Please refer to important disclosures at the end of this report This research product is commissioned and paid for by the company covered in this report. As such, this report is deemed to
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Net Insight
Reason: Initiating coverage
Company sponsored research
Not rated
Optimising media transportation
Offers technology to optimise media production & delivery
Expect strategic moves and/or cash injection near term
Volatile share trades at ~2x EV/sales with ~5% growth
A technology solutions firm in the challenging media space
Accelerating prices for TV rights, changing viewer behaviour, new
technology and increased demand for resource efficiency all contribute to
the burgeoning uncertainty and cost pressure within the media market.
Thus, broadcasters need to produce more content with fewer resources,
which is exactly what Net Insight offers. Net Insight is a media
technology company that focuses on media networks, resource
optimisation and streaming solutions, including both hardware and
software sales. It strives to be a key partner to its customers and a leader
in the media industry’s transition towards providing an improved media
experience for end-users at lower cost. Its main customer group is
composed of global network service providers and broadcasters.
Business units targeting different parts of the value chain
Nimbra is a product portfolio (media networks) that facilitates dependable
long-distance media transport across all types of underlying
infrastructure. Its software-integrated hardware products allow transport
of live content (audio, video and data). ScheduALL (resource
optimisation) helps media companies to reduce and control operating
costs, increase efficiency and optimise resource utilisation. Sye (to-
consumer live streaming) is a software for low-latency live streaming that
is addressing the increased demand for high quality streaming in several
verticals like sports, betting and quizzes. Live-streamed video traffic is
estimated to grow at a 70% CAGR in the coming years.
Weak recent financial development needs to turn
Net Insight has been a disappointment for shareholders since 2016. We
think that the company is exposed to an attractive market and has
products targeting the right needs, which should drive profitable growth.
We estimate a 5% sales CAGR in the coming years and a return to
positive EBIT in 2020e. Near-term triggers are potential divestment of
ScheduALL and a cash injection to finance further efforts in Sye. See
valuation scenarios (peer group, SOTP and DCF) on page 30.
29/11/2019
Performance
Equity Research - 02 December 2019 06:42 CET
SEKm 2017 2018 2019e 2020e 2021e
Sales 427 452 466 489 513
EBITDA 64 26 71 86 97
EBITDA margin (%) 14.9 5.8 15.1 17.5 18.9
EBIT adj -8 -37 -8 5 14
EBIT adj margin (%) -1.8 -8.1 -1.8 1.0 2.7
Pretax profit 5 -74 -9 5 14
EPS rep 0.01 -0.15 -0.02 0.01 0.03
EPS adj 0.01 -0.05 -0.02 0.01 0.03
Sales growth (%) -15.2 5.8 3.3 4.9 4.9
EPS growth (%) -89.8 -1,716.7 88.4 159.3 177.8
Source: ABG Sundal Collier, Company data
Lead analyst: Daniel Thorsson
Simon Granath
Share price (SEK) 2.7
Information Technology, Sweden
NETIb.ST/NETIB:SS
MCap (SEKm) 1,018
MCap (EURm) 96.7
Net debt (EURm) -2
No. of shares (m) 383
Free float (%) 88.0
Av. daily volume (k) 56.8
Next event Q4 report: 14 Feb
0
20
40
60
80
100
120
140
No
v 16
Jan
17
Mar
17
May
17
Jul 1
7
Se
p 1
7
No
v 17
Jan
18
Mar
18
May
18
Jul 1
8
Se
p 1
8
No
v 18
Jan
19
Mar
19
May
19
Jul 1
9
Se
p 1
9
No
v 19
Net Insight OMX STH PI
1m 3m 12m
Absolute (%) 57.0 61.8 -7.6
OMX STH PI (%) 0.5 11.5 19.0
Source: FactSet
2019e 2020e 2021e
P/E (x) -153.4 258.7 93.1
P/E adj (x) -153.4 258.7 93.1
P/BVPS (x) 2.06 2.06 2.06
EV/EBITDA (x) 14.1 11.9 10.7
EV/EBIT adj (x) -121.8 201.6 74.3
EV/sales (x) 2.13 2.08 2.03
ROE adj (%) -1.3 0.8 2.2
Dividend yield (%) 0 0 0
FCF yield (%) -1.9 -0.7 -0.2
Lease adj. FCF yld (%) -3.0 -1.8 -1.3
Net IB debt/EBITDA -0.3 -0.0 0.2
Lease adj. ND/EBITDA -0.8 -0.3 0.0
Net Insight
2 December 2019 ABG Sundal Collier 2
Geographical breakdown, sales, SEKm
Source: ABG Sundal Collier, Company data
Business area breakdown, sales, SEKm
Source: ABG Sundal Collier, Company data
EPS estimate changes, 2019e, SEK
Source: ABG Sundal Collier, FactSet
EPS estimate changes, 2020e, SEK
Source: ABG Sundal Collier, FactSet
Quarterly sales and adj. EBIT, SEKm
Source: ABG Sundal Collier, Company data
OpportunitiesNet Insight develops solutions to produce, contribute and
distribute media content for service providers and
broadcasters. These are facing a challenging market
requiring more content production at higher quality and
less resources. This is exactly what Net Insight helps out
with, through its media networks, resource optimisation
and to-consumer streaming solutions. The market trends
should be in favour of Net Insight’s role in the value chain
and its product offering.
