerschiöld EPS adj. 8.09 7.60 7.29 7.83

Share information P/E adj. 10.9 22.4 23.3 21.7 Share price (SEK) 184.0 EV/S 2.1 3.9 3.6 3.3

Number of shares (M) 97.9 EV/EBITDA 7.1 16.0 16.3 14.5 Market cap (MSEK) 17,987 Last updated: 2019-12-19 Net debt (MSEK) -1,018

Owner Equity Votes Analyst Bure Equity 27.9% 27.9% Fjärde AP-fonden 9.1% 9.1% Viktor Westman [email protected] JPM Chase NA 7.6% 7.6% SEB Fonder 6.7% 6.7% Invesco 6.2% 6.2% Conflict of interests Swedbank Robur Fonder 5.1% 5.1% Viktor Westman owns shares in Mycronic: No State Street Bank And Trust co 3.5% 3.5% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Lannebo Fonder 2.7% 2.7% Handelsbanken Fonder 2.4% 2.4% Vanguard 1.9% 1.9%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 138 COMPANIES

Company description The demand in Pattern Generators is stable, The Mid Cap company Mycronic develop systems for electronics albeit around top levels manufacturing and sells these systems either directly or through distribution The other share price pressure factor we have identified is the irregular sales of partners to hundreds of customers worldwide. Mycronic has been around for advanced display photomask writers in the Pattern Generators (PG) segment. about 30 years but its modern history started when the pattern generator Evident from history the PG sales and operating profits are very volatile given manufacturer Micronic acquired Mydata that manufactured systems for the single digit volumes of sold PG systems per annum and the prices of USD surface mounting. Ever since the Mydata acquisition Mycronic is divided into 12-45 million per unit. The market share of 100% limits the growth potential, but two business areas: Pattern Generators (PG) and Assembly Solutions (AS) also means stellar gross margins of up to 90%, according to our estimates. The where the recent acquisitions all are included in the AS segment. R&D is counter argument is therefore that as PG has peaked at delivery of 5-7 systems, primarily located at the headquarter in Stockholm, Sweden. Mycronic's primary substantially deteriorated earnings and even larger share price reactions await. strength is its market share of 100 percent of mask writers for display It is an undisputed fact that years with lower PG demand sooner or later will applications. Consequently, every smartphone and tablet etc. has been affect Mycronic. However, one can oppose the argument that such a downturn manufactured by the help of Mycronic's technology. Our belief is that this is a will be equal to the long dry out of orders during 2006-2013 given continuing niche segment that is not big enough to attract another supplier. In the AS display R&D and therefore increasingly longer photo mask writing times leading business area Mycronic only has a share of 1-2 percent of the total surface to higher PG demand. Besides more, larger and increasingly advanced display mount technology market but within the company's niche (high mix) its market models the photomask writing times are also affected by the utilization ratio. share is over 20 percent. Investments for several billion SEK have been made Despite Mycronic’s strong order intake during 2015-2017 about half of the resulting in a large number of patents, which also in a way points to Mycronic's installed base of approximately 70 systems is still over 10 years old. The weakness. The technology risk forces the company to maintain its high majority of the ordered mask writers for display applications since year 2000 investments to stay relevant. was delivered by more than 10 years ago. Basically all of these systems are covered by service contracts with best effort commitments as the customers Investment case are well aware of the end of life issues regarding the components. Furthermore, some customers initiated investments in building up a Chinese photomask • Large investments in Assembly Solutions lessens the Pattern Generators industry during the fall of 2017. The market dynamics of the history has been dependency that customers invest simultaneously out of fear of losing market shares. We • The demand in Pattern Generators is stable, albeit around top levels therefore assess that several of the competitors of the players that have started • Prexision orders of USD 12-45 million apiece will drive the share price investing will join the race and uphold the follow-the-leader tradition. Even though there is a risk for setbacks and negative earnings growth in relation to Large investments in Assembly Solutions the strong 2016-2019 our conclusion from the reasoning above is that the lessens the Pattern Generators dependency future of PG is stable, although individual quarters could differ a vast amount. Mycronic has made several acquisitions during the past years, decreasing the dependency on Pattern Generators, which we assume will continue. One Prexision orders of USD 12-45 million apiece factor holding back the Mycronic share price is the insecurity around how the will drive the share price acquisitions of AEi and Axxon will contribute but perhaps primarily the Prexision orders (e.g. P-800, P-80, P-10, P8 or P8R) alternatively a long-term unprofitability in general in business area Assembly Solutions (AS). Gross absence of such orders will drive the share price up or down respectively as one margins have consistently been stable and the reason behind the reported Prexision, depending on which model, can have a price of anything between USD losses is instead higher R&D costs. During 2015-2016 Mycronic in total 12-45 million. invested SEK 500 million in R&D only in surface mount technology and we believe that a major part of this is related to the Jet Printer and the Jet Catalyst types Dispenser respectively. The price performance that these two offer compared P-800 order to traditional technology implies an opportunity to penetrate several brand new Mycronic launched the P-800 during the spring of 2016 and received its first segments in an addressable market of USD 500 million. The Axxon acquisition order from Photronics during the fall of 2017. Our belief is that at least a few of is an important part of this equation. Furthermore, Mycronic has a strong the competitors will feel a need to join the race. secular tailwind from the trend towards increasingly smaller and more and more advanced electronics. This trend favours Mycronic’s strong niche position P-10 order in the production of the most advanced PCBs requiring high flexibility and The demand for large displays is growing, which leads to an increased demand reasonably fast changeovers. Bottom line, we are not particularly worried for Mycronic's P-10. About 30 display fabs are under construction/planned. regarding if the R&D costs in AS will result in profits. Due to e.g. the issues in the transport of photo masks and high Chinese tariffs we assume that a local photomask industry will be built in China , which means a need for Mycronic's P-10 mask writers.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 139 1900

Company page Neonode Inc https://www.redeye.se/company/neonode-inc

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Impact Timeframe Major Long Moderate Mid Minor Short 3 3 2 Bear Base Bull People Business Financials 2.0 4.0 10.0 Turn page for catalyst specifics

Financials

Redeye Estimates

2018 2019E 2020E 2021E

Revenue, MUSD 9 7 7 14

Growth -16.6% -21.5% 4.4% >100%

EBITDA -3 -2 -3 2

EBITDA margin Neg Neg Neg 14.5%

EBIT -4 -4 -5 1

EBIT margin Neg Neg Neg 5.1%

Pre-tax earnings -4 -4 -5 1

Net earnings -4 -4 -5 1

Marketplace N/A Net margin Neg Neg Neg 5.1%

CEO Urban Forssell Dividend/Share 0.00 0.00 0.00 0.00 Chairman Ulf Rosberg EPS adj. -0.67 -0.51 -0.43 0.07

Share information P/E adj. -2.5 -2.9 -3.3 20.7 Share price () EV/S 0.5 1.7 2.0 1.0

Number of shares (M) 8.8 EV/EBITDA -1.5 -6.0 -4.4 6.7 Market cap (M) Last updated: 2019-11-17 Net debt (MUSD) 0

Owner Equity Votes Analyst Ulf Rosberg 18.0% 18.0% Peter Lindell 17.4% 17.4% Viktor Westman [email protected] Carl Grevelius 5.0% 5.0% AWM Investment 2.7% 2.7% Andreas Bunge 1.2% 1.2% Conflict of interests Blackrock Inc 1.1% 1.1% Viktor Westman owns shares in Neonode Inc: Yes Vanguard Group 0.5% 0.5% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Geode Capital Management 0.2% 0.2% FMR LLC 0.2% 0.2% Credit Suisse Group 0.2% 0.2%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 140 COMPANIES

Company description Neonode, not only works with technology for touch displays but with human unlocking large values tomorrow by cutting costs and earn license revenue with interaction in numerous ways, e.g. gesture control.. In addition, Neonode is 100 % margin. This opportunity is not new in itself, but the difference, in our surface independent, meaning it does not even need displays or glass. The own view, is that the new main owners are not sentimental and will not tolerate business model for Neonode’s touch technology is manufacturing and selling more years of disappointment, meaning these values will eventually be of hardware modules as well as licenses. The modules together with the ramp- unlocked if the business does not turn. up of new car and printer models on the won platforms is the key parts of the growth strategy. Besides its many competitive advantages in its unique Big autotech option free of charge Smart Eye has the same market and drivers etc. as Neonode but the valuation technology, Neonode has wide barriers to entry in its automotive business differs by over 10x. In addition, Neonode has higher ASP and even better (see further the investment case section). The headquarter is in Stockholm, barriers to entry (hardware vs software) compared to Smart Eye. Thus, we have Sweden but sales have a global reach. reason to believe that the perception change could be quite substantial, should Neonode be perceived as a hot autotech company. Smart Eye has an expected Investment case order value of over SEK 1.5 bn for its total future license revenue. Neonode has • Turnaround case turned credible with new main owners & management not publicly quantified its order values but they should reasonably be several • Limited downside from underlying values that could be unlocked times larger than today's market cap. If Neonode would manage to close one • Big autotech option free of charge single automotive contract it could have a value the size of today's market cap. • Break-even and large module deals to drive the stock price We still believe that the steering wheel partnership with Autoliv could alone be worth USD 100m, although this lies a couple of years down the road, and Turnaround case turned credible with consequently is not on the stock market radar. Euro NCAP is now mandating new main owners & management driver monitoring technology but it still does not have any activities within The stock market's confidence in Neonode has completely vanished, for hands on the steering wheel. According to our industry sources though, it is very good reasons, in our view, most notably the communication. Sales have likely that such activities could start going forward. deteriorated, but the low valuation is also a punishment for old sins. However, this means that there are very clear reasons for why the shares are Break-even and large module deals to drive the stock price undervalued. The Neonode turnaround case has turned credible, due to a Our base case of USD 4 per share in relation to our reasonably pessimistic promising set of new people. Besides a new CEO with a successful autotech scenario of USD 2 and our bull case of USD 10 indicate a pessimistic track record, the new owners and board members are very engaged and perception and a good risk/reward. We argue that financial reports with black involved in the company. The COB comes from a long career in private equity figures are needed in order to change the perception of investors and move the where the COB works tight with Management. The new owners also have stock. In addition, large module contractsm, especially in auto, are important excellent track records in business and investing. The new board decided to catalysts for the Neonode shares (but of course the company also need to focus and closed several far-fetched, non-core projects initiated by previous deliver on those contracts - not only announce them). Management. Moreover, the failed change in business model was reversed. The company had told the customers they could only buy modules and not Catalyst types licenses going forward. This decision was reversed around year-end 2017 Major module deals and customers are now free to choose. We believe the lead times are about In the fall of 2016 Neonode received a module deal of in total USD 11 million two years, meaning we should soon begin to see some results. Despite all of related to door handle modules for one car model. Similar deals would have a Neonode's failures in the past, the company has only lost a few customers, major impact on the share price. We especially believe that a design win for the which is remarkable and implies a strong value proposition for the customers. steering wheel together with Autoliv/Veoneer would be positive as touch in Our conclusion is that the technology and customer benefits are fantastic while steering wheels is crucial in handing over from automatic to manual driving. execution and communication have been lousy. All in all, there are evidence suggesting that Neonode could, indeed, finally turn. Break-even We expect the reaching of break-even in the end of 2021 which would be an Limited downside from underlying values important milestone for the stock market to grasp that Neonode has left the that could be unlocked losses behind and hit the point of inflection. Neonode's market valuation is close to a bankruptcy valuation, especially in relation to the recurring license revenue base of about USD 5-6m per year. The burn rate is about USD 1m per quarter, meaning there should be a plan B in

REDEYE NORDIC TECHNOLOGY REPORT - 2020 141 1900500k40

NITRO Company page Nitro Games https://www.redeye.se/company/nitro-games

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 9.9 Major Long Moderate Mid Minor Short 3 2 1 Bear Base Bull People Business Financials 5.0 14.0 45.0 Turn page for catalyst specifics

Snapshot Financials

Nitro Games Redeye Estimates OMXS30 35 2018 2019E 2020E 2021E 1800 30 Revenue, MEUR 2 1 2 3 25 1700 20 1600 Growth 27.5% -61.0% >100% 45.8% 15 1500 10 EBITDA -5 -3 -2 -1 5 1400 EBITDA margin Neg Neg Neg Neg

Volume EBIT -6 -3 -2 -1

250k EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -6 -3 -2 -1 Net earnings -6 -3 -2 -1

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Jussi Tähtinen Dividend/Share 0.00 0.00 0.00 0.00 Chairman Jacob Ehrnrooth EPS adj. -1.64 -0.62 -0.38 -0.21

Share information P/E adj. -2.7 -1.8 -2.9 -5.4 Share price (SEK) 9.9 EV/S 7.4 26.8 13.0 9.3

Number of shares (M) 4.1 EV/EBITDA -3.1 -7.4 -13.4 -27.9 Market cap (MSEK) 41 Last updated: 2019-11-08 Net debt (MEUR) 18

Owner Equity Votes Analyst Jacob Ehrnrooth 16.7% 16.7% Savox Investments S.A. 12.0% 12.0% Tomas Otterbeck [email protected] Johan Biehl 8.2% 8.2% Swedbank Robur Fonder 7.8% 7.8% Ludvig Strigéus 4.7% 4.7% Conflict of interests Avanza Pension 4.2% 4.2% Tomas Otterbeck owns shares in Nitro Games: Yes Aktia Asset Management 3.8% 3.8% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Antti Villanen 3.6% 3.6% Luxus Micro Cap S.A 3.5% 3.5% Matti Nikkola 3.2% 3.2%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 142 COMPANIES

Company description Catalyst types Nitro Games is a mobile game developer and as of recent a publisher with a Second chance for Heroes of Warland decade of experience in developing games for the mid-core user segment. The new version of the game should be considered a totally new game with Nitro Games has a long history of stable cash flows from developing contracts improved game mechanics built upon a newly updated game engine specialized from bigger publishers which minimise risk in the business model. in shooter-games. The CPIs (Cost per Install) is low meaning the marketability

Nitro Games second business area is developing and publishing mobile games. for scaling up the game and potential geographic expansion looks somewhat Nitro Games has adapted its business model closely after market conditions. promising. For the moment the game has not been released for Android. This The company utilizes its own NG Platform -technology that allows it to develop is as well as the focus on US-audience a strategy to test the game in a cost- and publish high-end mobile games with impressive graphics and modular effective way. In a few months, we expect a soft-launch of the game with design under a short period of time. This is, as well as the company’s MVP- Netmarble as a publisher in the MEA-regions. process, are according to Nitro Games, unique strengths as they allow a cost- Royalty-opportunity effective development of the games portfolio. We believe Nitro Games is developing a game based on the IP “The Hunter” Investment case for Avalanche Studios. This is a popular game on PC and an already proven business case. We expect Nitro Games will have a royalty if the game is • Nitro Games has adapted its business model closely after market released on mobile, which could be an important cash stream in the future. conditions. With the NG Platform combined with a proven creative process Nitro Games can launch a mobile game in 5-10 months. The gateway to Asia Therefore Nitro Games can minimise the amount of time and money Netmarble and Nitro Games have signed two publishing agreements for both spent in every single project minimising risk. Medals of War and Heroes of Warland in the Middle-East and Africa . The first • Netmarble is interested in publishing agreements for Nitro Games publishing deal generated an initial revenue of EUR 0.2 million and the second self-developed games in Asia, which is the biggest and fastest growing one generated EUR 0.5 million for Nitro Games. Netmarble is also interested in market amongst mobile games. At this point a deepened partnership similar publishing agreements for the games in Asia, including China, Japan of this kind is likely and have a potential initial revenue of and Korea which is the biggest and fastest growing markets amongst mobile EUR 0.8-1.2 million. games. So a big potential catalyst for the stock is of course if new publishing • One of the biggest values in Nitro Games is the self-developed NG deals for those countries would be signed. At this point a deepened partnership Platform. The platform has been in development for over 4 years. With of this kind is likely and have a potential initial revenue of EUR 0.8-1.2 million. the NG Platform combined with a proven creative process Nitro Games We believe a deal of this kind is possible, which in this case means a probability can launch a mobile game in 5-10 months, typically this takes 6-18 of 30 percent. months for most mobile games.

Nitro Games and Netmarble EMEA have signed two Game Distribution and Servicing Agreements. Netmarble is the highest grossing mobile games publisher in Korea. In China and Japan, the publisher’s games are top 5 amongst the highest grossing games.

Investment risks According to a research made by Deloitte approximately 2.5 percent of the mobile game companies made over EUR 1 million in 2016. Most mobile game developers struggle with bad monetisation in their games.

The probability that it will take 2 years before Nitro Games will release a top grossing game is relatively high. We estimate the probability of this scenario is about 40-50 percent. We believe the stock will be volatile on investor’s hopes increasing risk in the stock.

