Andreas Eriksson | 2022-09-16 08:00
Slowdown in Q2 with some glimpses of lightAs mentioned in our last report, Motion Display reported a slowdown in order intake and thereby sales for Q2’22. Swedish peer Pricer however, reported continued growth in Q2, which we see as a sign that market conditions are slowly returning to a more normal state, where key customer segments such as retail, bars and restaurants again can focus on their in-store marketing. Even though the sales of SEK 3,4m can be overlooked, the order book of SEK 1.8m is more worrying. Cash levels are running low at SEK 0,6m, and if sales don’t take off during H2’22, we expect some sort of capital raise soon. However, the appointment of Per Dalby as Global Sales Director before the summer could be the missing piece to get the Motion Display sales team to the next level, given his extensive experience and network.
Looking to capitalize on favorable market trendsWe’ve seen a buzz around “digital signage”, which is the usage of LEDs in order to increase sales and profits from store- and brand promotions, that fulfills the same needs as Motion Displays e-paper-products. Analytics company Grand View Research estimates that the global market for digital signage amounted to USD 23.1 billion in 2021. Even though the LEDs today have become quite small and handy, they still need an electrical outlet which makes the installation so much more complex compared to Motion Display’s battery powered e-paper which can be attached to the shelf directly, as easy as a normal static sign. Given the products superior track record to increase sales in several case studies, and given the relatively cheap price (between USD 30 – 60 per display), we continue to expect a take-off for Motion Display’s solution.
Strong case, attractive entry levels, elevated riskAs we see it, the market is trending in Motion Display’s direction. Retail is definitely not dead and new trends are on the rise which should benefit the likes of Motion Display. The company is run with tight cost control, the product is finished with excellent track record and the only thing missing is establishing recurring sales rather than one-offs. It wouldn’t take much to lift Motion Display to new levels and the appointment of a Global Sales Director might just be the thing that has been lacking. As traction on the US-market has been disappointing, we expect the company to put more focus on Europe and the rest of the world, where the majority of orders in H1’22 came from. After revising our FY’22 Sales-estimates to SEK 18m (SEK 24m), leaving Sales of SEK 9m for H2’22 (Q4 has historically been the strongest quarter), we now find support for a fair value range of SEK 2.1-2.5 (2.8-3.3) per share, based on a defensive WACC of 30% and target multiples of 1.4x Sales’24E and 10x EBITDA’24E.
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