RisksAs many other technology companies, Net Insight is
operating in an ever changing industry with movements
between old and new technologies. This could result in the
company’s offering going from highly important to almost
obsolete over a short period in time, and also create an
environment with new competitors occuring. Sales stem
from a global basis which also adds risk from a global
investment appetite and FX movements.
0
50
100
150
200
250
Western Europe Americas Rest of World
Sales
0
50
100
150
200
250
300
350
400
Nimbra ScheduALL Sye
Sales
-0.03
-0.02
-0.01
0.00
0.01
0.02
0.03
0.04
ABGSC FactSet Consensus Mean
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
ABGSC FactSet Consensus Mean
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
0
20
40
60
80
100
120
140
quarterly sales quarterly adj. EBIT
Company descriptionNet Insight is a media technology company focusing on
media networks, resource optimisation and streaming
solutions. Net Insight strives to be a key partner to its
customers and a leader in the media industry’s transition
towards an improved media experience for end-users at
lower cost. Its main customer group consists of network
service providers and broadcasters. With 220 employees,
sales stem from a global basis and through three business
units covering media networks, resource optimisation and
to-consumer live streaming.
Net Insight
2 December 2019 ABG Sundal Collier 3
Table of contents
Summary ...................................................................................................... 4
Technology company in the media production industry ............................. 4
Weak financial history needs to turn ......................................................... 4
Ongoing CEO changes and potentially strategy shift ................................ 6
Valuation considerations ........................................................................... 6
Net Insight at a glance .................................................................................. 7
Market trends and offering ............................................................................ 8
Increased competition for TV viewers ....................................................... 8
Media transportation – Nimbra .................................................................. 9
Growth drivers ........................................................................................ 16
Competitive landscape ............................................................................ 16
Resource optimisation – ScheduALL ...................................................... 18
To-consumer live streaming – Sye .......................................................... 20
Forecasts ................................................................................................... 25
Business model ...................................................................................... 25
Estimates ................................................................................................ 25
Valuation .................................................................................................... 30
Risks .......................................................................................................... 34
Appendix .................................................................................................... 35
Nimbra product portfolio .......................................................................... 35
Management ........................................................................................... 36
Board of Directors ................................................................................... 37
Shareholders .......................................................................................... 38
History .................................................................................................... 38
Glossary ................................................................................................. 39
Net Insight
2 December 2019 ABG Sundal Collier 4
Summary
Technology company in the media production industry Net Insight is a media technology company focusing on media networks, resource
optimisation and streaming solutions. Accelerating prices for TV rights, changing
viewer behaviour, new technology and increased demand for resource efficiency all
contribute to the growing uncertainty and cost pressure within the media market. We
find an increasing demand for production and content among large global tech
companies, which should drive investments in products for in-production and to-
consumer solutions ‒ exactly what Net Insight offers.
Net Insight has its core foundation in Nimbra, a hardware product enabling remote
production for media companies and a reliable, high-quality data feeding from live
events into the production facility where video and audio expertise can be located
centralised. This enables media companies to produce better content at lower
prices, an never-ending challenge for the industry. In 2015, Net Inisght acquired the
software product ScheduALL for resource management in the media production
industry. It turned out to be an underinvested asset that needs some love from Net
Insight to prove its full potential, or be treated as an asset up for sale. Sye is the
optionality in Net Insight, a high-quality and low latency live-streaming platform from
production companies to end consumers, with clear advantages in sports, live
betting and interactive live games (like quizzes), although we have seen little
traction so far from end markets.
