Growth potential remains

Cyan 29 October 2020 Update
Download PDF German PDF Download


Growth potential remains


Scale research report - Update

29 October 2020



Market cap


Share price graph

Share details




Deutsche Börse Scale

Shares in issue


Net debt (€m) at H120


Business description

Cyan supplies cybersecurity systems for mobile data networks. Following the acquisition of I-New, its two major products are content management software sold as a white-label product to mobile network operators and a traffic management solution for MVNOs that enables them to reduce network traffic and corresponding costs.


Rapid growth in high-margin revenue expected.

Blue-chip customer base and healthy pipeline.

Opportunities to accelerate rapid growth through mobile banking initiatives.


Execution risk and capacity constraints.

Second wave of COVID-19 may affect implementation and the ability to sell its products.

Additional revenues may be driven by one-off licence sales, offering less visibility.


Dan Gardiner

+44 (0)20 3077 5700

Cyan’s share price has halved year to date. COVID-19 and the Wirecard insolvency affected both H1 sales and its pipeline, leading to a resetting of consensus. Yet H1 sales still more than doubled y-o-y and underlying EBITDA rose to €6.7m (excluding the Wirecard write-down). The prospects for long-term growth remain healthy. At €11, Cyan is valued at 7.0x FY21e consensus EBITDA, a substantial discount to peers. With a new CEO due to arrive in January, it might be time for investors to revisit the story.

A challenging H1: COVID-19 and Wirecard insolvency

Cyan’s H1 was affected by both COVID-19 and the declared insolvency of Wirecard. COVID-19 delayed technical integration at Orange (its largest customer) and reduced its ability to sign other big deals. Wirecard was a strategic customer and its declared insolvency in June resulted in a €4.5m write-down of an unpaid receivable. Despite these headwinds, Cyan’s sales grew 141% y-o-y to €16.9m and underlying EBITDA (ie before the impact of the Wirecard write-down) rose from -€1.0m to €6.7m in H120. Much of this growth was driven by Cyan’s BSS/OSS business, where revenues nearly trebled (up from €5.4m in H119 to €15.9m).

Consensus now reset; growth potential remains

We highlighted risks to consensus estimates in our Risks to consensus but solid fundamentals note. With forecasts now implying sales of just €12.5m in H2, and growth in FY21 and FY22 of 36% and 28% respectively, these now look more achievable. There is little visibility on Cyan’s sales base overall, but the potential of the market it is addressing remains unchanged. The growing use of mobile phones for banking and commerce is leading to rising cybercrime and demand for security measures to counter the threat. Cyan sees the overall market growing from €1.4bn in 2018 to €5.7bn by 2023 (a 32% CAGR) with the smaller “on-net” segment (where Cyan is focussed) growing even faster. The roll-out of its Orange France contract is due to begin in H2 and the extension of its Virgin Mobile contract bodes well for BSS/OSS sales. However, much hinges on the pace of deployment at Orange – a second COVID-19 wave could see further delays here and impact sales elsewhere.

Valuation: Upside potential if it can deliver

At €11, Cyan’s share price has fallen c 50% since the beginning of 2020. At current levels, it implies an enterprise valuation of 9.6x FY20e consensus EBITDA, a multiple that falls to 7.0x in FY21e. Its nearest cybersecurity peers, which are neither growing as rapidly nor as profitable, trade at an average FY21e EV/EBITDA multiple of 11x. If this peer group average multiple was applied to Cyan it would suggest a valuation of €18 per share, 65% upside to the current share price.

Consensus estimates and implied valuation multiples




Adj. EBIT* (€m)

Adj. EPS* (€m)































Source: Refinitiv. Note: *Adjusted for exceptionals including the Wirecard write down.

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

A challenging H1: COVID-19 and Wirecard insolvency

Both COVID-19 and the declared insolvency of Wirecard affected Cyan’s H1. Orange is Cyan’s largest contract with potential to generate €25m in annual recurring revenues by FY21 (see The future is bright, the future is…). COVID-19 delayed technical integration at Orange and led to the cancellation of the Mobile World Congress (MWC), the industry’s flagship trade show, where the product was going to be launched. This cancellation not only delayed the launch of the Orange product (and revenues), but also affected Cyan’s ability to close existing deals and market the solution to potential new customers.

Wirecard was a strategic partner; it planned to integrate Cyan’s endpoint cybersecurity solution into its apps and Cyan’s sales to Wirecard were c €5m in H219. Wirecard’s declaration of insolvency in June resulted in a €4.5m write-down of an unpaid receivable for Cyan.

Despite all these headwinds, Cyan grew revenue 141% y-o-y to €16.9m. Much of this growth was driven by its BSS/OSS business, which provides traffic management, billing and other software to virtual mobile operators. Sales here, including own work capitalised, nearly trebled to €15.9m. A large part of the licence sale from the extension to its contract with Virgin Mobile Group, announced in July, was recognised in Q2. Cybersecurity sales rose by 62% from €2.1m to €3.4m in H120.

