Max21 has almost completed a double repositioning. It has slimmed down to two core businesses and in turn, they have been refocused on scalable business models generating recurring streams of service revenue. Both businesses are placed in segments with good growth prospects: Binect in hybrid business communication and Keyidentity in multi-factor authentication security.
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Max21 |
Restructured for growth
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Technology |
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15 November 2017 |
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Max21 has almost completed a double repositioning. It has slimmed down to two core businesses and in turn, they have been refocused on scalable business models generating recurring streams of service revenue. Both businesses are placed in segments with good growth prospects: Binect in hybrid business communication and Keyidentity in multi-factor authentication security.
Huge, untouched market for hybrid communication
Binect provides a range of systems with which enterprises can digitalise postal business mail. Max21 puts the potential addressable market in Germany at 6-8bn letters annually compared to the 100m that it is currently processing. Take up of Binect systems has met expectations but usage (the key source of revenue) is still lagging.
First major MFA client signed in H117
Keyidentity provides multi-factor authentication (MFA) security systems for secure network access, portals and transactions. The systems combine physical tokens and one-time pass-codes. Keyidentity won its first major domestic enterprise customer in H117 but the sales cycle is slow. It is currently addressing international markets via a value-added reseller but may seek a closer form of partnership arrangement. The market is expected to show CAGR in the high teens over the medium term as network security receives ever higher priority, in part driven by regulation.
Both subsidiaries should reach breakeven in 2018
Slow contract acquisition mean that both subsidiaries are in the red with losses of €3.3m at the EBT level in H117. Trends in recurring revenues are more encouraging, especially at Keyidentity which Max21 expects to breakeven in H218. Cost reductions offer the prospect of breakeven at Binect in Q118. A share issue brought in €4.3m in H117 leaving Max21 with manageable net borrowings but further financing may be required.
Valuation: Uncertain basis
Lack of profits and consensus forecasts hamper comparative valuation. Reported NAV is €1.57/share but intangibles and tax losses, whose value depends on future profitability, account for 90% of total assets.
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Historical financials
Source: Max21 data. Note: *Year end changed. |
EDISON QUICKVIEWS ARE NORMALLY ONE OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Disclaimer
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Disclaimer
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FinTech Group’s (FTG) online brokerage business, Flatex, has been benefiting from the popularity of exchange-traded products and its customer base rose by c 30k over nine months to c 200k as at end-September. Flatex’s market share has risen to c 25% in Germany and c 50% in Austria, and further European expansion is planned. In addition to its brokerage businesses, FTG leverages its value chain by providing modular and standardised core banking technologies to B2B customers, most of which are banks. Management’s goal is to grow the business both organically and through acquisitions so that it generates €150m of annual revenues in the mid-term along with EBITDA of €50m. Despite being the fastest-growing major broking business in Europe, the shares continue to trade at a discount to the sector.