Talkpool outperformed Erik Penser Bank’s estimates for Q4 2021

In the analysis of Talkpool’s Q4 result, Erik Penser Bank concludes that Talkpool outperformed both its sales and gross margin estimates for the quarter. For the full year 2021 revenue grew 15% year on year. The acquisition of Nordic Proptech, the strong growth in Germany and the US market re-entry were mentioned among other highlights. The share price of SEK 17-19 recommended by Penser is 64-84% higher than the current market price.

Summary:

Growth in Q4

Sales for Q4 amounted to EUR 6.6 m (6.4 m), which was 2% above our estimates of EUR 6.5 m. Revenues thus grew 4% y / y. For the full year 2021, revenues will grow by 15% y / y driven by organic growth and the acquisition of Nordic Proptech. During the year, the company grew strongly in Germany through the collaboration with Deutsche Telecom.

Profitability

The gross margin was 24% against our estimates of 23%. EBIT amounted to EUR 0.2 m compared to our estimates of 0.3 m, where the large deviation was non-recurring items. Furthermore, we believe that the US investment announced at the beginning of 2022 can lead to good growth with good margins. In addition, Talkpool has continued to refine its market exposure by selling its Pakistan business.

Estimate adjustments

We adjust for revenues and cost items for the forecast period, to reflect Pakistan sales but also successes in e.g. USA. We note that the business is developing in line with the company's goals, but the multiple of the comparison group has decreased. In total, we see a justified value of SEK 17 - 19 per share (SEK 19 - 21). We continue to see medium risk.

Investment case

In recent years, Talkpool has shifted its IoT focus to focus on smart buildings. Through the acquisition of Nordic Proptech a major player in the Swedish market for smart buildings has been created. Furthermore Talkpool is focusing on more profitable product and market niches, which is expected to contribute to a stronger profitability in the future. Structurally, the company benefits from the transition to 5G, which leads to a sharp increase in the number of communication sites requiring service and maintenance, which increases the addressable market. Several of the markets where Talkpool is active also have very good 5G preparedness in terms of demand, regulation, and technical know-how. As a final aspect, the company is shifting its geographical focus, mainly towards Europe and the USA.

Find the full report in Swedish attached.