Sales per business area
Source: ABG Sundal Collier, company data
Content spending by major tech companies
Source: ABG Sundal Collier, company data
Weak financial history needs to turn Financially, Net Insight has been nothing else than a disappointment since 2016 for
shareholders. The negative development in the financial performance can be
summarised as a stable development in Nimbra, a declining trend in ScheduALL
with increased costs and a cash-burning effort into launching Sye that has been
delayed a couple of years. Net Insight is now undergoing potential strategic moves
to focus its business and set out a plan to reach profitability.
Even though we think the company has a solid technological foundation and
attractive end-market exposure, we argue that the history of financial
underperformance needs to be proven wrong before we see shareholder value
moving in the right direction again. Net Insight has announced that it is looking into
divesting ScheduALL and a capital injection for continued investments in Sye. Net
Insight has also appointed a new CEO (Crister Fritzson) from the board, who will
start in March 2020, at the latest. Hence, there are many moving parts that can
change the story near term.
375
74
2
379
77
11
387
82
21
394
87
32
406
94
47
-
50
100
150
200
250
300
350
400
450
Nimbra ScheduALL Sye
SEK
m
2018 2019e 2020e 2021e 2022e
2
5
2
4
2
9
3
5
3
12
3
5
3
15
6
0
2
4
6
8
10
12
14
16
HBO Netflix Hulu Amazon
US
Dbn
2016 2017 2018 2019
Net Insight
2 December 2019 ABG Sundal Collier 5
We estimate 0-3% organic growth in Nimbra with retained healthy profitability (EBIT
margin ~15-20%), improved sales growth in ScheduALL once version 6 of its
software starts to replace lost sales for version 5, and a high growth rate in sales for
Sye coming from low levels driven by the Swedish client Primetime, as well as the
non-disclosed Fortune 500 customer from 2020e. This results in a group sales
CAGR of 5% in the coming three years and returning to positive EBIT in 2020e.
Cash position and FCF
Source: ABG Sundal Collier, company data
Overview of business unit potential
Source: ABG Sundal Collier, company data
Key estimates
Source: ABG Sundal Collier, company data
230
201 197
178165
150
111
93
6149
67
15
-29
3
-16-13
-15
-38
-19
-28
-10
19
-50
-40
-30
-20
-10
0
10
20
30
0
50
100
150
200
250
Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19
Cash FCF
Business potential Nimbra ScheduALL Sye
Growth Medium Medium High
Margins Medium High High
Competition Medium Medium High
Competitive advantage High quality - Low latency
Hardware/Software Hardware & software Software Software
Share of 2018 sales 83% 16% 0%
Share of 2022e sales 74% 17% 9%
Key estimates (SEKm) 2018 2019e 2020e 2021e 2022e
Sales per segment
Nimbra 375 379 387 394 406
ScheduALL 74 77 82 87 94
Sye 2 11 21 32 47
Group sales 452 466 489 513 547
sales grow th 6% 3% 5% 5% 7%
organic sales grow th 2% -2% 3% 5% 7%
Group gross margin 58% 60% 61% 62% 63%
Group adj. opex -301 -289 -293 -304 -314
Group EBIT -75 -8 5 14 30
non-recurring items -39 0 0 0 0
Group adj. EBIT -37 -8 5 14 30
adj. EBIT margin -8% -2% 1% 3% 6%
Net income -58 -7 4 11 24
FCF -85 -19 -7 -2 8
Net Insight
2 December 2019 ABG Sundal Collier 6
Ongoing CEO changes and potentially strategy shift We also want to highlight that even though Net Insight appointed Henrik Sund as
CEO as late as in December 2018, he is now leaving his position to Crister Fritzson
(currently in the Board and previous CEO of SJ). Henrik took over the ship from
Fredrik Tumegård who was CEO between 2013 and 2018; hence, we are now
entering a period with the third CEO in less than 1.5 years.
Valuation considerations The Net Insight share price has been volatile in the last five years, which we assess
was due to a beginning of big hopes of an early launch of Sye in combination with a
profitable underlying business. This then turned out to be a later than expected
launch and market uptick at the same time as ScheduALL faced decreasing sales
and suddenly the group was loss-making.
