Redeye updates its estimates and valuation after reviewing Tessin's Q4 report, which showed weaker figures than expected. Despite the accelerated decline in sales during the quarter, we believe there is potential for a rapid rebound if institutional capital were to be secured.

Fourth quarter – Sales and profitability below expectations

Tessin’s Q4 report was surprisingly soft in our view, and net sales amounted to SEK6.8m, a y/y decline of 47%. This was lower than our expectations of SEK10.3m. The lower sales resulted in lower margins and Tessin’s EBITDA landed on SEK-5.8m and EBIT on SEK-7m, lower than our estimates of SEK-0.7m respective SEK-2.0m.

Tessin Nordic Holding

* Lack of profitability in recent years, with negative cash flow, which may lead to dilution of shareholder value through fundraising.
* No clear sustainable competitive advantage that will last for decades, potentially limiting long-term value creation.
* Absence of outspoken environmental goals, which may become a concern as sustainability becomes increasingly important to investors and stakeholders.
* Limited track record of expanding into new geographic markets, potentially hindering future growth opportunities beyond the Swedish market.

* Strong growth potential with ample room for expansion in a large market, positioned to benefit from secular tailwinds in the property financing sector.
* Asset-light business model allows for scalable growth without significant reinvestment, potentially leading to high incremental returns.
* Market leader in its niche with a strong brand and track record, creating a competitive moat against potential entrants.
* Operates in a stable market with limited competition due to regulatory constraints on traditional banks, reducing the risk of disruption.

* Operating Margin (EBIT) below 20%, suggesting potential challenges in maintaining profitability.
* Return on Equity (ROE) and Return on Assets (ROA) underperforming industry averages, indicating inefficient use of shareholder capital and assets.

* Strong gross profit margin exceeding 40%, indicating profitable product mix and pricing power.
* Sufficient cash and short-term investments to cover expected cash burn for more than two years, indicating financial stability.
* Likely to become sustainably cash flow-positive in the near future, signaling potential for self-funded operations and growth.

* Limited track record of successful value creation, with share price underperformance in recent years
* Weak commitment to innovation due to recent cost control measures
* Limited insider ownership, with management and board members not holding significant stakes in the business
* Lack of gender diversity in leadership, with no female representation on the board

* Lean, decentralized organization with senior team tenure exceeding five years, promoting accountability and stability
* Transparent and consistent investor communication, focusing on long-term value creation and timely business updates
* Board leadership shows independence, with directors capable of challenging management and possessing relevant experience aligned with business strategy

SEKm	2022	2023	2024e	2025e	2026e
Revenues	54.1	43.2	49.5	62.9	68.6
Revenue Growth	14.0%	-20.2%	14.7%	27.0%	9.1%
EBITDA	-30.0	-7.5	4.7	14.4	15.7
EBIT	-38.3	-12.8	1.6	11.4	12.5
EBIT Margin	-75.5%	-31.4%	3.4%	19.2%	19.2%
Net Income	-44.9	-14.4	-0.06	9.8	10.9
EV/Revenue	0.9	0.7	0.6	0.5	0.4
EV/EBITDA	-1.6	-3.9	6.2	2.0	1.8
EV/EBIT	-1.3	-2.3	18.4	2.5	2.3

Q4 results – Weaker than expected

Capital - still the limiting factor

Valuation

Key financials

Fourth quarter – Sales and profitability below expectations