Speqta

Speqta's Q3 net sales were 6% below our estimate, but EBITDA was ~50% above, mainly due to a solid contribution from Rahalaitos and Vinklubben. We expect a slightly longer impact from COVID-19 on Rahalaitos as the new wave hampers demand for consumer loans in the near term. This is temporary, however, and we expect performance to improve. Speqta is launching innovative growth initiatives, such as Bidbrain and Vinklubben SMART, which should help drive organic growth in the coming years. We adjust our DCF- and peer-based fair value to SEK 3.7-8.9 (3.9-9.0). Marketing material commissioned by Speqta.

We believe Speqta's Q3 report will show an improvement compared to Q2, as COVID-related headwinds on C&C ease slightly. In addition, temporary regulations on the maximum interest rate on loans in Finland drove rising activity for Rahalaitos at the start of Q3. We believe that Adtech will continue to post strong y/y growth as e-commerce volumes stayed strong throughout Q3 and because Speqta keeps adding on more clients to Shopello Bidbrain. We forecast for adjusted EBITDA to be up 30% y/y to SEK 6.7m. We maintain our DCF- and peer-based fair value at SEK 3.9-9.0. Marketing material commissioned by Speqta.

Speqta posted adjusted EBITDA of SEK 5.6m for Q2, beating our estimate of SEK 3m, as margins in both Content & Comparison (C&C) and AdTech took a significant step up from the Q1 level and surprised on the upside. In particular, we find AdTech's development encouraging, as we believe the increased e-commerce volumes are here to stay, as consumers' perception of e-commerce has shifted permanently after COVID-19. We believe the worst is now over. We forecast adjusted EBITDA to be up 28% q/q for Q3, as we believe the gradual improvement in the personal finance vertical has continued, although from low levels, and that AdTech will show solid y/y growth, with Speqta signing new clients and growing volumes. We adjust our DCF- and peer-based fair value to SEK 3.9-9.0 (4.0-9.3). Marketing material commissioned by Speqta.

We forecast SEK 46m in net sales and EBITDA of SEK 3m for Q2. Speqta has been temporarily affected by COVID-19 lockdowns, mainly in the personal finance vertical. As lockdowns ease, we forecast Q3 revenue growth of 21% q/q (125% y/y). We believe Q2 will mark the company's low point in 2020. We recently hosted the CEO at the Nordea Small Cap Days; he outlined important trends accelerated by COVID-19 that are benefitting Speqta, such as higher e-commerce penetration, and confirmed that Speqta continues to look for M&A opportunities, primarily comparison sites, in current as well as new verticals. We adjust our DCF- and peer-based fair value to SEK 4.0-9.3 (4.2-9.5). Marketing material commissioned by Speqta.

Speqta's Q1 report beat our expectations slightly, with EBITDA of SEK 8.5m (our estimate: SEK 7.1m), as a stronger-than-expected EBITDA margin made up for 4% weaker net sales than expected. This was the first quarter with Rahalaitos consolidated (1 February), bringing y/y growth to 98%. Looking at Q2, we see continued strong y/y growth driven by Rahalaitos, but organic growth of -5% y/y as Speqta's personal finance vertical has been hurt in the short term by COVID-19. On the positive side, we find the 27% y/y growth of Adtech very encouraging, and see potential for strong growth for years to come as Shopello Bidbrain is rolled out. We adjust our DCF- and peer-based fair value to SEK 4.2-9.5 (4.8-10.3). Marketing material commissioned by Speqta.

Following Speqta's COVID-19 comments, we lower our estimates for Speqta's personal finance vertical significantly, keep Food & Beverage intact, and expect slightly lower growth for Shopello. We forecast quite a negative scenario for 2020, where growth is significantly impacted in Q2 and half of Q3, but returning close to normal in Q4. This leads to 22% lower sales estimates for 2020E and 16% for 2021E, along with 53% lower EBITDA estimates for 2020 and 32% for 2021E. Long term, we expect this to accelerate the shift from traditional retail towards e-commerce, which should benefit Speqta. We also believe that the strong customer intake for Shopello Bidbrain is promising. Our updated 50/50 DCF and peer-based fair value range stands at SEK 4.8-10.3 (6.9-14.5). Marketing material commissioned by Speqta.

The Q4 results fell short of our expectations, with net sales of SEK 27.5m (7% below our estimate) and EBITDA of SEK 4.1m versus our estimate of SEK 6.3m. Speqta announced ambitious new targets, however, aiming for net sales of SEK 600m in 2022 (with organic growth exceeding a 20% CAGR) and an EBITDA margin above 20%. We argue that these targets are reachable and that the margin target is cautious – we model an EBITDA margin of 25.7% for 2020-22, reaching 24.4% as early as 2020. On net sales, we believe the company needs to add SEK ~200m through M&A to reach its target, which is possible given its strong cash generation. We make major estimate revisions to reflect a change of analyst and new targets. Our updated 50/50 DCF- and peer-based fair value range stands at SEK 6.9-14.5.

Speqta is expanding its reach into the finance value chain through the acquisition of Finnish Rahalaitos, a market leading online loan broker, and doubling its revenues at the same time. The acquisition involves an upfront payment of 4.5x EV/EBIT and an additional earn-out of up to 3.5x EV/EBIT. It is strategically positive and confirms our view on Speqta. We reiterate our fair value range of SEK 6.3-16.5 per fully diluted share.

Speqta posted sales growth of 98%, 12 pp ahead of our estimates, and an adjusted EBITDA margin of 17%, 2 pp better than anticipated. Organic growth accelerated to 72% y/y, mainly thanks to the well-performing shopping segment, and Shopello in particular. We slightly upgrade our sales estimates and fair equity value range to SEK 6.3-16.5 per share to reflect the somewhat improved outlook.

Speqta is a leading Nordic affiliate marketing platform with more than 2,680 connected stores and operations in 17 European countries. It operates in a market with strong underlying growth, and especially since it became a Google premium CSS partner in 2018, we see several more years of organic market share gains and margin expansion ahead for the company. Using a combination of DCF and relative valuation, we estimate a fair equity range of SEK 6.5-16.1 per share. Our valuation does not include any acquisitions that could lift this range higher.