We have conducted three different ways of looking at valuation on Net Insight, and
came up with the following valuation ranges: Group peer group: SEK 1.34-5.18,
SOTP: SEK 1.24-7.91 and a DCF: SEK 1.02-7.77.
Historical overview – sales (SEKm) and adj. EBIT margin (%)
Source: ABG Sundal Collier, company data
Share price and valuation ranges (SEK/share)
Source: ABG Sundal Collier, company data
229
274
233
288 295 280 281
379 376
504
427452 466
489513
547
14% 14% 15% 15% 15%
1%-3%
14%
5%10%
-2%
-8%
-2%1% 3%
6%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
0
100
200
300
400
500
600
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Sales Adj. EBIT margin
9% CAGR
5% CAGR
0
1
2
3
4
5
6
7
8
9
10
Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19
Net Insight B OMXS30 rebased
CEO change CEO change
Initial hopes on Sye
Decliningdevelopment in
ScheduALL and a slow uptake of Sye
Announced planned capital raise and
strategic movesPeers
SOTP DCF
5.18
1.34
7.91 7.77
1.241.02
Net Insight
2 December 2019 ABG Sundal Collier 7
Net Insight at a glance
Net Insight is a media technology company focusing on media networks, resource
optimisation and streaming solutions. It strives to be a key partner to its customers
and a leader in the media industry’s transition towards providing an improved media
experience for end-users at lower cost. Its main customer group consists of global
network service providers and broadcasters. With 220 employees, global sales stem
through three business units: Nimbra, ScheduALL and Sye.
Nimbra (Media Networks) enables reliable long-distance media transport across
any type of underlying infrastructure. Nimbra is a portfolio of software integrated
hardware products that allows reliable transport of live content (audio, video, and
data) over long distances. This requires high quality of data feeding and Nimbra
does that. It ultimately increases efficiency and reduces costs for production
companies. In 2018, Nimbra generated revenue of SEK 375m (83% of sales).
ScheduALL (Resource Optimisation) software enables media companies to
reduce and control operating costs, increase efficiency and optimise resource
utilisation. Net Insight acquired ScheduALL in 2015; customers in more than 50
countries us it and it is installed at more than 1,200 broadcast, satellite/transmission
and production facilities worldwide. In 2018, ScheduALL generated revenue of SEK
74m (16% of sales).
Sye (To-consumer Live Streaming) is a software for low-latency live streaming.
Sye is a proprietary technology for Net Insight; it is gaining ground with increased
demand for high quality streaming in several verticals such as sports, betting,
quizzes and others. Sye is in early phase and Net Insight recently signed a contract
with a Fortune 500 company, with estimated rollout late 2019/early 2020. In 2018,
Sye generated revenue of SEK 2m (~0% of sales).
Net Insight has five offices globally and generated 46% of sales in Western Europe,
33% in Americas and 21% Rest of World from more than 500 customers in 2018.
Revenue per product category was 33% hardware ‒ 29% software licenses and
38% support & services.
Sales and sales growth
Source: ABG Sundal Collier, company data
Adj. EBIT and adj. EBIT margin
Source: ABG Sundal Collier, company data
135
229
274
233
288 295280 281
379 376
504
427452
70%
20%
-15%
24%
2%
-5%0%
35%
-1%
34%
-15%
6%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
100
200
300
400
500
600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
SEK
m
Sales Sales growth y-o-y
-11
3338
34
43 43
3
-10
54
19
49
-8
-37
-8%
14% 14% 15% 15% 15%
1%
-3%
14%
5%
10%
-2%
-8%-10%
-5%
0%
5%
10%
15%
20%
25%
-60
-40
-20
0
20
40
60
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
SEK
m
Adj. EBIT Adj. EBIT margin
Net Insight
2 December 2019 ABG Sundal Collier 8
Market trends and offering
Net Insight acts as a niche player in the global media technology market,
which has been under pressure for a long time to deliver better content with
fewer resources. The company provides broadcasting solutions for IP media
transport, resource optimisation and live streaming. This method of media
transportation is increasing its market share as the available WAN bandwidth
for transport is increasing and is now approaching capacity of Serial Digital
Interfaces (SDI), the traditional media transportation method.