It is also possible that the company never will succeed in the self-publishing mobile games industry. However, Nitro Games third-party development services are reducing the potential downside in the stock. This is our Bear- case scenario with a probability of 25 percent.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 143 190010M2

NBZ Company page Northbaze https://www.redeye.se/company/northbaze

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 0.5 Major Long Moderate Mid Minor Short 3 2 2 Bear Base Bull People Business Financials 0.4 0.7 1.2 Turn page for catalyst specifics

Snapshot Financials

Northbaze Redeye Estimates OMXS30 1.75 2018 2019E 2020E 2021E 1800 1.5 Revenue, MSEK 96 127 159 172 1.25 1700 1 1600 Growth >100% 32.6% 24.6% 8.1% 0.75 1500 0.5 EBITDA -10 -17 6 11 0.25 1400 EBITDA margin Neg Neg 3.5% 6.2%

Volume EBIT -15 -23 -1 4

5M EBIT margin Neg Neg Neg 2.2% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -15 -23 -1 4 Net earnings -14 -23 -1 3

Marketplace First North Stockholm Net margin Neg Neg Neg 2.0%

CEO Henrik Andersson Dividend/Share 0.00 0.00 0.00 0.00 Chairman Anders Bruzelius EPS adj. -0.25 -0.23 -0.01 0.03

Share information P/E adj. 0.0 -2.3 -70.3 15.2 Share price (SEK) 0.5 EV/S 0.1 0.6 0.5 0.4

Number of shares (M) 97.8 EV/EBITDA -1.2 -4.1 13.2 6.5 Market cap (MSEK) 51 Last updated: 2019-12-18 Net debt (MSEK) 21

Owner Equity Votes Analyst Erik Fischbeck med bolag 8.3% 8.3% Spectric Intelligence AB 8.1% 8.1% Oskar Vilhelmsson [email protected] Gert Nordin 7.4% 7.4% Novo Utbildning AB 7.2% 7.2% Håkan Larsson 4.5% 4.5% Conflict of interests SEB Life International 4.5% 4.5% Oskar Vilhelmsson owns shares in Northbaze: No Arne Sandberg 4.3% 4.3% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. David Sanpen 3.9% 3.9% Clearstream Banking S.A. W8imy 3.9% 3.9% Cbsg-Ocbc Sec Pte Ltd-Client A/C 3.7% 3.7%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 144 COMPANIES

Company description Jays Group is a Swedish developer of consumer electronics products and Counter-thesis accessories. The company founded in 2006 was originally named Jays, Acquired uncertainties developing headphones in the mid-premium segment and was listed on First The new M&A-focused strategy carries risk. For example, Northbaze has taken North in 2011. After struggling to reach profitability a new strategy was set out on Krusell which have not been profitable in the last three years with a declining in 2017. Followed by three acquisitions, Jays now represent around 40% of sales trend. Moreover, a solid turnaround cannot be based on any single year. sales of the group's total sales. Managing integrations and making acquired companies profitable often takes Today, the Group offers products within two business areas: Audio & Sound more time than expected. and Smart Mobility. Audio & Sound consisting of Jays headphones together Fragmented market, fragile position with the Smart Speaker brand Clint. The second area, Smart mobility, offering Northbaze’ market is highly fragmented with some established brands and mobile leather accessories represented by Krusell, Kavaj, Pagalli, and Walk on many smaller companies operating locally or globally in both Audio & Sound Water. With offices present in Gothenburg, Germany, Denmark, China, and and Smart Mobility. As a consequence of easy access to OEM producers, there Thailand the employee base amounts to 300 people of which 280 are in are very low entry barriers both in terms of capital requirements and technology Thailand. challenges. Moreover, Northbaze’ position without competitive moats increases its challenges and pressures it for constant innovation. Investment case • Promising strategy: market-matching organic growth through new Earnings challenges product development by Jays Headphones, value-adding acquisitions, The group operates in a low profitable industry and has in the past been new business areas, and increased online sales to drive growth. struggling to reach profitability. In the history of Jays Headphones, profitability • Audio & Sound lead the way: fast-growing wireless headphones market was only achieved in the fiscal years of 12/13 and 13/14 (EBIT 10m forecasted CAGR of 20% over the next five years respectively 8m). Since then, sales have been declining from an all-time high of • Limited expectations: In view of its improved business opportunity and SEK 84m to approx. 50m in 2018. In the history of Krusell, the groups largest potential positive surprises in its acquisitions, we value the company at sales contributor, the trend is not either satisfactory. Profitability was achieved SEK 0.7 per share in 2014 (20m EBIT) when sales reached an all-time high of 173m (73m 2018). When it comes down to the bottom line, results in cost-cutting, and efficiency Across Northbaze we see better financial performance in prospect as the will be a larger challenge than increasing sales. group establishes a suite of brands in an attractive though highly competitive market: i) our conservative forecast for sales synergies from adopting the subsidiaries’ smart mobility product and a new online sales strategy gives a Catalyst types group CAGR of 10% over the next five years; ii) cost synergies from Achieving profitability consolidating office functions and moving Kavaj production to Krusell’s factory Better cash flows would merit higher multiples and valuation. We expect the in Thailand, plus shifting the group's sales channels online, should reduce company to reach breakeven in Q4’19, respectively an EBITDA of 6m in 2020. OPEX/sales from 58% (2018 pro forma) to 41% 2020 and around 38% by 2025; iii) blended gross margins of around 45% after the acquisitions should give a Value-adding acquisitions long-term competitive advantage against peers that average 25-40%. Additional acquisitions are likely. Management has a proven ability to find targets with good value-adding potential at relatively low multiples around or Audio & Sound lead the way below 0.5x sales Jays headphones and the smart speaker brand Clint offer the group’s greatest upside potential, we judge – particularly with a new offering in the fast-growing Full synergies wireless headphones market forecasted CAGR of 20% over the next five years. Northbaze does not yet see the full synergy effects of its acquisitions. Its new The group’s other area, Smart Mobility, provides a base for synergies. strategy, with an improved offering from Jays headphones, sales and cost synergies between Krusell and Kavaj, and potential value-adding M&A, should Strong, hands-on ownership position the group for better growth and profitability. In turn, this would Since investing in Northbaze in 2017, Erik Fischbeck and Gert Nordin, who now enable a revaluation own around 15%, have supported the company strongly. Their experience of Hexatronic’s M&A successes and their capital are both of significant value to Personal notes the company.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 145 190020M9

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 8.5 Major Long Moderate Mid Minor Short 4 4 3 Bear Base Bull People Business Financials 6.0 8.5 8.5 Turn page for catalyst specifics

Snapshot Financials

Opus Group Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 8 1800 Revenue, MSEK 2,497 2,705 2,860 3,028 3,179 7 1700

6 1600 Growth 34.3% 8.3% 5.7% 5.8% 5.0%

5 1500 EBITDA 504 632 693 740 716 4 1400 EBITDA margin 20.2% 23.4% 24.2% 24.4% 22.5%

Volume EBIT 206 219 307 384 413

10M EBIT margin 8.2% 8.1% 10.7% 12.7% 13.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 51 32 198 298 346 Net earnings 26 3 134 203 235

Marketplace NASDAQ Stockholm Net margin 1.0% 0.1% 4.7% 6.7% 7.4%

CEO Lothar Geilen Dividend/Share 0.05 0.07 0.10 0.15 0.20 Chairman Katarina Bonde EPS adj. 0.09 0.01 0.46 0.70 0.81

Share information P/E adj. 61.3 780.7 18.6 12.3 10.6 Share price (SEK) 8.5 EV/S 1.2 1.4 1.3 1.1 0.9

Number of shares (M) 290.3 EV/EBITDA 6.2 6.1 5.2 4.4 4.1 Market cap (MSEK) 2,433 Last updated: 2020-01-08 Net debt (MSEK) 1,175

Owner Equity Votes Analyst RWC Asset Management LLP 19.9% 19.9% Magnus Greko och Jörgen Hentschel 14.5% 14.5% 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 Rickard Andersson 3.2% 3.2% Henrik Alveskog owns shares in Opus Group: Yes Dimensional Fund Advisors 3.2% 3.2% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 146 COMPANIES

Company description Opus was founded in the early 90's in Gothenburg where their head office is still while yet. Vehicle inspection is a typically Western phenomenon, but the situated. During the first years the strategy was to provide AB Svensk problem of substandard vehicles is far greater in developing countries. In the Bilprovning with equipment for emission testing as the catalytic converters long term there is huge potential for further growth in these countries, and were introduced in the market. Step by step Opus extended its offering and Opus has the products, experience and ambition to participate. The risks in a costumer base and grew internationally. The big change, from an equipment country like Pakistan are obviously higher than in the US. But with more new supplier to a service provider, came in 2008 when Opus aquired Systech, a US establishments the risk becomes diversified while growth prospects improve. based vehicle testing company. According to Opus profitability in emerging markets should be higher to justify the risks that are involved. Since then revenues from vehicle inspection programs has grown substantially, both organically and through some major acquisitions. These programs make In the US and Western Europe, the overall market has been relatively upp for approximately 90 percent of revenues whereas the remaining 10 unchanged in size in recent years, but now there are some factors that point to percent comes from equipment sales. Starting in 2018 Opus is reporting two growth in the coming decade. One of these is a new EU directive covering more divisions: Vehicle Inspection and Intelligent Vehicle Suport. The latter is a newly stringent controls on electronic safety systems. Safety features in modern formed division assisting vehicle technicians with model-specific vehicle vehicles are based on multiple systems and sensors that interact to give the systems data. desired outcome. This means that tests are becoming more sophisticated and require a higher level of technology at inspection stations. This perfectly suits Opus currently operates a number of vehicle inspection programs in North and Opus since it is a technology-oriented company with its own development. South America, Sweden and Pakistan. Sweden is an open market, but in reality Another growth factor was illustrated by the VW scandal. Realistically, it is 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 the authorities give exclusive rights to run testing programs, usually for a relevant measurements, rather than relying on laboratory testing by automobile period of 8-10 years. In both cases revenues are stable and EBITDA-margins manufacturers. In the US, Environmental Protection Agency (EPA) tightened the around 20 percent. The company has around 2 600 (2019) employees at their standards for ground-level ozone not very long ago. This means that a number facilites in North- and South America, Sweden, UK and Pakistan. The shares are of areas in the United States must improve their air quality. Many states and listed on Nasdaq Stockholms Main market. counties have no vehicle inspection at all, which would appear to be the Investment case obvious first step, but of course not the only one. Since then the Trump administration has forced EPA to take a different course. Fortunately most • A number of new businesses are at this point running with low or states seem a lot more interested in doing something about the air quality than negative profits, but will gradually improve as volumes pick up. These are the federal government. primarily EaaS, the testing programs in Pakistan and South America and the division Intelligent Vehicle Support. Bear points: • The risk for Opus loosing some of its current programs in the US should • Some of the new countries that Opus has entered, e.g. Pakistan, are not be ignored. The bigger contracts are not due for renewal in several unstable in several aspects. The amount of business coming from these years but these procurements are sometimes difficult to predict. markets is not extensive so far, which limits the effect of any potential • Opus seems to have a number of new deals in their pipeline for 2019-20. damage, if things go sour. Both new markets and new clients in current markets. If some of these • Opus could loose some of its current contracts in the US. If that happens materialize a revaluation of the company may be triggered. it might be interpreted as if they haven't delivered according to the clients expectations. Or that prices are under preassure. Even if the size of the Over the past seven years, Opus has tenfolded its revenues while considerably contract is modest these signals could be clearly negative. boosting its margins. The growth comes both from a number of major acquisitions and several new contracts gained primarily in the US market. The Catalyst types next few years are unlikely to be as dramatic, but there are still plenty of growth Full impact from current business opportunities. The company's own target is 5-10 percent annual growth. The A number of activities are paving the way for better profits in the coming years: fact that Opus has won several contracts suggests it has a competitive offering 1) The rental business in California, Georgia and other upcoming states will and is well regarded by its customers. References are extremely important in gradually feed through. 2) Testing programs in Pakistan and Chile are now the vehicle inspection business. Of course there is also a risk of losing existing stepping up 3) Good leverage from IVS expansion. contracts from time to time, but with its track record there is a greater probability of it instead managing to win new business. This means that, over Winning new contracts 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

The stock market has certainly become aware of the company, but has renegotiated and new programs are implemented in some states or counties. probably not dared to factor in the journey being able to continue for a good

REDEYE NORDIC TECHNOLOGY REPORT - 2020 147 1900200k30

PAY Company page Paynova https://www.redeye.se/company/paynova

Redeye Rating Valuation and forecast is under review.

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 10.1 Major Long Moderate Mid Minor Short 3 3 1 Bear Base Bull People Business Financials 8.0 25.0 50.0 Turn page for catalyst specifics

Snapshot Financials

Paynova Redeye Estimates OMXS30 2018 2019E 2020E 2021E 25 1800 Revenue, MSEK 41 49 81 109 20 1700

15 1600 Growth 23.6% 20.2% 66.3% 34.0%

10 1500 EBITDA -17 -18 4 16 5 1400 EBITDA margin Neg Neg 4.7% 15.1%

Volume EBIT -29 -31 -6 9

100k EBIT margin Neg Neg Neg 8.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -31 -31 -6 9 Net earnings -33 -31 -6 9

Marketplace Nordic Growth Market Net margin Neg Neg Neg 8.0%

CEO Daniel Ekberger Dividend/Share 0.00 0.00 0.00 0.00 Chairman Anders Persson EPS adj. -0.04 -0.04 -0.01 0.01

Share information P/E adj. -3.2 -2.6 -13.0 9.4 Share price (SEK) 10.1 EV/S 3.8 2.8 1.2 0.4

Number of shares (M) 9.2 EV/EBITDA -8.9 -7.7 25.2 2.9 Market cap (MSEK) 92 Last updated: 2019-04-17 Net debt (MSEK) 14

Owner Equity Votes Analyst Daniel Ekberger 5.7% 5.7% Nordnet Pensionsförsäkring 5.0% 5.0% Kristoffer Lindström [email protected] Marcus Nordvall 4.9% 4.9% Chirp AB 4.6% 4.6% Origo Capital 4.4% 4.4% Conflict of interests Theodor Jeansson 3.9% 3.9% Kristoffer Lindström owns shares in Paynova: No Kjell-Ake Sundqvist 3.6% 3.6% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. David Larsson 3.0% 3.0% Swedbank Försäkring 2.4% 2.4% Anders Axelsson 2.3% 2.3%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 148 COMPANIES

Company description When Paynova was founded in January 2000, the company was offering an Proven platform electronic payment solution marketed under the brand name, the Paynova There is a value in both the existing processing platform and the newly Wallet. Paynova was listed on the Nordic Growth Market in February 2004. developed consumer credit platform. Acquiring a functioning payment platform would be interesting for both local and international companies that want to An important feature to Paynovas offering is that it is independent and that expand in the Nordics. Using the valuation on DIBS gives a value of Paynovas clients keep the ownership of the consumer relation throughout the approximately SEK 100 million for the existing platform for processing. As the whole payment process. Another crucial difference is that Paynova and their potential value of the consumer credit platform is much higher, it is fair to argue clients enter a partnership in which the proceeds are shared. Instead of just that the downside is limited being an outsourced service the client is paying for, Paynovas offering will increase the profit for their client. Investment risk Paynova is still in many ways a start-up, since the company was rebuild in Investment case 2013. Since a majority of the cash flow is coming from a minority of its client

• Paynovas new focus on "Invoice as a service" has much higher revenue the financial situation is not optimal. The ability to obtain new clients is potential. Industry participants are talking about a rough estimate of SEK therefore of highest importance. Until the company reaches a positive cash 20 on average for invoice and SEK 200 in total for instalments in flow there is additional risk for more targeted rights issues which will create a comparison to processing direct payments were the revenue per dilution for existing owners. transaction is about SEK 1. • There is a value in both the existing processing platform and the newly Catalyst types developed consumer credit platform. Acquiring a proven payment New share issue likely imminent platform would be interesting for many banks. Using the valuation on Cash and cash equivalents were SEK 1.9 million on September 30. In addition, DIBS gives a value of approximately SEK 100 million for the existing the company has a check credit of SEK 3 million. In other words, Paynova is in platform for processing. need of additional capital to strengthen the financial position. • Competitive business model: Paynovas service is enabling e-retailers to

receive a share of the proceeds from consumer credit and to keep the PayZmart gives revenue boost ownership of the customer. The latter is important since the payment PayZmart has now signed approximately 40 agreements with dental clinics. process can be used as a sales tool and increase repeat sales. The partnership with PayZmart should have an significant revenue impact during 2019-2020 for Paynova. A rapidly growing market

Paynova is operating in a market with high structural growth. Purchasing of Potential platform company agreement goods and services on the Internet is growing rapidly due to increasing Paynova is in discussions with several platforms that want to establish new penetration of connected devices, ease of use and increased security. E- and improved offerings in the market. These platforms are for example banks commerce in Sweden has grown by ten times since 2013 and this structural and credit market companies. The discussed potential cooperation with these growth shows no signs of abating. type of customers is likely something similar to the partnership with Payzmart.

Competitive business model Large physical market To be successful on-line, the handling of payments is an important factor for e- The leading POS supplier Paynova has spoken about earlier is now official. retailers. To address this, Paynova has developed a consumer credit service Panova's solution is integrated into the core systems at Visma/Extenda. In which enables the e-retailers to grow sales and increase profit margins addition to pure system integration, cooperation also involves further work to substantially. In short, Paynovas service is enabling e-retailers to receive a process the very large physical market jointly. share of the proceeds from consumer credit and to keep the ownership of the customer. The latter is important since the payment process can be used as a sales tool and increase repeat sales.

