Clavister: Security by Sweden - ABG

Major potential, but it has struggled with execution
Media reports about critical infrastructure such as hospitals and businesses being paralysed for days by hackers are becoming increasingly common. The total economic damage from cybercrimes is expected to reach USD 6tn in ’21, or 40x total cybersecurity spending. Clavister is a Swedish cybersecurity firm that helps keep critical government agencies, enterprises and 5G networks safe. Despite its small size, it is well positioned as a leading European vendor to capitalise on a growing market and to fend off large US multinationals in light of mounting geopolitical tensions and EU privacy regulations. We believe that Clavister will outgrow the market, which Gartner expects to expand at 12% p.a. The main growth driver will be the 5G roll-out, where Clavister already works with ~5% of all operators globally. Since its IPO in 2014, it has been struggling with major losses and poor strategic execution. But we see light at the end of the tunnel, due to the growth potential and the company’s relatively fixed cost base.

New strategy since 2018 has delivered results
Since 2018, Clavister has implemented a new strategy that has made its offering clearer to clients, while streamlining the sales organisation to focus on its core customer segments: service providers, governments and defence contractors. It is now banking on being able to leverage its relationships with partners to drive the necessary growth to scale. So far, the strategy is working. All incremental sales since 2017 have fallen to the bottom line. If the company can continue growing sales at a ~20% CAGR while keeping costs flat, we see it generating positive EBITDA in ’22e and EBIT in ’23e. We forecast a 19% sales CAGR ’21e-’23e, just shy of its growth ambition of 20% p.a. In terms of EBITDA margin, we forecast 3% and 16% for ’22e-’23e, respectively.

We initiate coverage with a fair value range of SEK 5-16
We arrive at a fair value range of SEK 5-16 per share by constructing a DCF and looking at peer multiples. On our estimates, the stock trades at 3.3x ’23e EV/sales, compared to the avg. cybersecurity peer of 10.6x.

Länk till analysen i sin helhet: https://www.introduce.se/artiklar/2021/09/new-company-at-introduce-clavister/