Precise Biometrics: Hit by a weaker smartphone market - ABG

Sales and EBITDA below ABGSCe in Q2 Raises up to SEK 83m in a rights issue Share trades at 3.4x-2.6x EV/sales on ‘22e-‘24e

Smartphone market is slowing down Precise delivered a Q2 with SEK 24.6m in sales, which was 11% below our expectation of SEK 27.7m. The primary driver of the miss was SEK 7.1m in royalty revenues, vs. ABGSCe of SEK 11.6m and SEK 10.2m in the last quarter. License sales surprised positively at SEK 15.7m vs. ABGSCe of SEK 13.5m. Moreover, Algo sales were lower than expected due to a slowdown in global smartphone shipments. With supply chain issues easing, lower demand seems to be a problem instead. Despite this, Algo revenues are still growing y-o-y, which is encouraging. EastCoast continued to grow its SaaS business. Mgmt. also highlighted that the integration of the subsidiary continues to develop well. The lower-than-expected sales in Q2 contributed to an EBITDA of SEK 0.9m vs. ABGSCe of SEK 2.3m. Furthermore, one of the highlights of this quarter was a directed share issue to its partner Egis Technology, making it a substantial shareholder of the company (~12%) as well as an announced preferential share issue. All in all, these issues could bring in SEK 83m to the company, allowing it to execute on its growth strategy. In addition to the cash, we think the deal is evidence of Precise’s strong product offering. Precise could also benefit from a deepening of the relationship.

We cut ‘22e-‘24e sales by 2%, 1%, and 1% Because of the slowdown in the global smartphone market, we have cut our Royalty estimates for H2’22e and made minor adjustments to 2023e-2024e as well. We also up 2022e License sales slightly on the stronger Q2. Because of this, we cut ‘22e-‘24e sales by 2%, 1%, and 1%, and EBITDA by 3%, 0%, and 0%, respectively.

Share trades at 3.4x-2.6x EV/sales on ‘22e-‘24e On our new estimates, Precise is trading at an EV/sales of 3.4x-2.6x on ‘22e-‘24e, which is fairly in line with its 5Y historical average of ~3x NTM (FactSet consensus). We make no c ... Läs mer på ABG Sundal Collier

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