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  • #671

    Jørgen Astrup



    Written: 31.01.2021

    By: Jørgen Astrup

    Disclaimer: The writer of this analysis owns shares in the company. This analysis is not financial advice. I am long Speqta shares. Shares have been accumulated between 4,17 and 4,20 SEK.

    Summary: Speqta is a potential good growth case at a cheap price. The future income for Speqta is uncertain. The market does not like uncertainty. I don’t mind uncertainty if there is a big margin of safety. The low price compared to the future projects, current earnings, assets, and the goals of the company make the margin of safety large. This is an investment inspired by the way of thinking described in the book “Thinking in bets”.

    *Who and what are Speqta:

    Speqta owns and develops products and services that increase traffic and sales online. The company’s goal is to become a market leader in lead generation and performance-based marketing.

    They operate in two segments Content and comparison (C&C) and AdTech.

    AdTech: Bidbrain™. Next-generation AI-based bidding, for Google Shopping Ads has been launched under the name Bidbrain™. The AI service will later be launched as a SaaS solution and aims at a global market under the domain bidbrain.com. Bidbrain™ is pushed into the customer’s own Google Ads account and requires hardly any installation, while the bidding becomes transparent.

    C&C segment –The C&C is using content and comparisons to inspire and to inform consumers to make decisions online.
    Speqta has C&C in: Personal finance, Food & Beverage, and Shopping (e.g.: discount codes, best-in-test).
    Some of the “brands/verticals/segments” in the C&C t:

    *All information in this subtitle and the photo are from the Q3 presentation of 2020.

    The major risks: 
    –          AdTech as Speqta has called one off their segment in a transition with BidBrain. Incorporation with BidBrain at e-retailers will take some time, and I don’t see the upcoming quarterly reports been strong in this segment. This will take some time. The biggest risk is that the project itself fails, and the sales from AdTech will fail dramatically compared to their optimistic goal.

    –          Covid-19 will affect the Content and comparison segment (C and C segment) for a long time. The C&C segment is the primary part of Speqta, and restrictions will heavily impact the company. The COVID-19 pandemic has primarily negatively impacted the segment as the demand for consumer loans has decreased. When we leave the biggest restrictions from the pandemic behind us there should be a fast recovery in the demand for consumer loans. When will this happen? Who knows, but I will wait for this to happens.

    –          Major risk is in wrong timing of acquisitions. I think it’s likely that Speqta will do more acquisitions to achieve its goal for 2022. Timing the payments in shares at the right price might be a tricky one for Speqta. I hope they will finish working on Bidbrain and wait for the C&C segment to recover after Covid- 19. If they force acquisitions when the stock price is low, they will be “overpaying” and dilute the current shareholders.


    Why buying into uncertainty:

    Low price and uncertainty go hand in hand. The future is uncertain. Some companies are easier to have an evaluated guess of the future than others. I will not do a DCF of this company, the future growth/acquisitions are so uncertain I don’t see the point. My reason for getting excited is the combination of growing cash flow from operation with low capital expenditures. That implies a possibility for a better free cash flow in the future. I do believe the market is too focused on the short-term outlook and that future cash flows from this business will be better than what’s excepted.

    The impact on Speqta in the short term is negative, especially with strong restrictions in Finland from Covid-19. When the demand for consumer loans will improve and if Bidbrain product will generate income will be the deciding factor for the future cash flows.


    Assumptions of the future:

    Their current guiding/goal: From Q3 2020: “The new targets are: Growth and profitability: Speqta’s goal is to reach sales of MSEK 600 in 2022 with at least 20% EBITDA margin, driven by both organic growth (above 20% CAGR) and acquisitions.”

    The stock makes EBIDTA of MSEK 120 in 2022 if their reach their goals without acquisitions.  It is now priced at a market cap of MSEK 270. I don’t see sales from their current segments reach sales of MSEK 600 in 2022. This implies further acquisitions.


    What 2022 might look like without further acquisitions:

    Let’s say the company doesn’t do any more acquisitions from now to mid-2022. (highly unlikely):

    Eone OY generated from November 2018 to October 2019 revenue of approximately MSEK 149 and an EBITDA of approximately MSEK 56 million. Covid-19 has highly impacted the revenue and profit after Speqta acquired it in January 2020.

    The example of the company in 2022 with assumptions:

    Eone OY returns to its former “glory” of income from the years of 2018/2019. In 2022 the revenue will somewhat less than their prior “glory” and now MSEK 125 and an EBITDA of MSEK 40.

    Speqta without Eone will generate:

    Revenue and EBIDTA from Jan–Dec for 2019: Net Sales approximately MSEK 102 with an EBITDA of MSEK 17.

    Let’s say the AdTech segment with Bidbrain delivering decent in 2022 and boosting the total sales to 140 MSEK and with an EBIDTA of MSEK 30.

    What does this imply?

    This implies sales of 265 MSEK and EBIDTA of MSEK 70 in total. Is this conservative, rational, or too positive?  You decide for yourself. I do believe the forecast of EONE`s future is conservative.

    Let’s say that MSEK of 10 will be taxes and net financials. The OPEX will be MSEK 15 million. The free cash flow will then be MSEK of 45. At the current market cap of MSEK 270, the company will trade at 6X free cash flow in 2022 if the price doesn’t change.

    Joel Greenblatt would say that 12X free cash flow is an attractive multiple to buy at, so I guess buying something today that will generate 1/6 of its market cap in free cash flow in 2022 sounds decent?


    A speculative factor for investing in Speqta:

    Today the company is considered a media-company and compared in peer groups to other media companies. The speculative side of this investment is a multiple expansion from today’s level if the company is considered an innovative technology company with AI as SAAS business model as its primary revenue stream. This is highly speculative, but it might be a bonus for the patient shareholder, if they overdeliver on BidBrain and do acquisitions to boost the AdTech segment.



    Sources all re-read 31.01.2021:

    Speqta_Annual report 2018

    Speqta Q3 2020

    Speqta acquire Eone_ january 2020

    Speqta annual report 2019



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