Rating suspended

Arctic Securities has been advisor to the Schibsted Board of Directors and the company in relation to the acquisition of the eBay classifieds Group portfolio. The rating (previous Buy) and price target on Schibsted ASA as we previously issued have been temporarily suspended due to Arctic’s role in the transaction. We will revert with an update and our further view on the transaction once this temporarily period has ended.

Q2: Pulling through the crisis with solid results

Schibsted reported stronger than expected Q2 results, with strong cost execution in classifieds, News Media and ‘Growth’. The results support a gradual recovery in 2H/20. Adevinta makes up 77% of Schibsted’s valuation and the remainder is attractively priced. We reiterate our Buy rating and increase our TP to NOK 311 following estimate changes and changes to Adevinta’s current valuation. The focus the next weeks should likely be the outcome of eBay classifieds.

Q2 first read: Strong results

Excluding Adevinta(reported yesterday), Q2 revenues slightly were above … EBITDA was NOK 498m vs. consensus at NOK 272m and ARCe at 333m Improvements in classifieds, with recovery in most verticals in June Acquires Oikotie – positive as strengthen the Finnish classifieds position

Q2e: Showing some strength

While the most severe impact from Covid-19 will likely be seen in Q2, we view the current consensus estimates (Infront from May 28th) as too pessimistic. Schibsted’s online classifies sites have shown improvements by quarter end, and Distribution (package and food delivery) and Prisjakt should report solid growth. In addition, M&A on a Schibsted or Adevinta level remains an option. As such, we maintain our Buy rating.

Improved trends in Nordic classifieds

Nordic classifieds report improving trends, and Finn increased car ads The trends support our view of a V-shaped recovery once crisis abates And the most severe impact from Covid-19 in Q2, and improvements after A solution to eBay classifieds a potential catalyst for Schibsted

Q1: Look beyond near-term weakness

While the most severe impact from Covid-19 will likely be seen in Q2, we view the current valuation as attractive as it only reflects the ownership in Adevinta and Finn. We see several potential catalysts to unlock Schibsted’s stub value, including acquisitions for Schibsted/ Adevinta, and a sell-down of its Adevinta ownership stake plus strong cash flow potential once the crisis abates – and stronger growth prospects within Distribution (packages and food delivery).

Q1 first read: softer, but positive revenue mix

Excluding Adevinta (reported yesterday), Q1 revenues was broadly in-line …while EBITDA was 10% below consensus and 6% below our estimate Positive mix: classifieds slight better, newspapers/ Lendo/ Growth weaker Cost savings increased within News Media and lower investments in Lendo

Attractive valuation, despite COVID-19 impact

Schibsted reports Q1 results on May 6, where we expect the focus to be on the outlook for Q2/Q3 following COVID-19. We expect temporary weakness within Marketplaces and News Media, but improved growth in Distribution (HeltHjem, Morgenlevering). We maintain our Buy rating as we view Schibsted’s current valuation as attractive, only reflecting the ownership in Adevinta and Finn. A potential sell-down in Adevinta remains a long-term trigger.

Negative near-term impact from COVID-19

Schibsted announced yesterday that it is cancelling its previously announced DPS for 2019, and that COVID-19 is having a negative impact on classifieds (80% value stub ex Adevinta) and newspapers (8% of value stub). We cut our target price to NOK 227 following estimate cuts (- NOK 10/share) and a lower current valuation for Adevinta (- NOK 66/share). We maintain our Buy rating and view the current weakness as temporary as seen in previous downturns.

COVID-19 impact on Schibsted

In previous recessions Finn was modestly impacted, but newspapers more Higher online penetration than last recession - classifieds more cyclical? Marginal negative impact on Marketplaces, and positive on e-commerce Schibsted “stub” (excluding Adevinta) attractive at current valuation

Q4: Every cloud has a silver lining

Schibsted Q4 results were somewhat below estimates, but trends remain fairly intact from Q3. We continue to find the “stub” (excluding the Adevinta ownership) attractive. Also, M&A optionality over time for Adevinta remains a long-term catalyst that we believe investors put little value on. In the coming months, we expect Schibsted to pursue online classifieds acquisitions in the Nordics to strengthen its Nordic classifieds segment. We maintain our Buy rating.

Q4 first read: softer, but with positive mix

Excluding Adevinta (reported yesterday), Q4 revenues was in-line ..while EBITDA was 9% below estimates. Positive mix: Classifieds solid, but newspapers, Lendo and HQ weaker Outlook comments supportive for estimates

A step in the right direction

Schibsted reports Q4 results on February 13. We maintain our Buy rating, and find the valuation for the Schibsted “stub” (excluding the Adevinta ownership) as attractive. The stub is now worth ~NOK 87/share which we model alone is justified by only the valuation for the classifieds site Finn in Norway and the newspapers. We adjust our target price to NOK 309 (292) following the share price increase for Adevinta and minor estimate changes.