Higher profitability Since Daniel Ekberger took the helm in February 2013 Paynova has transformed from a PSP into a Fin Tech company fully focused on consumer credit solutions. The new Consumer Credit offering, “Invoice as a service”, was launched and marketed towards existing and new clients in the beginning of 2015. The reason for launching Invoice as a service is the much higher revenue potential compared to processing direct payments. Industry participants are talking about a rough estimate of SEK 20 on average for invoice and SEK 200 in total for instalments in comparison to processing direct payments were the revenue per transaction is about SEK 1.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 149 1900110 500k

POLYG Company page Polygiene https://www.redeye.se/company/polygiene

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 8.5 Major Long Moderate Mid Minor Short 3 2 2 Bear Base Bull People Business Financials 3.0 7.0 12.0 Turn page for catalyst specifics

Snapshot Financials

Polygiene Redeye Estimates OMXS30 2018 2019E 2020E 2021E 9 1800 8 Revenue, MSEK 69 68 84 107 1700 7 1600 Growth -8.8% -1.8% 24.0% 27.0% 6 5 1500 EBITDA 9 -6 -5 3 4 1400 EBITDA margin 12.4% Neg Neg 2.4%

Volume EBIT 8 -7 -6 1 1 000k 500k EBIT margin 11.3% Neg Neg 1.3% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 8 -7 -6 1 Net earnings 6 -5 -5 1

Marketplace First North Stockholm Net margin 8.6% Neg Neg 1.0%

CEO Ulrika Björk Dividend/Share 0.00 0.00 0.00 0.00 Chairman Jonas Wollin EPS adj. 0.29 -0.25 -0.23 0.05

Share information P/E adj. 19.5 -23.9 -26.4 117.3 Share price (SEK) 8.5 EV/S 1.6 1.8 1.5 1.2

Number of shares (M) 20.5 EV/EBITDA 13.0 -22.0 -26.0 49.6 Market cap (MSEK) 174 Last updated: 2019-11-20 Net debt (MSEK) 4

Owner Equity Votes Analyst Håkan Lagerberg 8.4% 8.4% SIX SIS AG 5.7% 5.7% Havan Hanna [email protected] Svanberg & Co Invest 5.4% 5.4% JPM Chase NA 4.6% 4.6% Jonas Wollin 4.3% 4.3% Conflict of interests Jonas Pålsson 4.2% 4.2% Havan Hanna owns shares in Polygiene: No Aktia Fund Management 4.1% 4.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Lennart Holm 3.8% 3.8% Mats Georgson 3.7% 3.7% Avanza Pension 3.1% 3.1%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 150 COMPANIES

Company description Catalyst types Polygiene’s brand is based on its Polygiene Odor Control Technology, with a Higher sales growth than estimates strategy built on ingredient branding similar to that of Gore-Tex or Windstopper. Compared to Polygiene's financial goals (sales of SEK 330 million in 2022), The company is currently the leading ingredient brand in the sport and outdoor our estimates appear conservative, so there should be potential for positive segment and focuses on premium brands for all kinds of clothing (sports, surprises. leisure, fashion, work), footwear and home textiles. Its customers (often called partners by the company) include Adidas, Patagonia, Athleta and Hugo Boss. New partnerships with world-leading brands In 2018 sales were SEK 69 million and EBIT SEK 7.8 million. Polygiene has been We expect new partnerships across all segments going forward, but traded on First North Stockholm since March 2016. partnerships with new brands with the same status as Adidas would raise the valuation. Investment case

• Polygiene - an Ingredient Brand • The winner takes it all • Question marks about growth • Valuation at base case amounts to SEK 7.0 per share and fair value range to SEK 3.0 - 12.0

Polygiene - an Ingredient Brand Polygiene builds a brand (Ingredient Brand, like Gore-Tex) based on the permanent odor control functionality (Polygiene Odor Control Technology). So far, no competitor has succeeded in building an equally strong brand. We believe this to be its main competitive advantage.

The winner takes it all An established fact for Ingredient Brand strategies is that the leading brand receives a large market dominance. If the company succeeds in maintaining its leading position in Sport & Outdoor and capturing the same position in the newer segments of Lifestyle, Shoes and Home Textiles, there are high chances that the next Swedish export success may be a small company listed on First North.

Question marks about growth After a period of declining growth rate, the Q3’19 report showed record numbers in absolute terms and where sales grew 20% y/y. If the quarter proves to be the start of a positive period, our current estimates appear conservative - thus we see room for surprises on the upside going forward.

Main risks:

• The debate on chemicals in textiles. • The odor control functional segment is a relatively new market that still has to prove its existence, today it is too early to determine if odor control is here "to stay" - i.e. there is great market risk. • The intensive strategy work that took place in 2018 does not produce the desired growth.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 151 190015M175

PCELL Company page PowerCell Sweden https://www.redeye.se/company/powercell-sweden

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 171.0 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 35.0 60.0 100.0 Turn page for catalyst specifics

Snapshot Financials

PowerCell Sweden Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 150 1800 125 Revenue, MSEK 61 64 120 325 520 1700 100 1600 Growth 64.9% 5.8% 87.5% >100% 60.0% 75 50 1500 EBITDA -55 467 -37 37 90 25 1400 EBITDA margin Neg 729.9% Neg 11.5% 17.4%

Volume EBIT -61 462 -43 29 78 10M 5M EBIT margin Neg 722.1% Neg 8.9% 15.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -62 464 -40 31 85 Net earnings -62 464 -40 31 85

Marketplace First North Stockholm Net margin Neg 724.7% Neg 9.7% 16.3%

CEO Per Wassén Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Magnus Jonsson EPS adj. -1.19 8.95 -0.78 0.60 1.63

Share information P/E adj. -30.2 19.5 -224.9 288.3 106.8 Share price (SEK) 171.0 EV/S 29.2 119.7 64.4 23.8 14.8

Number of shares (M) 51.9 EV/EBITDA -32.2 16.4 -210.0 207.4 84.9 Market cap (MSEK) 9,046 Last updated: 2020-01-08 Net debt (MSEK) -525

Owner Equity Votes Analyst Fouriertransform AB 11.3% 11.3% Robert Bosch GmbH 11.3% 11.3% Henrik Alveskog [email protected] Avanza Pension 6.0% 6.0% Mohammed Al Amoudi 4.1% 4.1% Finindus 3.9% 3.9% Conflict of interests Nordnet Pensionsförsäkring 1.0% 1.0% Henrik Alveskog owns shares in PowerCell Sweden: No Palcmills Oy 0.8% 0.8% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 152 COMPANIES

Company description Operations started as an R&D project within the Volvo Group in 1993. Powercell industry dramatically. But we still don’t know what is stipulated in terms of as a company was founded in 2008. The year after the ownership base was royalty fees. Instead this is a new unknown variable. broadened with a rights issue to Midroc New Technologies, Fouriertransform In the next few years there are good opportunities for much more business and Finindus of Belgium. In December 2014 Powercell made an IPO and listed from other segments of the market. Most likely the S2-stack that is being its shares on Nasdaq First North. evaluated by Wuhan Tiger and other similar companies. These volumes could Since year 2016 Powercell has started launching its products in the market. easily be enough to take Powercell to break-even. When we see more Up until 2019 revenues have been somewhat sporadic and comes mainly from significant steps in this direction, the company can grow into its current sales of prototypes. Sales have been growing continously in spite of no real valuation. Primary value drivers for the near future are commercial successes business from repeat orders yet. The last couple of years the company has in terms of major orders. Or a partnership with Siemens for marine shown a loss of some SEK 60 million due to costs related to product applications, similar to the one with Bosch. developement. Powercell has a very strong balance sheet, thanks to the Bosch Bear points: deal in the spring of 2019. With around SEK 500 million in net cash position • If it turns out that Powercell cannot offer competitive prices at high there is plenty of financial flexibility and certainly enough to fund operations volume production. until break-even. Powercell has some 40 employees, primarily within • If several other manufacturers kan offer similar products which means development, construction and design, which is conducted in facilities adjacent Powercell has to compete with low prices. to the head office in Gothenburg. • If their Chinese business partners terminate the cooperation with Investment case Powercell. • If Powercell doesn't present any more substantial orders during 2020. • The market for fuel cells is expected to show robust growth over the next decade. But it is very difficult to estimate the potential size and growth Catalyst types rate of this market. Volume orders for fuel cell stacks • It is also still difficult to assess Powercells USP's. The recent deal with Additional volume orders for both S1 and S2 from industrial clients will confirm Bosch is certainly a strong indication of top notch technology. But there that Powercell has a competitive offering. are still 2-3 years (at latest 2022) until start of production of the S3-stack. • There is no doubt potential, but that has already been factored in by the Partnership with Siemens stock market. Primary value drivers for the near future are commercial Powercell has a MoU with Siemens to develop fuel cell systems for marine successes in terms of major orders. Or a partnership with Siemens for applications. A partnership similar to the one with Bosch would be very marine applications, similar to the one with Bosch. positive. Both in financial terms and as a confirmation of Powercells technology. The market for fuel cells has grown substantially over the last few years and the products are now used in a wide range of applications. The industry is still Additional insight into the Bosch deal at an early commercial stage and demand is to a great extent supported by The partnership with Bosch was the single most important news in several government subsidies. Hence it is hard to estimate the potential size and years. Additional insight into this deal could be significant. For example: the growth rates of this market. stipulated royalty terms. It is also still difficult to assess Powercells USP's. The recent deal with Bosch is certainly a strong indication of top notch technology. But there are still 2-3 years (at latest 2022) until start of production of the S3-stack. And there are several other manufacturers, Toyota, Hyundai, and Honda, who already have fuel cell vehicles on the roads. We can still not determine if Powercell has strong and long lasting competitive advantages, apart from the partnership with Bosch.

Share price reflects rather high expectations Since there is significant uncertainty regarding the fuel cell market on a global scale as well as Powercells competitive advantage, our valuation range is also very wide. There is no doubt potential, but that has already been factored in by the stock market. Powercell and other sector collegues in the fuel cell segment have valuations that reflect rather high expectations. The partnership with Bosch has improved Powercells chances to access OEM clients in the vehicle

REDEYE NORDIC TECHNOLOGY REPORT - 2020 153 1900500k275

PACT Company page ProAct IT Group https://www.redeye.se/company/proact-it-group

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 187.2 Major Long Moderate Mid Minor Short 4 5 4 Bear Base Bull People Business Financials 131.0 201.0 287.0 Turn page for catalyst specifics

Snapshot Financials

ProAct IT Group Redeye Estimates OMXS30 2018 2019E 2020E 2021E 250 1800 225 Revenue, MSEK 3,314 3,394 3,706 3,845 1700 200 1600 Growth 1.9% 2.4% 9.2% 3.7% 175 150 1500 EBITDA 231 278 326 353 125 1400 EBITDA margin 7.0% 8.2% 8.8% 9.2%

Volume EBIT 165 124 189 204

250k EBIT margin 5.0% 3.6% 5.1% 5.3% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 168 125 186 201 Net earnings 127 94 143 155

Marketplace NASDAQ Stockholm Net margin 3.8% 2.8% 3.9% 4.0%

CEO Jonas Hasselberg Dividend/Share 4.15 3.07 4.69 5.06 Chairman Eva Elmstedt EPS adj. 13.86 10.25 15.64 16.86

Share information P/E adj. 15.1 14.8 9.7 9.0 Share price (SEK) 187.2 EV/S 0.5 0.5 0.4 0.4

Number of shares (M) 9.7 EV/EBITDA 7.7 5.6 4.5 3.8 Market cap (MSEK) 1,822 Last updated: 2019-10-17 Net debt (MSEK) 59

Owner Equity Votes Analyst Martin Gren (Grenspecialisten) 11.2% 11.2% Livförsäkringsbolaget Skandia 10.9% 10.9% Fredrik Nilsson [email protected] Triton 8.0% 8.0% UBS AG London Branch 7.2% 7.2% Länsförsäkringar Fonder 6.9% 6.9% Conflict of interests Skandia Fonder 6.9% 6.9% Fredrik Nilsson owns shares in ProAct IT Group: Yes Unionen 4.0% 4.0% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Avanza Pension 3.8% 3.8% HSBC Bank Plc 2.8% 2.8% Canaccord Genuity Wealth Management 2.8% 2.8%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 154 COMPANIES

Company description Proact is one of Europe’s leading independent integrators with regards to data for specialist know-how in many fields is increasing. The changing market is centers and cloud services. The company covers everything from start to end likely drive a consolidation of smaller players. regarding data centers - including analysis and design, implementation and support. The data centers and cloud solutions are built using hardware and Misunderstood business Many investors still see Proact as a low-margin reseller of hardware struggling software from leading suppliers such as Cisco, Dell EMC, Hitachi Datasystems, to compete with cloud giants as Amazon and Microsoft. As around two-thirds NetApp and Veritas. Proact focuses on business-critical data for large and of its total sales are system revenues and public cloud services are expanding medium-sized corporations and authorities. rapidly, there is some basis to this view.

Investment case However, Proact focuses on large and medium-sized companies that seldom put their business-critical data – its specialty – in the public cloud for security Cloud growth taking off again and compliance reasons. New regulations and recent events, like the US Cloud Proact achieved decent growth in cloud revenues from 2014, when it started Act and data leaks such as those from the Swedish Transport Agency and to report its performance in this area, until 2018. Although its operational 1177, make migration of data in Proact’s niche to public clouds even more performance remained robust, the cloud revenue growth story vanished. questionable. However, in the fourth quarter of 2018 new cloud contracts sky-rocketed to SEK 176m – more than twice its previous best quarter on this measure (SEK 70m Moreover, Proact’s profits are mostly on its recurring revenue from cloud and in Q3 18) – taking last year’s new cloud contract growth versus 2017 to 84%. support services – the areas where it generates the greatest value for its The solid new cloud contract figures will drive cloud revenue growth in 2019. customers.

As cloud contracts usually run for 3-5 years, their direct growth contribution is Counter-Thesis limited. However, thanks to the robust intake, which is set to continue this year, Public cloud momentum we expect revenue growth above 10% in this area over the coming years. We The public cloud giants are moving into private and hybrid solutions. If they expect investors to reward the increasing share of recurring revenue at what we were to attract business-critical data from large and medium-sized companies, estimate will be higher margins than Proact’s average with increasing multiples. this would represent a threat to Proact. However, as these firms generally lack in-house capacity to implement solutions for large businesses, they are likely to Acquisitions in prospect need specialist partners like Proact. In December 2018 Proact increased its growth target from 4% to 10%. We believe that its organic target remains approximately 4% and interpret the Supplier expansion higher number as the company’s way of signalling that more acquisitions are to Proact’s suppliers, such as Dell EMC and Cisco, may establish or expand be expected going forward. European service divisions. Competing against these large and powerful companies with hard-to-beat product knowledge would be challenging. Potential targets span from system-heavy businesses to cloud-centric However, Proact has the advantage of being an independent supplier, companies. The first group has considerably lower multiples than the second. able to source the best technology from every supplier. For a business with a revenue mix like Proact’s, we judge 8x EBIT to be a reasonable level. In addition to multiple arbitrage, we believe Proact can realize synergies through co-ordinated purchases of hardware and software, as well as Catalyst types by adding its cloud and support services (system-heavy targets) and exporting Value-adding acquisitions acquired knowledge to other regions (cloud-centric targets). As Proact’s acquisition activity has been sporadic in recent years, we believe that investors would view a deal positive for two reasons. Firstly, it should As more complex variations of clouds and data centers – such as hybrid clouds boost EPS – both initially and over time as Proact realizes synergies. Secondly, and hyper-converged data centers – become more common, the need it would add substance to Proact’s higher sales growth target and the market would probably start to discount further acquisitions.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 155 1900500k25

RPLAN Company page Ranplan Group https://www.redeye.se/company/ranplan-group

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 13.5 Major Long Moderate Mid Minor Short 3 4 2 Bear Base Bull People Business Financials 4.0 17.0 37.0 Turn page for catalyst specifics

Snapshot Financials

Ranplan Group Redeye Estimates OMXS30 2018 2019E 2020E 2021E 20 1800 Revenue, MSEK 22 56 80 113 15 1700

10 1600 Growth >100% >100% 43.5% 42.0%

5 1500 EBITDA -28 -5 8 25 0 1400 EBITDA margin Neg Neg 10.2% 21.7%

Volume EBIT -29 -5 8 24

250k EBIT margin Neg Neg 10.0% 21.5% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -29 -5 8 24 Net earnings -29 -5 8 24

Marketplace First North Stockholm Net margin Neg Neg 10.0% 21.5%

CEO Per Lindberg Dividend/Share 0.00 0.00 0.00 0.00 Chairman Jie Zhang EPS adj. -1.43 -0.23 0.40 1.21

Share information P/E adj. -3.3 -60.0 35.4 11.6 Share price (SEK) 13.5 EV/S 3.4 4.9 3.3 2.1

Number of shares (M) 20.1 EV/EBITDA -2.6 -58.9 32.3 9.8 Market cap (MSEK) 268 Last updated: 2019-08-18 Net debt (MSEK) -18

Owner Equity Votes Analyst Xue Jinxing 40.2% 40.2% Per Lindberg 10.6% 10.6% Erika Madebrink [email protected] Li Hongbing 9.3% 9.3% Zhang Jie 5.3% 5.3% Wu Yuhua 5.0% 5.0% Conflict of interests Wu Qimei 3.8% 3.8% Erika Madebrink owns shares in Ranplan Group: No Fang Yibing 2.2% 2.2% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Zhao Wenkang 1.5% 1.5% Song Hui 1.4% 1.4% Avanza Pension 1.3% 1.3%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 156 COMPANIES