Reported EBITDA turned from negative €1m in H119 to positive €2.2m. Personnel costs of €5.5m were down from H219, but reported costs rose due to the one-off €4.5m Wirecard write-down. Underlying EBITDA (ie before the impact of the Wirecard write-down) was €6.7m. Operating free cash flow was -€4.4m and net debt was €1.0m.

Expectations for H2 and beyond

Cyan has not updated its guidance for FY20 since April, when it stated that it expects ‘revenues and EBITDA for 2020 to be at least at the level of the previous year’. While it still sees substantial growth in FY21 it no longer expects to reach sales of €75m. Cyan has pushed back achieving this milestone by six to 12 months (ie sales will reach €75m in FY22 – see Exhibit 1) due to the impact of COVID-19 on both contract negotiations and technical integration of its products.

Consensus appears more cautious in general. FY20 sales are expected to reach €29m, above the €26m minimum implied by guidance and suggesting revenues of just €12.5m in H2. For FY22e, consensus sees sales of €51m, €11m below consensus in April and 31% below guidance. The latest downward revisions to estimates appear not to have affected profit expectations (see Exhibit 2). Consensus anticipates that tight control of opex, combined with growth in high-margin software sales, will enable Cyan to deliver a doubling of EBITDA by FY22 (an implied margin of 44%).

Exhibit 1: Cyan originally guided to sales of €75m in FY21. It now expects this to be reached by FY22

Exhibit 2: Consensus EBITDA forecasts have remained stable since May

Source: Cyan, Refintiv

Source: Cyan, Refintiv

Exhibit 1: Cyan originally guided to sales of €75m in FY21. It now expects this to be reached by FY22

Source: Cyan, Refintiv

Exhibit 2: Consensus EBITDA forecasts have remained stable since May

Source: Cyan, Refintiv

Delivery milestones and pipeline

Through growth in its cybersecurity products, Cyan is targeting the development of a high margin, recurring revenue model. However the nature of its current business, which is dominated by large, high-margin BSS/OSS licence sales, offers limited visibility on the timing of revenue in general. COVID-19 is compounding this issue. Cyan’s pipeline (as measured by the number of customers) is still growing, particularly for its Cybersecurity solutions to mobile network operators, but it is difficult to predict when this pipeline will be converted.

Probably the best gauge to near-term prospects is the timing of delivery milestones for major projects. The product launch at Orange in France, its most significant subsidiary, is Cyan’s priority. It expects to launch its cybersecurity and child protection products in the B2B segment in H220. Roll-out of the products in the B2C segment is expected in FY21. Cyan has also begun technical implementation at Orange Slovakia across all customer groups and expects to roll out its solution across the whole customer portfolio during H220. The joint project with Aon has been completed technically and Aon is expected to begin intensively promoting its CySec product including Cyan’s solution across Europe before the end of 2020. The company believes this could provide a very significant boost to its cybersecurity revenues.

In September, the current CEO, Peter Arnoth, announced that he will step down at the end of 2020 to be replaced by Frank von Seth. Frank von Seth was most recently chief commercial officer for Austria and Switzerland for Aon and his background is expected to help accelerate the deployment of Cyan’s product at Aon.

Mobile cybersecurity threats likely to rise sharply

While the near-term outlook is cloudy, the longer-term growth opportunity Cyan is addressing remains attractive. The telecoms sector is unlikely to be deeply scarred by COVID-19 in our view and changing working patterns (the shift to homeworking) may ultimately lead to rising cybersecurity threats. The fundamental demand driver, the rising proportion of mobile phone users opting to shop, bank or use mobile payment systems, remains intact (see Exhibit 3). Cyan sees an addressable market of 2.6 billion customers willing to pay, either indirectly via their subscription or directly, to prevent mobile cyber threats, yet very few are doing so currently. Citing third-party analysis, Cyan believes its addressable market will quadruple from €1.4bn in 2018 to €5.7bn by 2023 (a 32% CAGR).

Exhibit 3: The rising use of applications that require cybersecurity on mobile phones

Source: Cyan citing GSMA and GlobalData as sources


At €11, Cyan’s share price implies an enterprise valuation of 9.6x consensus FY20e EBITDA, a 26% discount to its nearest cybersecurity peers. This multiple falls to 7.0x in FY21e and just 4.7x in FY22. Now that forecasts have been revised, risks to numbers have fallen, albeit there is limited visibility in general. Given the share price has halved year to date, if Cyan can meet lowered consensus forecasts there could be upside to both its rating and the share price. Its nearest cybersecurity peers, which are neither growing as rapidly nor as profitable, trade at an average FY21e EV/EBITDA multiple of 11x. If this peer group average multiple was applied to Cyan it would suggest a valuation of €18 per share, 65% upside.

General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).


Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt


London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia


Share this with friends and colleagues

You may be interested in