Tessin: Towards profitability
Research Update
2023-07-24
07:30
Redeye updates its estimates and base case after reviewing Tessin's Q2 report, which showed sales roughly in line with expectations. However, higher opex than anticipated resulted in slightly lower profitability than expected. Nevertheless, we believe the company is still on track to achieve profitability.
Anton Hoof
Tessin’s sales for the second quarter amounted to SEK12.6m, a y/y decrease of 17% and somewhat below our expectations of SEK13.4m. The value of brokered loans reached SEK242m, which was in line with our estimate of SEK250m. Regarding profitability, EBITDA and EBIT amounted to SEK0.4m and SEK-1.2m, respectively, lower than our estimates of SEK3.5m and SEK2.0m. Despite lower-than-expected sales, the achievement of SEK242m in brokered loans is impressive, especially in the current economic environment. We are pleased to note that the arrangement fee has remained at a high level (c5%), indicating that the company has successfully maintained its price increases from the previous quarter.
The demand for financing from property developers seems to remain high due to the increased restrictions traditional banks impose in this uncertain macroeconomic environment. Instead, the real limitation for growth is still sufficient capital to fund these projects. Hence, securing a larger institutional player will be vital to accelerate growth from these levels. While awaiting such an opportunity, it is important that the company continue exercising prudence in managing its costs.
Following the Q2 report, we have adjusted our sales estimates for 2023e-2025e, lowering them by approximately 9% due to a decrease in loan volumes. We have also made cost adjustments for 2023e-2024e, increasing them due to higher opex in the quarter. The outcome of the warrants led to lower dilution than anticipated, positively impacting our valuation. As a result of revised estimates and lower dilution, our base case is now SEK0.50 (previously SEK0.55), while the fair value range remains unchanged at SEK 0.10-0.80.
| SEKm | 2021 | 2022 | 2023e | 2024e | 2025e |
| Revenue Growth | 18.5% | 14.6% | -2.5% | 24.4% | 19.6% |
| EBITDA | -75.7 | -30.0 | 3.0 | 11.7 | 20.3 |
| EBIT | -82.2 | -38.3 | -3.2 | 5.5 | 13.7 |
| EBIT Margin | -186% | -75.5% | -6.5% | 9.0% | 18.6% |
| EV/Revenue | 2.4 | 1.0 | 0.8 | 0.6 | 0.3 |
| EV/EBIT | -1.3 | -1.3 | -12.3 | 6.6 | 1.8 |
Tessin’s Q2 report came in somewhat lower than our estimates in terms of sales which amounted to SEK12.6m, a y/y decline of 17%. Looking at the profitability, Tessin’s EBITDA landed on SEK0.4m and EBIT on SEK-1.2m, which is below our estimates of SEK3.5m respective SEK2.0m. The deviation is primarily due to higher opex, where other external costs were SEK2m higher than expected.
| Tessin: Forecast deviations | ||||||||
| 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | Actual | Estimate | ||
| SEKm | Q1 22 | Q2 22 | Q3 22 | Q4 22 | Q1 23 | Q2 23 | Q2 23E | Diff (%) |
| Net sales | 8.8 | 15.1 | 14.4 | 12.9 | 10.0 | 12.6 | 13.4 | -6% |
| Growth YoY (%) | 37% | 14% | 30% | -4% | 13% | -17% | -11% | -6pp |
| Gross profit | 8.7 | 14.9 | 14.3 | 12.0 | 9.6 | 12.5 | 13.2 | -5% |
| Gross margin (%) | 98% | 98% | 99% | 93% | 96% | 99.6% | 98% | -2pp |
| EBITDA | -8.6 | -2.9 | -6.3 | -12.0 | -2.1 | 0.4 | 3.5 | -88% |
| EBITDA (%) | -98% | -19% | -43% | -93% | -21% | 3% | 26% | -23pp |
| D&A | -1.7 | -1.6 | -1.6 | -3.3 | -1.7 | -1.6 | -1.5 | 11% |
| EBIT | -10.3 | -4.5 | -7.9 | -15.3 | -3.8 | -1.2 | 2.0 | -160% |
| EBIT (%) | -117% | -30% | -55% | -119% | -38% | -10% | 15% | -24pp |
| Net finance | 0.2 | -1.3 | -0.5 | -3.5 | -0.4 | 0.4 | -0.4 | n.m. |
| PTP | -10.1 | -5.8 | -8.4 | -18.8 | -4.2 | -0.8 | 1.6 | n.m. |
| Net income | -8.8 | -6.4 | -9.1 | -20.3 | -4.7 | -0.8 | 1.6 | n.m. |
| Source: Redeye (estimates), company data (historicals) |
Disclosures and disclaimers