Company description Ranplan is a wireless communications software company headquartered in towards securing additional “OSS”-deal, i.e. similar use case as the Japanese Cambridge, UK. Its commercial journey took off in 2014 when Ranplan customer which placed the SEK 22.5m order in February. Such orders should launched its network planning tool for mobile operators, network equipment have positive effects on the share price as it likely would mean large revenues vendors, system integrators, small cell vendors, and building managers. The and further prove that the Japanese order was no one-off. We further believe company has deals with several key players on the mobile telecommunications that additional reports with maintained significant growth should close the gap market, some of which act as resellers of Ranplan’s offering. With the imminent to our fair value in base case. rollout of 5G technology, and an increasing need to plan mobile networks, In a scenario where Ranplan gains larger market shares and gets its software Ranplan’s unique in-building network planning software positions it well to engine integrated into a larger number of operators’ network management capitalize on a digitalizing world. systems, which leads to higher long-term growth and enhanced profitability, we see a fair value of SEK 37 per share as reflected by our bull case. Investment case Bear points (counter-thesis) • Unique software: Ranplan’s combination of support for both in-building Historically unclear ROI and responsibility for installing in-building networks and outdoor networks gives it an unmatched ability to mitigate Ranplan often cites that only 2% of all commercial buildings have dedicated in- interference. We believe this will be key to gain share in the growing building wireless networks. Apart from demonstrating the market potential, this network planning market. also highlights an uncertainty: no customer group has historically identified • High growth and margin potential: we expect sales to grow at a CAGR of sufficient ROI in installing in-building wireless mobile networks at a larger 72% until '21e. Its operational leverage further allows for strong scale. Historically operators have only focused on providing network coverage profitability, which explains our forecast of long-term EBIT-margins for complete outdoor areas. exceeding 30%. On the other hand, a shift is expected following the introduction of improved • Good upside potential: our DCF-based valuation results in a base case wireless technologies that should clarify the ROI potential. The introduction of fair value of SEK 17 per share. 5G and use of higher frequency bands will require a change as the traditional Unique software play. Ranplan is an asset-light software provider with high “outside-in” approach will not provide sufficient coverage and capacity for new gross margins (>95%) and recurring revenues from sales of licenses. Its high high data rate services. operating leverage will translate into significant profitability if it succeeds in growing with the market. Given the uniqueness of its offering, we see Ranplan New competitors likely to emerge as well-positioned for notable growth in the coming years. Although the market for outdoor network planning tools is established, the market for indoor network planning is still relatively new. Given the substantial Ranplan benefits from 4G network densification in preparation for 5G. Although opportunities that the emerging 5G market will bring, it is reasonable to expect the number of 5G connections will only reach major scale around 2022, an increasing number of new players trying to benefit from these as well as Ranplan’s software will be valuable throughout the rollout phase. In February it increased competition from providers of outdoor network planning software. received its first 5G order: at SEK 22.5m this was more than its entire 2018 sales (SEK 22m, up 118% year-on-year). Besides underscoring its sales potential, it also laid the ground for growth in 2019, where reported sales in Catalyst types H1’19 was 32% higher than the full-year sales in 2018. It was further the first New channel partner Although it directly targets most of the larger operators and telecom equipment order where its software will be used for integration in an operator’s cloud- vendors, channel partners (distributors/resellers) can help Ranplan grow its based OSS for automatic optimisation. volumes. We, therefore, regard additional reselling partners as important for Verified by major telcos. The presence of major telecom firms among the case. Ranplan’s customers, including China Mobile, Ericsson, Telenor and Verizon, supports the case. The challenge now is to increase the number of licenses New "OSS" order sold to each of these while continuing to attract new clients (having already We argue that additional orders are the key catalysts in the current stage. An risen from 10 at the beginning of 2017 to about 75 by the end of Q1’19). example is the SEK 22.5m Japanese order, which reassured investors about High growth and margin potential. We see plenty of further growth and, Ranplan’s potential and drove a rally of more than 50%. Investors will want especially, margin potential in Ranplan over the coming years, forecasting sales proof that this order was not a one-off. to grow at a CAGR of 72% until 2021 where we forecast an operating margin of 22%. Furthermore, we expect it to achieve much higher EBIT-margins in the long-term (peaking around 35%) through its strong operating leverage.

Solid upside potential. We have increased our DCF-based valuation to SEK 17 per share in our base case. In the short-term, we will place greatest focus on additional order news. Management has stated that Ranplan is working

REDEYE NORDIC TECHNOLOGY REPORT - 2020 157 1900500k13

REMEDY Company page Remedy Entertainment https://www.redeye.se/company/remedy-entertainment

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 12.4 Major Long Moderate Mid Minor Short 4 4 3 Bear Base Bull People Business Financials 6.0 14.0 21.0 Turn page for catalyst specifics

Snapshot Financials

Remedy Entertainment Redeye Estimates OMXS30 12 2018 2019E 2020E 2021E 1800 11 Revenue, MEUR 20 39 34 48 10 1700 9 1600 Growth 17.3% 94.0% -12.6% 39.2% 8 1500 7 EBITDA 1 13 5 12 6 1400 EBITDA margin 3.0% 32.5% 15.4% 25.2%

Volume EBIT 1 13 5 12

250k EBIT margin 3.0% 32.5% 14.0% 24.4% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 1 12 5 12 Net earnings 1 11 4 9

Marketplace First North Finland Net margin 3.0% 27.0% 11.2% 19.5%

CEO Tero Virtala Dividend/Share 0.00 0.10 0.15 0.17 Chairman Markus Mäki EPS adj. 0.05 0.87 0.32 0.77

Share information P/E adj. 132.8 12.2 33.6 13.9 Share price (EUR) 12.4 EV/S 3.0 2.5 2.8 1.8

Number of shares (M) 12.1 EV/EBITDA 99.8 7.6 17.9 7.3 Market cap (MEUR) 150 Last updated: 2019-09-09 Net debt (MEUR) -34

Owner Equity Votes Analyst Markus Mäki 27.3% 27.3% Accendo Capital 20.5% 20.5% Tomas Otterbeck [email protected] Sami Järvi 5.1% 5.1% Working Capital Management Pte Ltd 3.4% 3.4% Tero Virtala 2.9% 2.9% Conflict of interests Taaleritehtaan Rahastoyhtiö Oy 2.5% 2.5% Tomas Otterbeck owns shares in Remedy Entertainment: Yes Saku Lehtinen 2.2% 2.2% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Mika Reini 2.1% 2.1% Tero Tolsa 1.6% 1.6% Anssi Hyytiäinen 1.5% 1.5%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 158 COMPANIES

Company description Catalyst types Remedy Entertainment is at the ratings forefront globally for its games. Its Alan Wake remaster biggest commercial success to date is the cult classic Max Payne, released in July 1 2019 announced that the publishing rights of Alan Wake were reverted the early 2000s. In the history Remedy is also known for spending a very long from Microsoft. After this deal Remedy has full control of the Alan Wake time developing its games, which in this industry means in excess of four franchise. For example, the studio can decide to develop a remaster of the years. game (and the spin-off). This game could also be a Sony exclusive.

Shortly after the release of the game Quantum Break, Remedy began a new Cash from Sony for an exclusive game chapter in its life when Markus Mäki, co-founder and the largest shareholder, The so-called “third project” under development at the Remedy studio is likely a ceded the role of CEO to Tero Virtala. single-player action game according to us. We believe Sony want the game to Remedy’s most important strategic decisions in this process were: be exclusive on Playstation consoles and one good reason to buy the new 1) Remedy will in future be a PC & console-independent game developer after console Playstation 5. having developed games for Microsoft for 12 years.2) Game development transitioned to a multi-project model.3) Remedy will over time build an IP Sales from the game Control portfolio and part-finance its game development.4) In addition Remedy Remedy’s game, Control released August 27 2019. The publisher, 505 Games, selectively does work for hire type project where risks are lower but which also will take 55 percent of gross revenue. We expect it to generate EUR 13 million have an upside potential based on the success of the game.5) The company of income in the second half of 2019 for Remedy. chose to start developing games with focused feature-set and scope with Royalty from Crossfire Story Mode uniqueness, based on its core values of storytelling and innovative action. The Story Mode for Crossfire HD and Crossfire X is being developed by Investment case Remedy. We believe there is a variable aspect to this deal, with potential royalties. • Remedy has gone from working with single projects to working with 2-4 projects simultaneously, and as the amount of projects grows, will release games more regularly. The key will be to maintain its quality reputation among gamers. • Remedy’s business model is in transition. The company is moving from a pure “work for hire” model to multi-project model in which the company also partly finances those game developments in which it retains IP ownership. • The new business model suggests more risk for each project, but considerably raises leverage if the game becomes a commercial success. Profitability could improve greatly in the coming years if Remedy continues to develop high quality games.

The best example of a similar journey on the Swedish stock market is Starbreeze after the acquisition of Overkill, which went from having financial difficulties to being highly profitable with the release of Payday 2 in 2013.

We believe an important reason for the low valuation is that the market has missed or neglected the change in Remedy’s business model. Realistically, this misunderstanding will likely persist until Remedy’s next game, Control, is released and the level of its operating margin becomes clearer.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 159 1900180 000k

SDIP B Company page Sdiptech https://www.redeye.se/company/sdiptech

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 76.0 Major Long Moderate Mid Minor Short 4 5 3 Bear Base Bull People Business Financials 38.0 78.0 126.0 Turn page for catalyst specifics

Snapshot Financials

Sdiptech Redeye Estimates OMXS30 2018 2019E 2020E 2021E 70 1800 Revenue, MSEK 1,496 1,822 2,119 2,339 60 1700

50 1600 Growth 39.7% 21.8% 16.3% 10.4%

40 1500 EBITDA 213 329 318 361 30 1400 EBITDA margin 14.2% 18.1% 15.0% 15.4%

Volume EBIT 143 212 290 328

500k EBIT margin 9.6% 11.6% 13.7% 14.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 127 205 260 297 Net earnings 92 146 185 214

Marketplace First North Stockholm Net margin 6.2% 8.0% 8.7% 9.1%

CEO Jakob Holm Dividend/Share 0.00 0.00 0.00 0.00 Chairman Jan Samuelson EPS adj. 3.04 4.82 6.11 7.05

Share information P/E adj. 13.7 14.3 11.3 9.8 Share price (SEK) 76.0 EV/S 1.3 1.7 1.5 1.3

Number of shares (M) 30.3 EV/EBITDA 9.3 9.6 9.8 8.5 Market cap (MSEK) 2,301 Last updated: 2019-10-29 Net debt (MSEK) 994

Owner Equity Votes Analyst Ashkan Pouya 22.8% 32.6% Saeid Esmaeilzadeh 20.9% 31.4% Fredrik Nilsson [email protected] Swedbank Robur Fonder 7.6% 4.8% Handelsbanken Fonder 5.7% 3.6% Catella Fonder 2.9% 1.9% Conflict of interests Elementa Management 2.9% 1.8% Fredrik Nilsson owns shares in Sdiptech: Yes Luxembourg Branch, Caceis Bank 2.4% 1.5% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Aktia Asset Management 2.1% 1.3% Avanza Pension 1.9% 1.2% Fredrik Holmström 1.8% 1.2%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 160 COMPANIES

Company description Sdiptech is a Swedish infrastructure technology group with over 30 operational performance to narrow the valuation gap to peers. However, the subsidiaries, offering specialized services and products. The demand is driven promising signs seen so far in 2018 seem to have been ignored by the market by aging infrastructure, growing consumption and urbanization as well as so far, creating an exciting opportunity, in our view. increasing requirements for sustainability and safety. The group’s operations are in Sweden, the UK, Norway, Austria, and Croatia. The group consists of Further value-adding acquisitions to be made Acquisitions are an important part of Sdiptech’s business model. Since the IPO three Business Units, Water & Energy, Special Infrastructure Solutions and of the preferred share in 2015, the company has made over 25 acquisitions. Property Technical Services. Usually, Sdiptech pays around 6.5x EBITA for the acquired businesses. As Sdiptechs growth strategy relies heavily on acquisitions, and the company has Sdiptech itself is trading at higher multiples, the acquisitions should be value- a target of acquiring SEK 90m in EBITA annually. The group is using a adding regardless of synergies. Sdiptech is cautious about synergy realization decentralized model, where the overtaken entities keep most of their from acquired companies, due to its decentralized strategy. However, Sdiptech operational freedom. promotes so-called “non-invasive synergies.” For example, cross-selling and coordinated purchasing of supplies. We argue that future acquisitions, although Investment case expected, will create additional value for Sdiptech shareholders, as the current • Infrastructure niches supporting organic growth valuation, in our view, does not discount a future flow of value-adding • Time to shrug off the first impression acquisitions. In addition, further acquisitions will make the group more • Further value-adding acquisitions to be made diversified, thus, reducing risk.

Infrastructure niches supporting organic growth Counter-Thesis – Bear Points Among the listed serial acquirers, steady organic growth is rare. Sdiptech has Profitability issues spreading to new areas an organic growth target of 5-10%, which according to us, is not reflected in the If a situation like the problems in the elevator business was to occur again, current stock price at all. From 2013 to 2017, the subsidiaries Sdiptech held at we believe the share would take another hit due to deteriorating investor the end of 2017, had a sales-CAGR of 10%. Undoubtedly impressive. However, it confidence. On the other hand, as Sdiptech becomes more and more diversified may be due to Sdiptech acquiring businesses with a track record of robust the likelihood of such scenario decreases. growth as well as a solid Swedish economy during the period. Since the IPO,

Sdiptech’s actual performance has been weak, mainly due to the elevator niche. Competition making acquisitions more expensive Although, several of Sditpech’s product-based offerings – in niches such as Sdipech’s value creation is dependent on the ability to acquire businesses Climate and Electricity – have had a solid development. Most of Sdiptech’s cheaper than its valuation. A higher difference in valuation creates more value product-based offerings is supported by structural drivers as sustainability, and vice versa. Thus, if acquisition multiples were to increase, it would be security, and convenience, leaving an opportunity for growth rates in line with harder for Sdiptech to create value for its shareholders through its M&A Sdiptech’s target. The company’s ambition is to increase the share of product- strategy. based offerings. If successful, while also reaching its growth target, Sdiptech would deserve a substantial revaluation. That is in our view, the most A weak construction market hitting harder than expected interesting long-term case in Sdiptech. The direct exposure to the Swedish construction market is <10% of sales, while several subsidiaries are exposed to infrastructure investments. These, at least Time to shrug off the first impression to some extent, are driven by construction of new buildings and structures, Starting with a profit warning a few months after the IPO of its common share which could be adversely affected by a weak construction market. in May 2017, due to problems in the then dominating elevator business, Sdiptech’s performance so far has been far from impressive. So far during Catalyst types 2018, the elevator business has shown promising signs of improvement, which Gaining a solid track record combined with a more diversified business reduces the risk for further Sdiptech is trading at a substantial discount compared to other listed serial setbacks. We believe that the operational bottom is behind us. However, it acquirers. We believe the discount to mainly be a result of Sdiptech’s short and seems as though the market does not agree, as no revaluation has occurred volatile history. If Sdiptech can prove to be as stable as most of its peers, we and as the discount compared to peers remains significant. see the potential for a revaluation. The peers are businesses that in most cases have shown strong performance in the stock market for over ten years, mainly due to successful acquisition strategies. Sdiptech has so far demonstrated its capability to execute several acquisitions during a short time-frame and has recruited several key persons from its successful peers. We believe Sdiptech will need to show strong

REDEYE NORDIC TECHNOLOGY REPORT - 2020 161 1900100M2.25

SENS Company page Sensys Gatso Group https://www.redeye.se/company/sensys-gatso-group

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 1.5 Major Long Moderate Mid Minor Short 3 4 2 Bear Base Bull People Business Financials 1.0 1.7 3.4 Turn page for catalyst specifics

Snapshot Financials

Sensys Gatso Group Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2 1800 Revenue, MSEK 383 364 464 580 1.75 1700

1.5 1600 Growth 30.8% -5.1% 27.5% 25.0%

1.25 1500 EBITDA 37 10 37 103 1 1400 EBITDA margin 9.8% 2.6% 8.0% 17.8%

Volume EBIT 1 -44 -1 68

50M EBIT margin 0.2% Neg Neg 11.8% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -3 -48 -4 66 Net earnings -5 -40 -3 51

Marketplace NASDAQ Stockholm Net margin Neg Neg Neg 8.8%

CEO Ivo Mönnink Dividend/Share 0.00 0.00 0.00 0.01 Chairman Claes Ödman EPS adj. -0.01 -0.05 0.00 0.06

Share information P/E adj. -341.2 -29.1 -417.7 23.2 Share price (SEK) 1.5 EV/S 4.0 3.3 2.6 2.0

Number of shares (M) 860.0 EV/EBITDA 41.3 124.6 32.2 11.2 Market cap (MSEK) 1,246 Last updated: 2019-12-26 Net debt (MSEK) 25

Owner Equity Votes Analyst Gatso Special Products B.V. 19.0% 19.0% Avanza Pension 4.2% 4.2% Viktor Westman [email protected] Per Wall 2.7% 2.7% Inger Bergstrand 2.4% 2.4% Nordnet Pensionsförsäkring 1.4% 1.4% Conflict of interests State Street Bank And Trust co 1.1% 1.1% Viktor Westman owns shares in Sensys Gatso Group: No Swedbank Försäkring 1.0% 1.0% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. AXA 0.9% 0.9% Danica Pension 0.9% 0.9%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 162 COMPANIES

Company description Traffic safety company Sensys Gatso was formed when Sensys Traffic customers in order for them to assure reliable long-term delivery and the unique acquired its Dutch competitor Gatso in summer 2015. The new company is the type approval procedures in each country. market leader with approximately a quarter of the market sales for traffic safety systems, particularly speed cameras and traffic light monitoring cameras. Share price driven by big deals The shares have always been driven by announcements of major deals, such as However, much of Sensys Gatso’s focus when it comes to growth will be placed the skyrocketing of about 360 % in the fall of 2015, which was largely related to on its other business area, Managed Services, where the company operates its the gigantic North African order worth SEK 165 million. The business and the own traffic safety systems and issues and administers fines. The company’s stock will remain volatile. Larger System Sales orders will remain important size and its new position as the market number-one are important factors in catalysts, although the most significant event would be a new, major Managed achieving greater credibility with its customers. There are entry barriers through Services contract. the type approval procedures, which often differ from country to country.

