Redeye updates its estimates and valuation after reviewing Tessin's Q1 report, which showed lower sales and profitability than expected. All eyes continue to be on securing institutional capital, and until then, we expect muted loan volumes in the coming quarters.

Q1 – Sales and profitability below expectations

Tessin reported net sales of SEK6.2m in Q1, a 38% y/y decline, lower than our expectations of SEK8m. Looking at profitability, Tessin’s EBITDA landed at SEK-3.6m and EBIT at SEK-4.1m, lower than our estimates of SEK-2.3m and SEK-3.1m. The deviation is due to lower sales, as opex was somewhat lower than our estimates.

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
Net Sales	50.7	40.6	33.2	52.8	58.1
Sales Growth	14.6%	-20.0%	-18.2%	59.3%	10.0%
EBITDA	-30.0	-7.5	-7.3	7.7	9.1
EBIT	-38.3	-12.8	-9.3	5.1	6.3
EBIT Margin	-75.5%	-31.4%	-27.9%	9.6%	10.8%
Net Income	-44.9	-14.4	-13.2	1.1	2.4
EV/Sales	1.0	0.7	1.6	1.0	0.9
EV/EBITDA	-1.6	-3.9	-7.3	7.1	5.6
EV/EBIT	-1.3	-2.3	-5.8	10.8	8.0

Q1 results – Continued headwinds

Securing short-term financing

Valuation

Key financials

Q1 – Sales and profitability below expectations