Audioboom Group - Q1 24 revenue growth of +11%, FY24E forecasts reiterated

Audioboom’s FY23 results and Q1 trading update show Q1 24 revenue growth of +11% yoy, $6.7m of March 2024 revenue marking the platform’s highest revenue month since May 2022, and a confident outlook that leads us to reiterate our FY24E forecasts. Following the focus on new initiatives through FY23, the platform is now in its strongest ever operational position, with a record 1.1bn monthly ad impressions created in March 2024, record global audience reach of 38.6m unique global listeners in Janua

Alphawave Semi: FY23 trading update, amended forward guidance

Alphawave Semi has reduced guidance for FY23 and prospectively citing lower revenues from China, changes in expected revenue recognition from long-term contracts, and continuing investment in R&D. The share price has reacted negatively, giving up most of the gains since the trading statement at the end of January. Current consensus, which is a good match for pre-existing guidance, should be reduced, most likely following release of the FY23 results and full 1Q24 trading update due on 23 April. H

Crimson Tide - FY23 reports +15% revenue; investment phase complete

Crimson Tide has reported FY23 results to December in line with expectations, with additional operating leverage benefitting updated FY24 and maiden FY25 and FY26 forecasts. FY23 delivered +15% revenue growth to £6.2m at 86% GM, of which over 90% is recurring, and maintained £5.8m ARR even after unexpected customer churn in the year as we previously noted. Crucially, the Group achieved milestone adj EBITDA profitability of £0.4m at 7% EBITDA margin, and edges closer to adj PBT profitability expe

Morning Note – 16 April 2024

Devolver Digital (DEVO LN) - Rebuild year

Devolver Digital encouragingly delivered 2023 results slightly ahead of expectations and provided a steady medium-term outlook that leads us to reiterate our 2024 Adjusted EBITDA estimates. Longer term, the company is now planning to further develop its two major planned titles, Human Fall Flat 2 and System Era's next major new release. We now expect those major titles to be released in 2026 rather than 2025, meaning we lower our 2025 Adjusted EBITDA forecast to $10.6m from $17.6m but introduce

Morning Note – 15 April 2024

Checkit - New product launch and contract wins

Checkit has won contracts with two customers worth at least £417k over the three-year lives of the contracts, confirming its ability to upsell to its existing customer base and supporting our forecasts. Having trialled the new technology with multiple customers, Checkit has launched its Asset Intelligence module, which uses advanced analytics and machine learning to enhance customer sustainability, reduce costs and increase revenue.

Soft growth patch

Auction Technology Group - H1/24 Trading update

ATG’s H1/24 trading statement indicates revenue for the six-month period to 31 March 2024 was $86m, a 6% increase on H1/23 (1% organic growth), helped by the addition of the EstateSales.Net (ESN) marketplace last year, which performed well in the period. Total marketplace revenue increased 2% (organic), driven by growth in value-added services (VAS) and event fees, offsetting a decline in commission revenue (mainly through lower asset prices).

Morning Note – 17 April 2024

Touchstar - Full year results: Recurring revenue strategy delivers further profit growth

Touchstar is a supplier of mobile data computing solutions and managed services to a variety of industrial sectors. This morning's full year results reflect the outcome of a multi-year strategy coming to fruition for the group, with recurring revenue growth of 8.7% delivering overall revenue growth of 7.1% and in turn a 60% increase in PBT to £0.7m. Over the past few years, Touchstar has focused on enhancing the returns from their product offering through a shift towards recurring software licen

It’s not what you sell, it’s the way that you sell it

This report is intended to help UK small- and mid-cap investors gain a better understanding of software companies’ routes to market, and to highlight how one of the most important facets of the way in which they grow and deliver value is routinely ignored.  We examine sales processes for six UK-listed companies and one that has recently been taken over, and consider why they have followed their respective paths.

LIBERUM: Cirata plc: Cirata from the flames

Engage XR Holdings - Expanding from FY23, FY24E forecasts reiterated

ENGAGE XR’s FY23 results show revenue and net cash in line with the February trading update, EBITDA ahead at -€4.0m vs -€4.5m due to the split of cash outflow between opex and working capital, and a confident outlook that leads us to reiterate our FY24E forecasts. FY23 revenue for the core ENGAGE platform was unchanged vs FY22 at €3.3m, as H2 23 revenue was impacted by the record seven-figure contract announced in February shifting to 2024, and several enterprise customers scaling back renewals

Initial Equity Trading Comments - 19 February 2024