Locations: Sensys Gatso Group has subsidiaries in Australia, Germany, the Catalyst types Netherlands, Sweden and the United States, as well as in the United Arab Large Managed Services contracts Emirates The most important catalyst for the stock is large Managed Services orders, given the margin profile and the recurring revenue. We especially look forward Investment case to orders from new adjacent areas, like the uninsured vehicles enforcement program in Oklahoma. • Growing recurring revenue from Managed Services • Large potential in new adjacent areas Large system orders • Share price normally driven by big deals The share price is largely driven by the announcement of major orders. For the Growing recurring revenue from Managed Services next quarters we see larger orders from several geographies, especially related to the competitive offering within in-vehicle solutions The Managed Services business with its high margins, long contracts and repeat revenue, is a critical factor in securing a sustainable growth and will therefore determine the long-term performance of the shares. The Gatso part of Sensys Gatso has during the past decade committed a lot of hard work and investments in building a strong foothold in the US. Moreover, the Managed Services model is easy and steady spreading across the World. The Company has so far never lost a Managed Services contract but it has taken over a few contracts from competitors. We have previously been a bit hesitant towards the US market following the Trump election but the market has not deteriorated thus far.

Large potential in new adjacent areas During the fall of 2017, Sensys Gatso won an important ANPR contract for uninsured vehicle enforcement in Oklahoma - a brand new area for the company as well as the very first program of its kind. In Oklahoma, Sensys Gatso takes full responsibility for administration of tickets and therefore receives about 40-50% of every citation during the contract period. In all of the US states where Sensys Gatso is present there are substantially more uninsured vehicles than in Oklahoma. Thus, there is a major upside if Sensys Gatso can get others of its customers on board for programs similar to Oklahoma. Using ANPR for uninsured vehicles is one good illustration of how the company can leverages its expertise and competitive advantages (securing an unbroken chain of evidence) in other adjacent areas, but there are other possibilities as well, e.g. school zones, distracted driving, environmental zones, etc. Besides the evidence integrity issues there are two other important barriers to entry for smaller, local players: The size and stability requirements of

REDEYE NORDIC TECHNOLOGY REPORT - 2020 163 19005M10

SIVE Company page Sivers IMA https://www.redeye.se/company/sivers-ima

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 8.0 Major Long Moderate Mid Minor Short 3 3 2 Bear Base Bull People Business Financials 1.0 7.0 16.0 Turn page for catalyst specifics

Snapshot Financials

Sivers IMA Redeye Estimates OMXS30 2018 2019E 2020E 2021E 1800 9 Revenue, MSEK 71 98 135 248 1700 8 1600 Growth 9.1% 37.1% 37.3% 84.0% 7 1500 EBITDA -53 -37 -33 17 6 1400 EBITDA margin Neg Neg Neg 7.0%

Volume EBIT -70 -77 -66 -20

2.5M EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -79 -88 -88 -65 Net earnings -72 -83 -88 -65

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Anders Storm Dividend/Share 0.00 0.00 0.00 0.00 Chairman Tomas Duffy EPS adj. -0.61 -0.63 -0.67 -0.49

Share information P/E adj. -10.6 -15.0 -14.4 -19.3 Share price (SEK) 8.0 EV/S 10.8 12.8 10.3 6.1

Number of shares (M) 131.6 EV/EBITDA -14.7 -33.9 -41.7 87.1 Market cap (MSEK) 1,069 Last updated: 2019-12-02 Net debt (MSEK) 143

Owner Equity Votes Analyst Keith Halsey 26.3% 26.3% Rothesay Ltd 23.7% 23.7% Erika Madebrink [email protected] Danske Bank International S.A. 17.9% 17.9% Swedbank Robur Fonder 8.8% 8.8% Avanza Pension 6.8% 6.8% Conflict of interests AMF Försäkring & Fonder 3.5% 3.5% Erika Madebrink owns shares in Sivers IMA: No Nordnet Pensionsförsäkring 2.1% 2.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Neil Martin 1.6% 1.6% Andrew McKee 1.5% 1.5% Prioritet Finans 1.1% 1.1%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 164 COMPANIES

Company description Sivers IMA has extensive experience from developing micro- and millimeter currently value Sivers IMA in the base case to SEK 7 per share, with a fair value wave products. The company is focused on the development and sales of radio range of SEK 1-16 per share. To justify a higher share price, we want to see frequency components and modules for data- and communication systems. stronger signals that volumes are about to ramp up on the wireless side and/or The most significant area of application is 5G, which is expected to bring that larger customers are in the pipeline in the fiber segment. substantial opportunities. In 2017, Sivers IMA acquired the Scottish foundry CST Global, which produces optical semiconductors. Its most promising Counter thesis markets are FTTx and data centers. Common for both business units is that Fierce competition may put pressure on margins they grow with the demand for improved data and communication systems. Sivers IMA has a number of competitors that are making similar components, and it is difficult to differentiate the product offering. Given the brutal nature Investment case that competition usually takes in hardware businesses, we believe that price competition will put pressure on margins in both segments going forward. • Unique technology based on extensive background in microwave development. Rapid technological development • Case strengthened by partnerships with established providers. Technological development in the industry advances quickly, and even state-of- • Add-on opportunity of large volume orders from the Fortune 100 the-art products soon become obsolete. To be able to continue to offer customer. attractive products to its customers, Sivers IMA will have to work with product development continuously. Huge 5G market potential In the coming years, the market for 5G network equipment is forecasted to, Uncertainties regarding 5G deployment more or less, explode when the industry is preparing for the launch of the new Even though the 5G transformation is starting to happen, it is difficult to say technology. This will require not only large investments in current networks but how quickly 5G will be adapted and also exactly how the new technology will also a densification of networks. The market outlook for fiber-to-the-home be utilized. It is not yet possible to say how extensively millimeter wave applications are also good, with increased usage of fiber in the networks in frequencies will be employed or when this will happen. general. Thus the market outlook for Sivers IMA’s two product segments in the coming years is great. Catalyst types New design-wins with large telecom players Established partnerships to increase the value of product offering As of now, Sivers IMA is not profitable and is awaiting its first large volume Sivers IMA has so far partnered up with some of the largest telecom equipment orders within wireless. The company’s focus has been to build an ecosystem suppliers, such as Ampleon and NXP Semiconductors. Going forward, Sivers of partners and are currently teamed up with two partners that are suppliers to IMA is in a good position to be able to reach large potential customers, and Tier 1 telecom players – Ampleon and NXP Semiconductors. If the combined potentially also gain one or several Tier 1 customer. There are however also offering of Sivers IMA and its partners were integrated into one the Tier 1 smaller equipment vendors, the Tier 2 players, that would be attractive as players’ system, it would mean a real take-off in Sivers IMA’s sales. potential customers as well. We believe that Sivers IMA could gain several Tier 2 player customers that could generate annual sales of approximately SEK Large orders from Fortune-100 customer 1,000m in 2025. Sivers IMA has, as mentioned above, received substantial orders from a Fortune 100 company over the last year. If the customer moves forward and Binary add-on opportunity for orders from a Fortune 100 company A large Fortune 100 company approached Sivers IMA a little more than a decides to integrate Sivers IMA’s components in their final product, this would year ago, which was interested in semiconductor components from the fiber entail very large orders and strong growth for the fiber division. Even though we division. The customer has placed three pre-series orders totaling around would expect that such a large customer would use its bargaining power to put SEK 50m during the last year. We believe that if the customer decides to pressure on margins, we expect that the orders would increase the bottom line proceed, it will imply very large volumes. Thus, it represents a significant growth and create a substantial upside in the stock. opportunity, but it is rather binary in nature, and it is difficult to assess whether 5G market takes off the customer will move forward with Sivers IMA or not. Given that the company Many industry experts voice the opinion that 5G is happening faster than they has received two follow-up orders from the customer, it looks promising so far. had expected. When the market for 5G telecom equipment in the higher In full ramp-up, we expect that the customer could generate peak sales of at frequencies takes off, Sivers IMA is in a good position to take part in the least SEK 600m annually. transformation. It would lead to strong growth and would act as a catalyst for We value Sivers IMA to SEK 7 in a base case scenario the stock. In the long term, we believe that Sivers IMA will profit from the 5G transformation, and we also expect growth in the fiber segment. However, we believe that the deployment of the new technology may take some time. We

REDEYE NORDIC TECHNOLOGY REPORT - 2020 165 19001130 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 120.8 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 2018 2019E 2020E 2021E 120 1800 110 Revenue, MSEK 51 56 103 244 1700 100 1600 Growth 17.5% 9.6% 84.3% >100% 90 80 1500 EBITDA -42 -76 -50 54 70 1400 EBITDA margin Neg Neg Neg 22.3%

Volume EBIT -56 -93 -73 30

500k EBIT margin Neg Neg Neg 12.4% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -56 -94 -73 30 Net earnings -56 -94 -73 30

Marketplace First North Stockholm Net margin Neg Neg Neg 12.4%

CEO Martin Krantz Dividend/Share 0.00 0.00 0.00 0.00 Chairman Anders Jöfelt EPS adj. -4.80 -6.19 -4.76 1.95

Share information P/E adj. -10.4 -15.8 -20.6 50.3 Share price (SEK) 120.8 EV/S 11.2 23.7 13.8 5.8

Number of shares (M) 15.1 EV/EBITDA -13.4 -17.3 -28.0 26.1 Market cap (MSEK) 1,835 Last updated: 2019-10-28 Net debt (MSEK) -67

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 5.3% 5.3% Avanza Pension 3.7% 3.7% Aktia Asset Management 3.6% 3.6%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 166 COMPANIES

Company description Smart Eye provides eye tracking software for especially automotive stable revenue stream for many years to come as the large switching costs applications but addresses customers in defence, aircraft and academic provide solid barriers to entry. The stock market however, as always, only sees research as well. In the Research Instruments segment, where Smart Eye has a the coming few quarters, meaning significant potential for patient, long term market share of 4-5 percent, it provides systems consisting of hardware, investors. software and accessories. Our investment case, however, is fully based on the Automotive Solutions segment, which is an OEM business where Smart Eye Design wins to move the share price provides tier 1 automotive suppliers with algorithms and software for We expect a steady news flow going forward with design wins from already embedding eye tracking in products that are later sold to the car OEM won procurements as well as RFQ’s worth SEK 6 billion in progress for the next manufacturers. When a car model with Smart Eye's technology is launched quarters, which should drive the share price. Smart Eye will receive a royalty based license fee per car. Within Automotive Solutions Smart Eye has won designs from about half of the customers that Catalyst types has procured eye tracking thus far. The automotive market has high barriers to VW win entry as it is costly and time consuming to develop products that meet the The Volkswagen procurement will be finished imminently. Volkswagen sells customers' high standards and switching costs are high, meaning important almost 11 million vehicles per year and is the World's second largest car OEM competitive advantages for Smart Eye.Listing: Stockholm Stock Exchange (second only to Toyota), meaning significant catalyst potential if Smart Eye (First North) since year 2016.Locations: HQ in Sweden. Offices in Detroit, China would win Volkswagen. and Japan.

Design wins in China Investment case We believe there are design wins overdue in China where Smart Eye's tier-1 • In pole position within eye tracking for mandated driver monitoring partner has been selected and only paperwork remains before Smart Eye is • Impatient & short term focused stock market officially nominated. • Design wins to move the share price Volvo win In pole position within eye tracking for Following the announcement of NVIDIA winning a DMS contract for Volvo we mandated driver monitoring believe that Smart Eye might be able to win Volvo given its strong partnership Due to EU and Euro NCAP's decisions to mandate driver monitoring, the market with NVIDIA. for driver monitoring systems (DMS) is about to explode. This expected growth is a known fact for the stock market but we believe many do not understand Design wins and follow-up orders in general Smart Eye’s strong positioning. Smart Eye has devoted 18 years of 100 percent The major key catalyst in general is won contracts from the many RFQ’s worth focus to and investments in this very niche (whereof 16 years of actual sales). in total SEK 6 billion, which should drive the share price. In addition, we expect The company is in pole position with an unmatched 57 design wins for 10 follow-up orders from existing customers customers. As for barriers to entry, the technology needs to cope with e.g. changing light conditions, tunnels, sunshine, darkness, vibrations etc. and at the same time never fail. Competition is therefore basically limited to one other tier-2 player aside of the tier-1 customers’ own solutions. However, we believe it is unlikely that the customers in the long run are willing to put up with all investments and maintain the focus necessary for in house sourcing. Smart Eye states that, being platform independent and hardware agnostic, it has a competitive edge as its technology can be locked late in the development process.

Impatient & short term focused stock market Smart Eye’s first design wins with new customers are in general worth a lot more than what meets the eye as they are platform based. The platforms will usually (although not automatically) yield additional new car models for every year over the platforms’ lives of about 10 years. In addition, each car model lives around seven years. For Smart Eye this creates a very foreseeable and

REDEYE NORDIC TECHNOLOGY REPORT - 2020 167 1900111 000k

SPEQT Company page Speqta https://www.redeye.se/company/speqta

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 7.0 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 3.0 10.0 20.0 Turn page for catalyst specifics

Snapshot Financials

Speqta Redeye Estimates OMXS30 2018 2019E 2020E 2021E 10 1800 Revenue, MSEK 59 102 131 163 9 1700

8 1600 Growth 59.9% 73.3% 27.8% 24.6%

7 1500 EBITDA 8 16 27 43 6 1400 EBITDA margin 13.5% 16.0% 20.9% 26.1%

Volume EBIT -4 2 11 24

500k EBIT margin Neg 1.9% 8.6% 14.7% 0 Mar May Jul Sep Nov Jan Pre-tax earnings -5 -2 9 23 Net earnings -4 -1 7 18

Marketplace First North Stockholm Net margin Neg Neg 5.6% 11.2%

CEO Fredrik Lindros Dividend/Share 0.00 0.00 0.00 0.00 Chairman Fredrik Burvall EPS adj. -0.15 -0.02 0.19 0.48

Share information P/E adj. -56.5 -381.1 40.3 16.0 Share price (SEK) 7.0 EV/S 4.2 3.0 2.2 1.6

Number of shares (M) 38.2 EV/EBITDA 30.9 18.6 10.7 6.3 Market cap (MSEK) 270 Last updated: 2019-11-21 Net debt (MSEK) -1

Owner Equity Votes Analyst Andre Lavold 13.6% 13.6% Jonas Söderqvist 13.2% 13.2% Eddie Palmgren [email protected] Henrik Persson Ekdahl 12.6% 12.6% Henrik Kvick 12.4% 12.4% Andreas Friis 12.0% 12.0% Conflict of interests Bjarthe Westerheim 3.7% 3.7% Eddie Palmgren owns shares in Speqta: Yes Mikael Riese Harstad 3.6% 3.6% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Avanza Pension 2.0% 2.0% Norrland Invest AB 1.5% 1.5% Hamberg Förvaltning AB 1.3% 1.3%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 168 COMPANIES

Company description Speqta is a digital media house headquartered in Stockholm, Sweden. The • Identify acquisition targets through Shopello's affiliate network and in company excels in constructing scalable and auto-generated web products. related and highly profitable verticals such as Finance, Health, and The concepts behind the products are language independent, which means Education they can be applied on a multinational level. Speqta was founded in 2003, and • Reduced Google risk through a portfolio, leading to higher valuation the share is traded on Nasdaq Stockholm First North. Speqta has two divisions; of the whole than separately (the casino affiliate market is a prime Speqta Shopping and Speqta Food and Beverage. The Group has a focus on example) performance-based marketing and lead generation. • Synergies in the Shopello network, i.e., better rates when they can offer e-merchants larger volumes Speqta Shopping segment has a focus on performance-based marketing within • Tests with new Cost Per Order model with the potential to significantly e-commerce through an e-commerce platform, Shopello, which promotes other increase profitability webshops products and receives revenue through the mediation of traffic. • Cross marketing and merging email databases, both existing lists in Furthermore, Speqta Shopping consists of AffiliJet, a product for premium Shopello and other verticals publishers to leverage on their web traffic. The business unit also includes sites • Cost-cutting by implementing Shopello’s affiliate network when acquiring such as Kampanjjakt, AlltidRea and Outlet Sverige. new sites Speqta Food and Beverage segment consists of the Group's food-related sites; • Geographical expansion, the business model is extremely scalable, and myTaste, Matklubben, and Vinklubben. Also in this segment is the company new sites in other countries are relatively easy to set up putting more resources to generate performance-based marketing revenues. • Leverage technical know-how to develop apps and browser plugins to improve the customer experience Investment case • Data gathering where e-commerce vendors have a high willingness to pay • Opportunity in the performance-based market for e-commerce, a vast and fragmented market. Other verticals such as finance and iGaming are Catalyst types also interesting. Optimizer Invest is injecting capital and additional AffiliJet expansion acquisition expertise. The collaboration with Expressen develops well and has expanded from • Smaller performance-based marketing companies have development performance-based marketing of discount coupons to loans and iGaming. risks and significant risk exposure to Google; these factors most often Speqta has also acquired a similar collaboration with the Norwegian result in relatively low acquisition prices for highly profitable companies newspaper Nettavisen. Large publishers are searching for new income streams • Speqta wants to create a portfolio of these businesses; thus reducing the and AffiliJet is a flexible and profitable solution. We believe that new deals are direct Google risk and leverage their technical know-how likely within the coming months, both organically and through acquisitions. Our investment case in Speqta is based on the vast opportunities within performance-based marketing. The company has a strong presence in the e- Improved fundamental performance changing the market perception commerce market and is expanding to new verticals such as finance and The acquisitions within Shopping should lead to gradually enhanced growth iGaming. Revenues are also generated within beverages and food, where and profitability. Speqta shows positive EBITDA results and can the company Speqta has a long experience. demonstrate further profitability, we believe the market perception and valuation will appreciate. A market up for grabs The company has identified a vast and fragmented market of e-commerce Value-adding acquisitions affiliates. Most of the smaller lead marketing companies today have limited The company is open with its high acquisition ambitions and thus, it should not resources when it comes to technical development and has a significant risk come as a surprise for the stock market. We still believe new M&A deals could exposure to Google; these factors most often lead to a relatively low be positive catalysts as it would validate the strategy. We also have confidence acquisition price for highly profitable companies. Speqta wants to create a in Optimizer Invest's ability to negotiate attractive terms and thereby, create portfolio of these businesses and reduce the direct Google risk and leverage shareholder value. their technical know-how. In-house product innovations In short, the opportunity for Shopping is: Speqta has a history of entrepreneurship and business creativity. The founders • A market driven by the structural forces that today is only starting out, in are still active in the operations, and the company is adding interesting Sweden the e-commerce stands for about 10% of the total retail market competence as it grows. We believe the innovative in-house organization will • Shopello is a Google Premium Comparison Shopping Services (CSS) generate new exciting products to capitalize on the opportunities within Partner and is rapidly expanding the offering in Europe performance-based marketing.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 169 1900400M3

