ABG initiates coverage of SPENN Technology

“We are pleased to have a reputable stockbroker and corporate advisory firm, such as ABG, follow the development of our company. ABG has done a good job in understanding how SPENN is building a complete financial ecosystem across banked, unbanked, businesses agents, and banks. The report provides valuable insights for current and new shareholders, which SPENN stands to benefit from.” says Jens Glaso, CEO of SPENN Technology.

In its initial report, ABG sees a “significant market potential if SPENN is successful”, and ABG also addresses risk and uncertainty, which is reflected in the valuation range of DKK 0 to 1.03 per share.

“We find that ABG has managed to capture our business model and highlights the market potential for SPENN based on current markets.” says Glaso.

Here are some highlights from the report/analysis from ABG:

Building an inclusive financial ecosystem that does not come at the expense of the consumer. In our view, the very essence of SPENN’s investment case rests on capitalising on the financial ecosystem that the SPENN platform can help to build over time. By offering free-of-charge banking services to consumers, SPENN seeks to grow a large base of end-users, and use this to open up for adjacent revenue streams from third parties and businesses, in addition to the float revenue and fees that the funds held at partner banks will generate.

Userbase development – 77% CAGR since March 2020. 15 million addressable unbanked users in current markets. It also recently entered Uganda and Ghana, where we find more than 6.2 million addressable unbanked users.

Significant upside potential from adjacent markets and the banked population. In addition to the market potential in SPENN’s current markets, there are naturally significant opportunities in new geographical markets, population segments and products. In our view, geographical expansion and increasing adoption within the banked population represents a significant potential in addition to the unbanked market opportunity. With an estimated combined adult population in 2021 of 93 million, the potential within the banked population in SPENN’s existing markets could be substantial if there were to be a meaningful adoption here.

Significant market potential within the Business segment. Although it is challenging to quantify the serviceable obtainable market within the business segment given the lack of accurate data, there are some datapoints that indicate a significant market opportunity within this segment. In Tanzania alone, for example, there are more than 3 million SMEs, of which a large part belong to the informal sector. Based on an adult population of ~32 million in Tanzania, this implies 10.7 adults per SME.

Based on our market forecast, we estimate revenues of DKK 149m in ‘22e, up from DKK 13m in ‘21e. 

Our valuation range is based on a DCF scenario approach to reflect the wide range of potential outcomes. In scenario 1, SPENN successfully builds a large user base that it is able to monetise on, while in scenario 2, SPENN fails to profitably monetise on its customer base. These two scenarios imply an EV range of DKK 0-4.3bn on a fully diluted and de-risked basis. This corresponds to a share price interval of DKK 0-1.03.

Read the full analysis: https://www.introduce.se/foretag/spenn-technology/Equity-research/2022/2/spenn-technology---mobile-banking-for-the-people/