STAR B Company page Starbreeze https://www.redeye.se/company/starbreeze

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 1.9 Major Long Moderate Mid Minor Short 3 3 1 Bear Base Bull People Business Financials 0.4 1.2 2.5 Turn page for catalyst specifics

Snapshot Financials

Starbreeze Redeye Estimates OMXS30 2018 2019E 2020E 2021E 2022E 2.5 1800 Revenue, MSEK 361 274 95 80 106 2 1700

1.5 1600 Growth -0.4% -23.9% -65.4% -15.7% 32.3%

1 1500 EBITDA -1,410 -311 -11 -28 26 0.5 1400 EBITDA margin Neg Neg Neg Neg 24.5%

Volume EBIT -1,575 -331 -63 -104 -47

200M EBIT margin Neg Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -1,584 -331 -71 -113 -57 Net earnings -1,449 -331 -71 -113 -57

Marketplace NASDAQ Stockholm Net margin Neg Neg Neg Neg Neg

CEO Mikael Nermark Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Torgny Hellstöm EPS adj. -4.46 -1.01 -0.22 -0.34 -0.17

Share information P/E adj. -2.0 -1.9 -8.8 -5.5 -11.1 Share price (SEK) 1.9 EV/S 9.6 5.0 15.3 19.3 15.1

Number of shares (M) 329.4 EV/EBITDA -2.5 -4.4 -135.4 -55.4 61.7 Market cap (MSEK) 622 Last updated: 2020-01-08 Net debt (MSEK) 837

Owner Equity Votes Analyst Swedbank Robur Fonder 14.6% 6.5% Första AP-fonden 10.7% 4.4% Tomas Otterbeck [email protected] Bo Andersson Klint 6.2% 23.7% Avanza Pension 5.2% 3.8% Hongkong & Shanghai Banking co LTD 2.9% 5.2% Conflict of interests Smilegate Holdings Inc. 2.9% 5.2% Tomas Otterbeck owns shares in Starbreeze: Yes Banque Internationale A Lux 2.7% 1.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Nordnet Pensionsförsäkring 1.8% 1.3% Securities Services Spa Societe Generale 1.2% 5.1% Digital Bros 1.2% 5.0%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 170 COMPANIES

Company description Catalyst types Starbreeze currently has three business areas: Starbreeze Games, Publishing Publisher agreement and VR Tech & Operations (Virtual Reality). In December 2018 the company In 2020, Starbreeze is expected to receive a publisher agreement for Payday 3. filed for reconstruction. The uncertainty about the company's future is This is expected to generate a much-needed contribution to repay the debts the significant. company has accumulated over the years.

Investment case Major new share issue Starbreeze carries out a major new issue to all owners at a market discount. A • With its game Payday 2, Starbreeze proved that it is one of the few public new share issue could be imminent if a strategic partnership regarding Western game developers who have understood how to generate long- Payday 3 falls short. term revenue linked to a single game title according to the business model "Game as a service". Payday 3 is now under development. • Payday is a strong brand which means that chances are good for Starbreeze to sign a favorable partnership agreement with a major player in the industry. • Starbreeze has a debt of around SEK 300 million. In addition, the convertible loan to Smilegate is expected to entail additional fees of SEK 165 million until 2024. This dampens the potential upside in the stock significantly.

A public new share issue could be imminent (Q1 2020) if a strategic partnership regarding Payday 3 falls short.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 171 18004005M

SF Company page Stillfront Group https://www.redeye.se/company/stillfront-group

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 359.0 Major Long Moderate Mid Minor Short 5 4 4 Bear Base Bull People Business Financials 235.0 415.0 520.0 Turn page for catalyst specifics

Snapshot Financials

Stillfront Group Redeye Estimates OMXS30 2017 2018 2019E 2020E 2021E 350 1700 300 Revenue, MSEK 166 1,325 1,982 2,406 2,887 1600 250 1500 Growth 75.0% >100% 49.6% 21.4% 20.0% 200 150 1400 EBITDA 52 473 765 953 1,235 100 1300 EBITDA margin 31.5% 35.7% 38.6% 39.6% 42.8%

Volume EBIT 26 348 559 805 1,009

2.5M EBIT margin 15.6% 26.3% 28.2% 33.5% 35.0% 0 Jan Mar May Jul Sep Nov Pre-tax earnings 10 265 492 743 972 Net earnings 6 156 362 525 717

Marketplace First North Stockholm Net margin 3.7% 11.8% 18.3% 21.8% 24.8%

CEO Jörgen Larsson Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Jan Samuelson EPS adj. 0.26 6.62 13.87 20.10 27.44

Share information P/E adj. 692.4 26.4 26.2 18.1 13.2 Share price (SEK) 359.5 EV/S 24.5 3.4 5.3 4.2 3.3

Number of shares (M) 26.3 EV/EBITDA 77.7 9.5 13.8 10.7 7.7 Market cap (MSEK) 9,403 Last updated: 2019-12-05 Net debt (MSEK) 728

Owner Equity Votes Analyst Christian och Kai Wawrzinek 15.9% 15.9% Första AP-fonden 9.4% 9.4% Kristoffer Lindström [email protected] Handelsbanken Fonder 9.4% 9.4% Swedbank Robur Fonder 9.1% 9.1% SEB Fonder 7.0% 7.0% Conflict of interests Länsförsäkringar Fonder 3.6% 3.6% Kristoffer Lindström owns shares in Stillfront Group: Yes Carnegie Fonder 3.0% 3.0% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Avanza Pension 2.7% 2.7% Ålandsbanken I Ägares Ställe 2.3% 2.3% Livförsäkringsbolaget Skandia 1.7% 1.7%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 172 COMPANIES

Company description The largest risks and counterarguments to our investment Stillfront Group has grown substantially over the past years through case (Bear points) acquisitions. Following the massive purchase of Goodgame Studios the Group • Title risks: Despite a focus on their game portfolio there is always a title now has around 500+ highly skilled and experienced game professionals. The risk when it comes to a gaming company. The largest risk will always lie company combines the indie studios’ agility with a professional public in titles where the company has invested the most. structure in order to attain synergies and efficiency. Stillfront has global reach • The risk of acquisitions: Stillfront has a clear focus on acquiring with more than 5 million monthly active users from over 100 countries. The companies. Acquisitions always come at a risk for paying too much for a company listed their shares on Nasdaq Stockholm First North during 2016. company that might not deliver on expectations. Stillfront continues to be cautious and extremely picky when it comes to game quality and price Investment case tag. Still, this is something an investor must continue to monitor.

• Strong focus on risk: Stillfront has a distinct focus on creating good risk adjusted return to their shareholders. We find that the market do not put Catalyst types enough premium on this ability. Kixeye adding value • We believe Stillfront's other core assets will benefit greatly from We find that the market often underestimates how much earnings and sales a Goodgames marketing expertise and vast network of active players, more substantial acquisition, like Kiexeye, will add to the Group. It usually takes likely boost the overall performance of the Group. a couple of quarters post-acquisition before a revaluation occurs. Kixeye will • Compared to many gaming peers Stillfront has a solid underlying revenue add substantial revenue and earnings to the group, but also knowledge and a generation capability and is in a way less dependent on new “hits.” The distribution platform. lower risk profile should warrant a premium valuation compared to most comparable companies Global launch of Strike of Nations The global version of Nida Harb III, Strike of Nations, has been released. It's still Focus on risk and return creates an advantage quite early, but see no apparent reasons why Strike of Nations wouldn’t work

We believe Stillfront will continue to deliver significant growth as the company outside the MENA region. focus on bringing low-risk titles to the market. We also expect underlying Goodgame synergies growth in the gaming market and an increase in revenues from mobile. The The acquisition of Goodgames takes the company to a whole new level, We acquisition of Goodgames takes the company to a whole new level; We believe believe Stillfront's other core assets will benefit greatly from Goodgames Stillfront's other core assets will benefit significantly from Goodgame's marketing expertise and vast network of active players, likely boost the overall marketing expertise and a vast network of active players, likely boost the performance of the Group overall performance of the Group. Stillfront continues to add new products to their portfolio and the at the end of 2018 the company states that their pipeline is the strongest in the company's history. The highly successful Nida Harb III from Babil Games is going global under the brand Strike of Nations. Even if the global version is only half as successful as the MENA title, then Stillfront have yet another cash-cow at their hands. Early data implies an extremely high monetization rate of Strike of Nations.

We find that Stillfront is valued at low multiples of earnings, about the same levels as public mobile game developers, despite Stillfront's focus on a combination of browser, mobile, and PC. Compared to mobile gaming companies the Group has 2-3x margins, and a strong competitive position in their niche, less title risk and a track-record of successful M&A. We believe that these factors should lead to a higher valuation than the one we see today.

As a gaming company, there is always uncertainty in the success of new launches. Compared to many gaming peers Stillfront has a solid underlying revenue generation capability and is in a way less dependent on new “hits.” The lower risk profile should warrant a premium valuation compared to most comparable companies in our view. We find Stillfront conservatively valued and consider the company as an attractive risk-reward from an investment perspective and that the market both underprices the company’s ability to deliver risk-adjusted earnings to their shareholders and the upcoming game launches.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 173 19002M4.5

STRAX Company page Strax https://www.redeye.se/company/strax

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 4.0 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 4.0 6.0 10.0 Turn page for catalyst specifics

Snapshot Financials

Strax Redeye Estimates OMXS30 2018 2019E 2020E 2021E 4 1800 3.5 Revenue, MEUR 107 109 119 125 1700 3 1600 Growth 6.9% 1.6% 9.1% 5.5% 2.5 2 1500 EBITDA 1 8 11 12 1.5 1400 EBITDA margin 1.4% 7.5% 9.0% 9.4%

Volume EBIT -2 5 8 9

1M EBIT margin Neg 4.3% 6.8% 7.1% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 22 -6 8 8 Net earnings 17 -7 6 7

Marketplace NASDAQ Stockholm Net margin 15.7% Neg 5.0% 5.3%

CEO Gudmundur Palmason Dividend/Share 0.00 0.00 0.00 0.00 Chairman Bertil Villard EPS adj. 0.14 -0.06 0.05 0.05

Share information P/E adj. 22.0 -5.2 6.1 5.5 Share price (SEK) 4.0 EV/S 3.5 0.4 0.4 0.3

Number of shares (M) 120.6 EV/EBITDA 249.5 5.6 3.9 2.9 Market cap (MSEK) 474 Last updated: 2019-12-11 Net debt (MEUR) 5

Owner Equity Votes Analyst Clearstream Banking S.A. W8imy 50.2% 50.2% Gudmundur Palmasson 26.0% 26.0% Oskar Vilhelmsson [email protected] Ingvi Tyr Tomasson 25.9% 25.9% Per-Arne Åhlgren 16.4% 16.4% Anchor Secondary 4 AS 5.7% 5.7% Conflict of interests Merril Lynch Int. 5.4% 5.4% Oskar Vilhelmsson owns shares in Strax: Yes Otus Capital Management 4.9% 4.9% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Anchor Invest 4.1% 4.1% Avanza Pension 2.5% 2.5% Landsbankinn Hf 2.4% 2.4%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 174 COMPANIES

Company description Counter thesis (Bear points) Strax is one of Europe’s largest specialized distributors in mobile accessories. Failures in the processes of managing & growing brands Strax combines its distribution with proprietary brands, which is a unique Accessories are a fashion business where players have a constant need to strategy that provides Strax’s own brands immediate exposure to a vast invent and follow the latest trends. At the same time, it is hard to find unique distribution network of 40 000 point of sales. It designs and sells mobile phone brands with strong potential and acquire them at a reasonable price. Strax accessories, such as headphones, portable speakers, chargers, power banks, needs to follow all of these steps continuously. Strax could, in our view, cases, covers, other protective gear, and more. Strax's distribution network has sometime slip in one of the areas, which could lead to a period of hampered over 600 B2B partners Worldwide. It represents 40 of the largest global brands growth and profitability. in mobile accessories and e.g. has distriution agreements with 50 telecom operators. The distribution network is a key advantage and barrier to entry. A weaker European smartphones market Distribution is a local business and hard to scale as the contract periods are Given Strax’s European focus, the European smartphone market is important usually ten years. The distribution gives Strax early leads of new trends, which for the company. We see a risk that the market decline could continue. is vital in the fashion-centric accessories indsutry. The high speed and constant need for finding the latest trends and adopting new solutions etc. is the main Migration to online drawback of Strax's business, but the company has a solid track record in We believe online retail is becoming more challenging and therefore expect acquiring and growing brands. Urbanista and Gear4 e.g., grew sales by CAGR acquisition costs to increase over time. However, there is still a need to migrate 54% and 45% to EUR 15m and 34m, respectively, during 2013-2018. to more online sales. Thus, we see a risk for lower margins from online sales.

Investment case Catalyst types

• Underestimated track record & business model Development of Urbanista Urbanista does represent a significant part of sales in the Brands segment. Its • The temporary profitability hit is over success (measured by sales scale-up) will play an important role in the • Growth of own brands will expand margins company’s success which will be reflected in the valuation of the company. Underestimated track record & business model Strax has a proven track record in acquiring, managing, and growing brands. Brand acquisitions Urbanista and Gear4 e.g., grew sales by CAGR 54% and 45% to EUR 15m and Strax targets one M&A transaction per year. Given the track record in growing 34m, respectively, during 2013-2018. We believe the distribution platform is a acquired brands (e.g., Urbanista and Gear4), we believe coming M&A is a vital part that will allow for more successful own brands as they get immediate significant, positive catalyst for the stock. exposure to a vast distribution network of 40 000 point of sales. The stock market, however, seems to think that Urbanista and Gear4 are two-hit wonders. Earnings releases We do not expect any material news in between the quarterly reports. Thus, we Back to profitability following a temporary setback believe the stock will move in conjunction with the coming earnings reports, as There is a strong correlation between smartphones and phone accessories the profitable growth story continues. sales. Strax’s organization was adapted for continuing strong growth in 2018. However, in Q2’18, Strax and its shareholders were taken by surprise by the ferocious smartphone market decline. At the end of Q4’18, Strax implemented a program with annual OPEX reductions of EUR 7m in 2019, for a one-time cost of EUR 5.6m. Following these actions, the lean and mean Strax in Q3’19 returned to its solid profitability streak.

Growth of own brands will expand margins From 2020 and onwards, Strax will distinguish the sales of its own brands from the distribution revenue in its reports. For 2019, own brands account for 26% of total sales YTD with a strong gross margin of 38%, compared to distribution that is 74% of total sales but has lower gross margins of 26%. We believe the faster growth from Strax’s own brands will expand the group margin, as own brands become an increasingly larger part of total sales.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 175 19002M200

SYSR Company page Systemair https://www.redeye.se/company/systemair

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 185.0 Major Long Moderate Mid Minor Short 4 4 3 Bear Base Bull People Business Financials 115.0 168.0 210.0 Turn page for catalyst specifics

Snapshot Financials

Systemair Redeye Estimates OMXS30 2018 2019E 2020E 2021E 175 1800 Revenue, MSEK 8,327 9,328 10,004 10,710 150 1700

125 1600 Growth 14.0% 12.0% 7.3% 7.1%

100 1500 EBITDA 762 1,020 1,179 1,323 75 1400 EBITDA margin 9.2% 10.9% 11.8% 12.4%

Volume EBIT 528 765 930 1,071

1M EBIT margin 6.3% 8.2% 9.3% 10.0% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 458 728 889 1,042 Net earnings 321 524 631 740

Marketplace NASDAQ Stockholm Net margin 3.9% 5.6% 6.3% 6.9%

CEO Roland Kasper Dividend/Share 2.00 2.50 3.00 3.50 Chairman Gerald Engström EPS adj. 6.18 10.08 12.14 14.23

Share information P/E adj. 15.9 16.8 14.0 11.9 Share price (SEK) 185.0 EV/S 0.9 1.1 1.0 0.9

Number of shares (M) 52.0 EV/EBITDA 9.4 10.3 8.5 7.2 Market cap (MSEK) 9,568 Last updated: 2019-12-06 Net debt (MSEK) 1,224

Owner Equity Votes Analyst Gerald Engström 42.6% 42.6% ebm-papst AB 21.3% 21.3% Henrik Alveskog [email protected] Swedbank Robur Fonder 7.5% 7.5% Alecta Pensionsförsäkring 4.4% 4.4% Nordea Fonder 3.4% 3.4% Conflict of interests Lannebo Fonder 2.8% 2.8% Henrik Alveskog owns shares in Systemair: No AFA Försäkring 2.6% 2.6% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Wpr Brown Brothers Harriman/Lux 2.2% 2.2% Fidelity International (FIL) 2.2% 2.2% C WorldWide Asset Management 1.4% 1.4%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 176 COMPANIES

Company description Systemair was founded in 1974 by Gerald Engstöm who is still main owner and In the longer term, however, the major growth will certainly come from regions since 2015 chairman of the board. The original product and business idea was outside Europe. In several of these (Eastern Europe, the Middle East and parts a round duct fan that improved the air flow in ventilation systems. Since then, of Latin America), Systemair has already established strong positions. The step by step, the company has added to their range and today Systemair stock has something of a premium valuation, which is also well deserved probably has the most extensive offering in the European market. Availability thanks partly to historical strong growth and stable profits, but also because ot and reliable deliveries are important key values. That means a broad range of the good long-term growth prospects for the ventilation industry and standard products should always be ready for delivery. The products must be Systemair's strong market position. robust and easy to install and operate. Systemair is also a quality brand but they are not into tailor made solutions. Bear points:

The group has some 20 production facilities in Europe, Asia and North • Regarding some of the their largest acquisitions, the Airwell companies America. More than 6 000 employees and subsidiaries in more than 40 in Italy and France and Menerega, Systemair under estimated the countries on all continents. In fiscal year 2018/19 turnover amounted to SEK challenges of restoring profitability. Regarding these companies there is 8.3 billion and pre-tax profits SEK 458 million. Head office is Skinnskatteberg, still a risk for setbacks. Sweden. The shares are listed on Nasdaq Stockholm main market since year • The company's is focused on reaching the 10 percent EBIT-margin target. 2007. If we do not see any progress this ambition will certainly be questioned.

Investment case Catalyst types • For the moment we consider the valuation to be fairly reasonable. Turn around in the under performers • Systemair's own target of 10 percent annual growth and 10 percent EBIT- A few units within the group are loss making or at least performing poorly. margin is not at all impossible to reach although our assumtions are These are primarily the Airwell companies in France and Italy and the more conservative. If they reach their targets there is substantial subsidiary Menerga. All of these should be able to reach double digit margins potential for revaluation. which would drive group EBIT margins towards their own target of 10 per cent. • Good growth opportunities for the foreseeable future and a history of Major acquisitions stable profitability make Systemair an interesting long term investment. Systemair acquires a number of smaller companies as a natural part of their However, it doesn't appear to be clearly undervalued and we do see any expansion strategy. If they were to buy something more substantial (annual short term major catalysts. sales > SEK 300 m) it would call for some attention. Most likely they are able to This company is, and always has been, truly growth oriented. Since the early buy these companies at lower multiples than their own. 1990's its sales have increased in every year except 2009, when the banking and financial crisis hit. Its growth has certainly come partly from acquisitions, but organic growth has also been really good, on average around 6-7 percent over the past 10 years. Despite its expansion, which has sometimes involved the acquisition of unprofitable companies and entering into new markets, Systemair has never shown a full-year loss. Its profitability has naturally varied, but not as much as other manufacturing industries.

For a couple of years its operating margin has slipped down to around 6 percent, mainly because some of its new units have yet to show adequate profitability. During the company's historical profitability peaks in 2006-08, its margins were around 12-13 percent and Systemair is well placed to get there again. In its current corporate structure, the level of technology and the product mix is better than ever. If these margin gains are fully achieved, it would represent an improvement in profits exceeding 50 percent. The market has factored in hardly any of this.

Even with more conservative assumtions of sustained profitability, the share is attractive thanks to the company's good groth prospects. The need for energy efficient ventilation is increasing in several parts of the world, even in northern Europe which is a mature market. The EU directive on energy savings in buildings plus requirements on the working environment are spurring a growing market for Systemair, which was an early investor in energy-efficient solutions.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 177 190020M1.3

TAGM B Company page TagMaster https://www.redeye.se/company/tagmaster

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 0.8 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 0.8 1.6 2.5 Turn page for catalyst specifics

Snapshot Financials

TagMaster Redeye Estimates OMXS30 1.2 2018 2019E 2020E 2021E 1800 1.1 Revenue, MSEK 196 263 373 414 1 1700 0.9 1600 Growth 0.2% 34.6% 41.7% 10.9% 0.8 1500 0.7 EBITDA 13 12 34 48 0.6 1400 EBITDA margin 6.5% 4.5% 9.0% 11.5%

Volume EBIT 1 -19 -7 7

10M EBIT margin 0.4% Neg Neg 1.8% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 0 -23 -10 6 Net earnings 3 -25 -10 1

Marketplace First North Stockholm Net margin 1.7% Neg Neg 0.4%

CEO Jonas Svensson Dividend/Share 0.00 0.00 0.00 0.00 Chairman Rolf Norberg EPS adj. 0.02 -0.07 -0.03 0.00

Share information P/E adj. 68.8 -11.1 -28.4 187.3 Share price (SEK) 0.8 EV/S 1.1 1.0 0.7 0.6

Number of shares (M) 366.2 EV/EBITDA 16.8 22.6 7.9 4.9 Market cap (MSEK) 297 Last updated: 2019-10-31 Net debt (MSEK) -9

Owner Equity Votes Analyst Gert Sviberg med bolag 13.7% 13.7% Tomas Brunberg inklusive bolag 13.4% 13.4% Eddie Palmgren [email protected] Alto Invest SA 10.6% 10.6% LMK-bolagen & Stiftelse 7.6% 7.6% Didrik Hamilton 6.8% 6.8% Conflict of interests Nordnet Pensionsförsäkring 3.6% 3.6% Eddie Palmgren owns shares in TagMaster: Yes Avanza Pension 3.5% 3.5% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Ribbskottet 3.0% 3.0% Mikael Aronowitsch 2.7% 2.7% Jan Westlund 2.6% 2.6%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 178 COMPANIES

Company description TagMaster is a provider of identification technology and data systems for After initially focusing on turnaround targets, TagMaster is now able to acquire Intelligent Transport Systems and Smart Cities. Its value proposition is to offer larger and better companies. The group operates in fragmented markets solutions with outstanding performance that meet demanding customer needs underpinned by structural forces, which offers attractive opportunities for and are easy to use. consolidation and organic growth. Acquisition prices are higher for larger and better companies, but an increasing market share, benefits of scale, and The company’s two segments, Traffic Solutions and Rail Solutions, sell across additional cross-selling should lift TagMaster’s profitability and valuation. much of the world. The US and EMEA are the largest markets. It primarily makes sales via system integrators, with TagMaster’s contribution often a Credible leadership small but crucial component of the offering. There are risks with M&A, but we argue that investors are overlooking the firm’s TagMaster embarked on an acquisition-driven growth strategy in 2015. M&A is deep acquisition expertise. The strategic roadmap is driven by board members scaling up sales and expanding the technology portfolio, especially with the from successful M&A organizations like Securitas and ASSA ABLOY. large acquisition of the US company Sensys Networks in 2019. TagMaster also has a solid ownership structure with long holding periods. These factors should prove positive for shareholders.

Investment case Since 2012, the current Board and CEO has put a clear strategy in place and

• Misunderstood earnings power executed it. Rolf Norberg, Chair of the Board, has played a vital role in laying out • Promising M&A strategy the company’s roadmap. He and fellow board member Magnus Jonsson have • Credible leadership credible backgrounds from successful Swedish M&A companies. The keys to those organizations’ value-adding acquisitions were freedom with Investment Thesis responsibility, keeping the right people, and monthly financial follow-ups. In our view, TagMaster’s leadership demonstrates a cost-conscious mindset, Misunderstood earnings power transparent communication and genuine long-term commitment. This has Accounting principles and exceptional acquisition costs blur TagMaster's taken the firm to a promising position in its niche and supports our conviction underlying rise in profitability. IFRS adoption is probable in the next two years going forward. and would strengthen investors’ understanding and, in turn, the valuation. Perception is also likely to improve with more stable growth, as the Traffic Solutions segment now represents > 80% of sales. Catalyst types Improving fundamental performance TagMaster’s gross margin improved from 54% to 63% between 2014 and 2018. TagMaster is consolidating its acquisitions and the outlook is promising for It has also taken about SEK 25m in restructuring costs to trim acquisitions. gradually enhanced growth and profitability. This should improve market Additionally, the accounting principle K3 requires TagMaster to amortize goodwill over 5-10 years. The company is R&D intense but capitalizes perception and the valuation. development investments over the income statement. IFRS-adoption would IFRS-adoption significantly improve earnings visibility and comparability. We estimate a Investors’ perception of TagMaster is likely to improve if the group changes reported EBIT margin of -2% in 2020, while we forecast an IFRS-adjusted EBIT its accounting approach from K3 to IFRS. With the goodwill from Sensys margin to 10%. IFRS is an international standard and TagMaster could use its Networks, we now view IFRS-adoption highly probable by 2020 or 2021. share as a currency in future acquisitions. These are strong arguments to Goodwill and R&D costs would then have less impact on the income statement, adopt IFRS, which we view highly probable by 2020 or 2021. resulting in significantly higher reported profitability. Cash flow is unaffected, Investors’ perception of TagMaster should also improve as Traffic Solutions but valuation multiples would be remarkably more attractive. now is its core business and will constitute > 80% of sales in 2020 (64% 2018). Historically, the profitable but project-based rail division has caused Substantial order flow considerable variations, which we believe have created uncertainty among Several large orders would strengthen investors’ confidence in TagMaster’s investors. As M&A and higher organic growth make the Traffic segment an organic growth. Potential boosts are large-scale rollouts in Sensys Networks, ever-larger part of revenues, more stable growth should eliminate the ANPR systems or Rail Solutions. “unpredictability discount”. Value-adding acquisitions Promising M&A strategy M&A should not surprise investors, as TagMaster’s acquisition-driven growth Value-adding acquisitions and disciplined strategic execution should propel strategy is clearly communicated. Even so, it proves the strategy. In a longer TagMaster’s growth. Consolidation is enabling it to build a more substantial perspective, we argue that investors underestimate TagMaster’s ability to buy position in its fragmented markets, which offer both attractive opportunities and integrate value-adding firms. and significant structural growth.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 179 180022.51 500k

TOAD Company page Toadman Interactive https://www.redeye.se/company/toadman-interactive

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 18.1 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 16.0 26.0 34.0 Turn page for catalyst specifics

Snapshot Financials

Toadman Interactive Redeye Estimates OMXS30 2017 2018 2019E 2020E 2021E 20 1700 17.5 Revenue, MSEK 11 73 160 552 703 1600 15 1500 Growth >100% >100% >100% >100% 27.3% 12.5 10 1400 EBITDA 1 6 3 83 134 7.5 1300 EBITDA margin 6.9% 8.7% 2.0% 15.1% 19.1%

Volume EBIT 1 6 1 -4 38 1 000k 500k EBIT margin 6.6% 7.8% 0.9% Neg 5.4% 0 Jan Mar May Jul Sep Nov Pre-tax earnings 1 6 -12 -30 8 Net earnings 0 4 -16 -30 8

Marketplace First North Stockholm Net margin 3.9% 5.4% Neg Neg 1.1%

CEO Robin Flodin Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Alexander Albedj EPS adj. 0.00 0.26 -0.50 -0.98 0.26

Share information P/E adj. 0.0 43.0 -39.1 -19.9 76.2 Share price (SEK) 18.1 EV/S -0.1 2.1 5.6 1.6 1.2

Number of shares (M) 31.2 EV/EBITDA -1.0 24.4 279.7 10.5 6.0 Market cap (MSEK) 562 Last updated: 2019-12-18 Net debt (MSEK) 172

Owner Equity Votes Analyst Robin Flodin 12.2% 12.2% Rasmus Davidsson 12.2% 12.2% Kristoffer Lindström [email protected] Alan Hunter 7.4% 7.4% Ben Granados 7.4% 7.4% Johan Svensson 5.7% 5.7% Conflict of interests Alexander Albedj 5.4% 5.4% Kristoffer Lindström owns shares in Toadman Interactive: No Garry Williams 4.4% 4.4% James Cato 4.4% 4.4% Fatshark AB 3.2% 3.2% Ted Löfgren 2.2% 2.2%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 180 COMPANIES

Company description Petrol, which changed the business entirely. A refinancing or a new program ata shareholder returns; we find this as undoubtedly positive. We genuinely prefer lower rate is likely and would be positive. what we call “Owner Operators”, namely a management team that owns a Toadman Interactive is a Swedish company active within the gaming industry. substantial stake of the company. We regard Robin Flodin, founder, and CEO, as It originated as a game development company within console gaming crucial for Toadman’s future success. He is the largest shareholder with over specialized in first-person action/RPG game. After two major acquisitions in 12% of the capital. Fatshark, the renowned Swedish gaming studio, is both an 2019 Toadman has operations within marketing (Petrol), game publishing owner and a close partner on work-for-hire deals. (Sold Out) and game development (Toadman Core). The company was founded in 2013 and has grown rapidly to now employ roughly 195 people spread out in M&A across the value chain Stockholm, Los Angeles, Oslo, Berlin, Penryn (England) and Tver (Russia). Toadman has an active M&A agenda with the aim of expanding across the gaming value chain. The company has used SEK 220m of its SEK 500m bond Investment case program. With an underlying pro forma EBITDA of some SEK 50m following the

• Stable cash flow gives many shots at goal acquisition of Sold Out, there is still significant room to increase leverage. It is • Marketing expertise in-house clear that we will see more acquisitions to strengthen Toadman, either by filling • Skin in the game current gaps or reinforcing current business areas. Toadman focuses on not • M&A across the value chain overpaying for companies and has historically paid an EV/EBIT multiple of about 6x for their acquisitions. Compared to standard gaming valuations, this is Toadman has transformed itself from a small gaming studio focused on work- low. Toadman has strengthened its M&A team significantly during 2019. We for-hire to a presence across almost the whole gaming value chain. In our view, view the recruitment of COO Christopher Bergstresser as key in this. management is building a highly attractive operation with a clear focus on cash flow generation in combination with game development’s significant return Counter-arguments potential. Investors should also consider the following counter-arguments to our case: • Title risk – Although Toadman has sought to build a broad portfolio of Stable cash flow gives many shots at goal games, it nonetheless faces title risk (particularly on larger projects) like Gaming is a volatile business where success depends on how well games all of its gaming peers. Disappointing releases could dampen investors’ releases perform. Toadman differs from most listed gaming companies by its enthusiasm and hurt the company’s financials. Nonetheless, Toadman is stable cash flow from work-for-hire/financed projects, marketing consultancy protected by more stable cash flow than other small gaming companies (Petrol) and publishing (Sold Out). This is then reinvested into game thanks to its consulting, marketing agency and game publishing arms. development projects that could produce significant returns. Assessing games’ • Somewhat unproven M&A strategy – Growing through acquisitions potential success before launch is almost impossible, but Toadman’s strong always involves the risk that targets fail to add shareholder value. As financials enable it to manage title risk as its future does not depend on any Toadman is a rather young company, it’s still too early to judge all of its single title. This structure gives it the ability to take many ‘shots at goal’ and acquisitions – especially the most recent. Investors should focus on increases the likelihood of a commercial success. tracking their performance during the coming years to judge Marketing expertise in-house management’s capacity to add value through M&A. Petrol’s services are highly sought after in gaming with over 50 clients including • K3 and M&A is a bad match – Despite it not affecting cash flow, K3 projects like ‘Call of Duty’, the highest-grossing game series on console. This accounting is a bad fit for a company conducting a lot of M&A. As world-class marketing expertise gives Toadman a valuable asset and reported profits will be artificially low compared to underlying earnings advantage over many peers that should boost its prospects of successful power, this can impact valuation and market perceptions of the company. releases – as well as lowering its marketing costs. Petrol generates annual revenues of SEK 179m with an expected 3-year CAGR of 7% and an EBITDA Catalyst types margin of 14-15%. Osiris announcement The most imminent catalyst is more information about the Osiris project. Partnership with leader Leyou Toadman has a 20% royalty of gross sales, but the project’s future is still Toadman has stable cash flow and revenue thanks mainly to Petrol, but also its unclear. If the game is released, it could generate significant revenues and a consultancy-focused game development revenue model. An example is the high return on investment. Due to the uncertainty, however, we apply a 70% major ‘Osiris’ project with China’s Leyou, the owner of ‘Warframe’ - one of the discount to our forecast lifetime income. most successful free-to-play shooters of recent years. Toadman has a 20% royalty of gross sales on top of work for hire revenues. If the game is released, Bond re inancing or new program Toadman should see significant revenues. We view 12% interest as too high for a company with Toadman’s high and stable cash flows. Its bond was issued prior to the acquisition of Sold Out and Skin in the game Petrol, which changed the business entirely. A refinancing or a new program at 58% of Toadman is owned by management, the board and other key employees, a lower rate is likely and would be positive. which shows that its leadership is highly incentivized to generate

REDEYE NORDIC TECHNOLOGY REPORT - 2020 181 1800500k6

WPAY Company page Westpay https://www.redeye.se/company/westpay

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 3.0 Major Long Moderate Mid Minor Short 4 3 2 Bear Base Bull People Business Financials 2.5 4.0 6.1 Turn page for catalyst specifics

Snapshot Financials

Westpay Redeye Estimates OMXS30 2017 2018 2019E 2020E 2021E 1700 5 Revenue, MSEK 93 67 61 85 106 1600 4 1500 Growth 21.0% -28.5% -8.7% 39.7% 25.0% 3 1400 EBITDA 11 -10 -14 -3 5 2 1300 EBITDA margin 11.4% Neg Neg Neg 4.4%

Volume EBIT 6 -15 -20 -8 -2

250k EBIT margin 6.8% Neg Neg Neg Neg 0 Jan Mar May Jul Sep Nov Pre-tax earnings 6 -16 -20 -8 -2 Net earnings 4 -14 -16 -6 -2

Marketplace First North Stockholm Net margin 4.7% Neg Neg Neg Neg

CEO Sten Karlsson Dividend/Share 0.00 0.00 0.00 0.00 0.00 Chairman Christina Detlefsen EPS adj. 0.20 -0.60 -0.46 -0.19 -0.05

Share information P/E adj. 61.1 -7.8 -7.2 -18.0 -70.2 Share price (SEK) 3.0 EV/S 2.8 1.6 1.6 1.3 1.1

Number of shares (M) 33.8 EV/EBITDA 24.3 -10.8 -7.0 -34.4 24.4 Market cap (MSEK) 101 Last updated: 2019-10-28 Net debt (MSEK) -17

Owner Equity Votes Analyst Nordnet Pensionsförsäkring 17.3% 17.3% Malte Roggentin 8.3% 8.3% Kristoffer Lindström [email protected] Per Jörgen Roland Nordlund (med bolag) 7.0% 7.0% Avanza Pension 6.3% 6.3% Without Bank Julius Baer & co LTD 5.3% 5.3% Conflict of interests Göran Sparrdal 4.7% 4.7% Kristoffer Lindström owns shares in Westpay: Yes Ejderholmen AB 4.1% 4.1% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Sten Karlsson (med bolag) 3.1% 3.1% Bengt Roger Andersson 2.5% 2.5% Thomas Wernhoff 1.8% 1.8%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 182 COMPANIES

Company description Westpay is a Fintech company and a supplier of smart transaction- and to merchants, has begun to sell a terminal from a supplier, they would prefer to payment solutions. The end-customer has operations within retail, hotels, avoid changing it. This leads to a lock-in effect on West's customers as they do restaurants, and retail banking. Westpay’s offering aims to create and improve not like to change a supplier of terminals. the efficiency of payment flow for the end-consumers within the retail space. Expansion abroad drives growth Westpay has a global presence; The Nordics, Europe, Africa, South- and East West has a clear goal and strategy with international expansion. The company Asia, and Australia, where the Nordics are the largest market today. Clients has already established itself in a number of geographic markets where sales include among others, Open, Elavon, Wirecard, MAX Burgers, ABSA Bank, potential is high and entered strategic partnerships. We believe the expansion Svenska Handelsbanken, and more. The company has been listed on Nasdaq in new markets regions will be the most significant driver of growth in the Stockholm First North since 2007. coming years. Investment case We believe that the stock market has not yet revealed how much sales potential is actually at Westpay. The company is still relatively undiscovered, in • Global expansion not yet discounted: Today's valuation indicates that the particular, it has gone a long way since one of Sweden's largest card terminals market has not yet understood the opportunities with the expansion supplier is a small company listed on First North. abroad. • Moving up the value chain leads to improved profitability: The company Counter-arguments (Bear points) invests in its technical platform, which means that West will soon be able to make money on transaction volumes, which will lead to increased • Risk of relying on a partner: Westpay's expansion abroad is clearly profitability and the possibility of more rapid international expansion. dependent on their partners succeeding as the company has no own • High entry barriers: Westpay operates in a market where there are major sales in the new markets. The company cannot control the amount of obstacles for new companies to establish themselves. Primary effort the partner makes. competitive advantages are heavy technology investments, long start-up • New regulations can affect and change: The banking industry as a whole times in new markets and lock-in effects undergoes a number of changes. New laws and regulations may lead to complications in the establishment of new markets or possibly Moving up the value chain simplification for competitors. Westpay is a company that has changed sharply in recent years. Thanks to • Subdued technology investments: Continued investment in payment investments in the Card Terminal segment, the company has significantly infrastructure is important to Westpay. Should the economic decline, improved its profitability in terms of gross margin expansion. The company has there is a risk that planned expenditures by West end customers will be managed to achieve significant traction with their competitive offering and is postponed in the future. now one of the largest PoS suppliers in Sweden. Westpay's Card Terminals are at the forefront of technology, security, and function and are competitively Catalyst types priced. We believe that the company has excellent opportunities to continue to Revenue ramp-up abroad gain market share in Sweden and we see a strong expansion abroad in the Besides Sweden the company now have partnerships and EFTPOS’s soon or coming years. The international development and the launched payment already operational in; Denmark, Finland, Germany, Poland, Norway, South gateway will lead to increased profitability as the company takes a step in the Africa, Southeast Asia, and Australia. These markets will start generating value chain. substantial revenue during 2019.

High barriers to entry Recurring revenue on the rise In Sweden, in addition to Westpay, there are only 3-4 other players in the Card During 2017 roughly 11% of revenue was on a recurring basis, this income type Terminal market. The most prominent player is Verifone and Ingenico is is on the rise thanks to an expanding base of operating EFTPOS. Contracts sign number two. These two players strongly dominate the world market. One of the with partners outside of Sweden has a much higher recurring income stream; main reasons why there are only a few players in such a big market is that this will enhance both the stability and profitability going onward. existing players, such as Westpay, are protected by high barriers to entry. The regulatory requirements on Card Terminals are very high. The terminals must Margin improvement through value chain expansion be approved according to the card companies regulations and a number of The company invests in their technical platform and now have launched a regional and international safety standards. This creates real barriers to entry. payment gateway, which means that West will be able to make money on There is also a strong lock-in effect with customers, which creates high transaction volumes, leading to long-term enhanced profitability. switching costs. Customers to West are PSPs. A PSP has developed software in the form of a gateway that needs to be integrated with the software in the card terminal provided by Westpay; then they must be certified together according to different security standards. After a PSP, which sells the terminal

REDEYE NORDIC TECHNOLOGY REPORT - 2020 183 190019 500k

XMR Company page XMReality https://www.redeye.se/company/xmreality

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 4.1 Major Long Moderate Mid Minor Short 3 3 2 Bear Base Bull People Business Financials 2.0 6.0 18.0 Turn page for catalyst specifics

Snapshot Financials

XMReality Redeye Estimates OMXS30 8 2018 2019E 2020E 2021E 1800 7 Revenue, MSEK 10 12 15 23 6 1700 5 1600 Growth 52.0% 15.2% 25.0% 60.0% 4 1500 3 EBITDA -25 -24 -28 -25 2 1400 EBITDA margin Neg Neg Neg Neg

Volume EBIT -29 -28 -32 -31 1 000k 500k EBIT margin Neg Neg Neg Neg 0 Mar May Jul Sep Nov Jan Pre-tax earnings -29 -28 -32 -31 Net earnings -29 -28 -32 -31

Marketplace First North Stockholm Net margin Neg Neg Neg Neg

CEO Johan Castevall Dividend/Share 0.00 0.00 0.00 0.00 Chairman Claes Nylander EPS adj. -1.72 -1.64 -1.90 -1.79

Share information P/E adj. -4.0 -2.4 -2.1 -2.2 Share price (SEK) 4.1 EV/S 7.9 5.0 6.1 5.0

Number of shares (M) 17.1 EV/EBITDA -3.2 -2.5 -3.2 -4.7 Market cap (MSEK) 64 Last updated: 2019-11-04 Net debt (MSEK) 22

Owner Equity Votes Analyst Investment AB Spiltan 14.5% 14.5% Handelsbanken Fonder 9.4% 9.4% Magnus Skog [email protected] AMF Försäkring & Fonder 7.5% 7.5% Lars Svensson 5.0% 5.0% Avanza Pension 4.8% 4.8% Conflict of interests Claes Nylander 3.2% 3.2% Magnus Skog owns shares in XMReality: No Nordnet Pensionsförsäkring 3.0% 3.0% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. LMK-bolagen & Stiftelse 3.0% 3.0% UBS Switzerland AG 2.7% 2.7% Christer Svensson 2.4% 2.4%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 184 COMPANIES

Company description Counter-Thesis – Bear Points XMReality has developed and offered augmented reality solutions since 2007. Slow adoption brings uncertainty The company is offering software and hardware for remote guidance towards The adoption of Remote Guidance has so far been slow. One of the reasons field service companies where clients either implement the solution throughout could be that the service personnel are reluctant to change their way of their internal service organization or in their service offering towards clients. working. The customers of XMReality’s customers may also be reluctant to receive service through an AR-based solution that requires some work by Investment case themselves, instead of someone physically coming over and conducting all • Scalable business model: XMReality's solution is offered towards work for them. customers that incorporate XMReality's solution in their own offering. Upcoming capital needs The company further faces fractional marginal costs of adding additional The company held SEK 17.8m in cash by the end of Q3, and we calculate a users to the platform. likely need for the company to secure additional external funding during the • The fact that a company of ABB`s magnitude ramps up its cooperation coming nine months or so. We do not believe that the company will be able to with XMReality indicates the value of the product. Furthermore, it will be raise the necessary capital through debt financing, and hence find an equity a useful reference for further sales. issue more likely. Against a backdrop of the currently, depressed share price, • Good potential for large roll-outs: We remain confident of its potential however, an equity issue is also likely to face certain challenges. among its list of customers, and expect the company to reveal this over the coming year through announcements of larger orders (with software Uncertainties regarding the online SME offering values exceeding SEK 2m). XMReality has introduced a new online offering targeting smaller businesses through online marketing and we feel uncertain about the impact it will make. Highly scalable offering in a rapidly growing market. XMReality targets The barrier to apply a new technique is probably hard to overcome with just industrial players that incorporate its software in their service offering, which in online based automated marketing. Hence, we are currently uncertain about turn will act as resellers by driving sales of additional licenses to their the long-term potential. Albeit we have not assumed any significant revenues customers. The company faces negligible marginal costs of adding additional from the launch, it is possible that it will consume resources that would have licensed users to the platform, and the potential to achieve high profitability is had greater impact on the enterprise offering. reflected by the gross margins exceeding 90%. The use case further opens up for lock-in effects as customers incorporate XMReality’s solution in their large- scale service operations. Catalyst types XMReality’s technique is unique in combining hand overlay, works in areas of Large scale software roll-out weak network capacity and you invite customers to new sessions through a We see great potential in a large roll-out of XMReality’s Remote Guidance weblink, i.e. eliminating the need to run sessions through an installed app on solution throughout a large client’s service organization after running tests for a the customer side. Not having to download software is a unique important long period. Apart from yielding recurring revenues and high margins, it would feature mitigating the potential problem of this new technique being perceived indicate that the industry truly is ready to adopt the solution and run it on a as complicated and complex. The company launched this new feature only a larger scale. year ago and with sales cycles often exceeding a year, we believe that the full New channel partner(s) scope of this introduction is yet to be seen. There is further potential for a new channel partner(s) that incorporate ABB-case indicates positive progress. XMReality has increased their XMReality’s solution in their offering toward clients. We, however, believe this to collaboration with ABB throughout 2019 and has so far announced software be more relevant as the company has shown larger volumes of software sales. orders worth SEK 1.6m. While the deals with other large industrials mostly regard smaller testing user bases, whereas this is a larger deal pointing New technology partner(s) towards a commercial breakthrough and an interest to adopt the solution on a We believe that new technological partners in hardware developers such as greater scale. It will further be an important reference when approaching new Microsoft or RealWear would strengthen XMReality’s case. Such a partnership prospective customers. would increase the potential user base and further strengthen XMReality’s The absence of additional substantial orders and high growth have, together positioning as a leading provider of industrial AR-solutions. with risks regarding upcoming capital needs, put pressure on the share that now trades below SEK 4 per share. While we argue that the company has failed to meet growth expectations, we still see factors suggesting positive long-term prospects and expect the company to generate roll-outs over the coming years. We currently see an upside to our base case at SEK 6 per share from the current depressed levels. We deem additional, and especially larger (>SEK 2m software orders to be the most important share catalysts over the coming year as it would reveal the potential within the customer base.)

REDEYE NORDIC TECHNOLOGY REPORT - 2020 185 19004M26

ZETA Company page ZetaDisplay https://www.redeye.se/company/zetadisplay

Redeye Rating

COMPANY QUALITY FAIR VALUE RANGE CATALYST POTENTIAL

Last price Impact Timeframe 23.4 Major Long Moderate Mid Minor Short 4 4 2 Bear Base Bull People Business Financials 17.0 30.0 40.0 Turn page for catalyst specifics

Snapshot Financials

ZetaDisplay Redeye Estimates OMXS30 2018 2019E 2020E 2021E 24 1800 Revenue, MSEK 404 427 545 608 22 1700

20 1600 Growth >100% 5.7% 27.7% 11.6%

18 1500 EBITDA 48 28 78 109 16 1400 EBITDA margin 11.9% 6.5% 14.3% 17.9%

Volume EBIT 43 5 54 82

2M EBIT margin 10.7% 1.3% 9.8% 13.4% 0 Mar May Jul Sep Nov Jan Pre-tax earnings 47 24 39 67 Net earnings 39 24 31 52

Marketplace NASDAQ Stockholm Net margin 9.8% 5.6% 5.6% 8.6%

CEO Per Mandorf Dividend/Share 0.00 0.00 0.00 0.00 Chairman Mats Johansson EPS adj. 1.63 0.85 1.09 1.86

Share information P/E adj. 10.3 27.8 21.7 12.7 Share price (SEK) 23.4 EV/S 1.3 2.0 1.5 1.3

Number of shares (M) 26.8 EV/EBITDA 11.3 30.7 10.6 7.1 Market cap (MSEK) 627 Last updated: 2019-11-12 Net debt (MSEK) 159

Owner Equity Votes Analyst Nordea Bank Ab(Publ) 14.3% 14.3% Virala Oy Ab 14.1% 14.4% Fredrik Nilsson [email protected] Anders Pettersson 10.6% 10.6% Mats Johansson 9.8% 9.8% Prioritet Finans 4.6% 4.6% Conflict of interests Magari Venture AS 4.4% 4.5% Fredrik Nilsson owns shares in ZetaDisplay: No AMF Försäkring & Fonder 4.2% 4.2% Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this. Nordea Bank Norge Nominee 4.2% 4.2% Anders Moberg 4.0% 4.0% Mats Leander 3.7% 3.8%

REDEYE NORDIC TECHNOLOGY REPORT - 2020 186 COMPANIES

Company description ZetaDisplay is a Swedish digital signage company, implementing Successful acquisition history communication concepts based on standardized hardware - from leading In recent years, ZetaDisplay has made several acquisitions, which today form manufacturers such as LG, Philips and Samsung - and proprietary software the basis of ZetaDisplay's most profitable regions and which have contributed solutions sold as SaaS. The company is currently active in Sweden, Finland, to several significant agreements. ZetaDisplay has a stated ambition to Norway, Denmark, Benelux and the Baltics. continue acquiring and consolidating the European market. The Digital Signage market is fragmented and many of the companies today are only locally Investment case established, which makes the market well suited for consolidation. Since September 2019, Per Mandorf has been CEO; at the same time former CEO Leif • Leading European position in Digital Signage Liljebrunn took the role of acquisition manager, and the company has issued a • Growing market bond to enable cost-effective financing of further acquisitions. We expect more • Successful acquisition history acquisitions in the future, and given the company's good history, we assess the likelihood that future acquisitions will be value-creating as high. Leading European position in Digital Signage ZetaDisplay drives digital transformation in physical environments. The Counter-thesis company's communication concept and software affect people's behavior at Financing cost of acquisitions (completed and future): The company has, the time of decision in-store and public environments as well as workplaces. through its acquisition strategy, issued preference shares and raised loans. The solutions are known as Digital Signage, which the company develops and Should it prove that the profitability of completed acquisitions differs from offers as SaaS. ZetaDisplay has established itself as one of the three largest expectations, this may be problematic for the company. players in the European Digital Signage market thanks to a series of successful Acquisition risk: The company has a stated acquisition strategy, which means acquisitions and significant long-term customer contracts, for example with potential acquisition risk. These risks include integration problems, an acquired ATG, IKEA, Hurtigruten, KPN, KeskoGroup, and Ekornes. The company is a company failing to meet expectations, and the difficulty in finding acquisitions market leader in the Nordic countries, which is conceptually and technologically that meet set requirements. far ahead in an international comparison. The company implements Lower growth than expected: Today's stock price assumes continued strong communication concepts based on standardized hardware - from leading growth. Therefore, it is important for the company to win new business while manufacturers such as LG, Philips and Samsung - and proprietary software retaining and establishing long-term relationships with existing customers. solutions. Most of the company's revenue today comes from the resale of hardware and implementation. However, the value lies in the recurring SaaS revenue, which already accounts for the majority of gross profit. If ZetaDisplay Catalyst types succeeds in showing continued good growth in its SaaS revenues, we see Additional acquisitions at attractive valuation significant potential for higher margins over time. We believe that the The company has a stated acquisitions strategy and another profitable development of recurring revenue is the most important thing to focus on as an acquisitions at an attractive valuation would justify a higher value of the share investor in ZetaDisplay. Communicates greater share of recurring revenues Growing market The business model is based on three diferent revenue types: services, In 2018, the European Digital Signage market grew by 14%, and the drivers of software and licenses, and digital systems. The focus is on increasing growth are the on-going digital transformation, new technological opportunities recurring revenues, and the company has succeeded. This increasingly gives and changing consumer behavior. ZetaDisplay's digital signage offer can be ZetaDisplay the character of a software company. The continued development divided into three different segments. The most significant segment is digital of recurring revenues will be interesting for investors to follow as we consdier it store communication aimed at consumers. Retail environments are becoming to be the most important value driver in the company. increasingly digital for a variety of reasons, such as smaller stores that need to be more space-efficient and the retailer's desire to link online and offline commerce. In addition to retail environments, ZetaDisplay also offers solutions for internal digital communication for employees as well as digital communication in public environments aimed at the public. Common to all segments is that new technology, changed behavior, and market conditions, as well as ever-decreasing hardware prices, make Digital Signage more attractive compared to analog solutions.

REDEYE NORDIC TECHNOLOGY REPORT - 2020 187 REDEYE NORDIC TECHNOLOGY REPORT - 2020 188 REDEYE NORDIC TECHNOLOGY REPORT - 2020 189 REDEYE NORDIC TECHNOLOGY REPORT - 2020 190 Disclaimer

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Redeye Rating (2019-12-31)

Rating Employees Business Key figures 5p 11 11 2 3p - 4p 88 67 28 0p - 2p 9 30 78 Company N 108 108 108

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REDEYE NORDIC TECHNOLOGY REPORT - 2020 191 redeye.se