Increased competition for TV viewers Accelerating prices for TV rights, changing viewer behaviour, new technology and
increased demand for resource efficiency all contribute to the growing uncertainty
and cost pressure within the media market. As a result of the changing market
conditions, the traditional value chain of content owners, TV companies and
distributors are being changed. Distributors are buying commercial rights and there
is a trend towards content owners offering services directly to consumers. One
example is that relatively new media operators, such as Netflix, Amazon and
Facebook, are adding exclusive content to their service offerings, in terms of own
productions and live content. For example, in 2018 Amazon acquired the rights to
selected Premier League games in the UK and is now starting to compete with
traditional broadcasters.
Intensifying global competition over viewers and rising costs means that TV
companies need to increase revenue from broadcasts and improve operational
efficiency. This also contributes to growing industry consolidation, where TV
companies acquire other operators to create a more competitive offering and
improve profitability. Comcast’s acquisition of 21st Century Fox’s stake in Sky last
year exemplifies this. TV companies are also looking for new opportunities to
increase the efficiency of in-production and to-consumer media transport. To
maintain competitiveness, media companies need to produce more for less. Net
Insight offers solutions to address this trend, namely with 1) in-production media
transportation, 2) recourse optimisation and 3) to-consumer live streaming.
Media rights market outlook
Source: SportsCal, Delta Partners Analysis
12.0 12.5
15.016.0
18.019.0
20.021.0
22.023.0+7.5%
0
5
10
15
20
25
30
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
US
Dbn
Net Insight
2 December 2019 ABG Sundal Collier 9
Media transportation – Nimbra The market for in-production media transportation has since 2017 increasingly
started to embrace the internet protocol (IP) as its main media delivery technique
over the previously dominant Serial Digital Interfaces (SDI). This transition is fuelled
by technological development in networking hardware increasing the bandwidth as
well as development in software enabling more efficient media transport. In addition,
IP enables new production workflow, often referred to as remote production,
supporting effective personnel and resource management by transporting media
over long distances.
Own content has been increasingly important, and we see, for example, both the
value of Premier League TV broadcasting rights as well as content acquisitions from
global media companies increasing steadily over time.
Olympic Games commercial rights value
Source: ABG Sundal Collier, Independent1
Content acquisition spending
Source: ABG Sundal Collier, Company data
The occurrence is also notable on a global basis, where many of the major sports
leagues in various sports are showing high sports rights inflation metrics (as
demonstrated in the graph below).
1 https://www.independent.co.uk/news/business/analysis-and-features/rio-2016-olympic-games-richest-
ever-usain-bolt-mo-farah-a7171811.html
2.5
3.8 4.1
5.4
8.0
9.2CAGR +6.7%
0
2
4
6
8
10
12
Atlanta1996
Sydney2000
Greece2004
Beijing2008
London2012
Rio 2016
US
Dm
2
5
2
4
2
9
3
5
3
12
3
5
3
15
6
0
2
4
6
8
10
12
14
16
HBO Netflix Hulu Amazon
US
Dbn
2016 2017 2018 2019
Sport rights inflation 2018 vs. 2013
Source: ABG Sundal Collier, company data, SportsCal, press clippings, Delta Partners analysis
4.6
1.1 10.8
0.5 0.60.2
6.5
2.31.9
1.6
0.9 0.8 0.9
0
1
2
3
4
5
6
7
NFL NBA LaLiga MajorLeague
US Open Nascar MLS
US
Dbn
2013 2018
111%
41%
87%108%
94% 20%265%
Net Insight
2 December 2019 ABG Sundal Collier 10
The recently released “Big Broadcast Survey”, assembled by research firm
Devoncroft, states the most important commercial trends in the media technology
sector.2 We see content delivery as the highest priority, which is exactly what Net
Insight offers with its Nimbra product.
The survey questions ~10,000 media technology professionals (for example
technicians at Net Insight, Evertz and Brightcove); however, the chart above shows
the responses of all technology purchasers (not only vendors), which makes these
answers an important indication of how broadcasters will invest in the coming years.
Modernising the broadcasting ecosystem
Historically, the SDI has been the common standard for in-production media
transport, which is the transportation of uncompressed video within production
facilities. This allow broadcasters to connect their equipment, including cameras,
editing and production, together. The benefits of using SDI are clear; it provides a
common uncompressed digital infrastructure with minimal latency and perfect
synchronization. The transport of video in SDI can be seen as an instant stream of
video.3
The Society of Motion and Television Engineers (SMPTE) developed in 2007 the
SMPTE-2022 standards, a framework for a method to send digital video over IP.
These standards are referred to as SDI over IP, as it creates an interface for IP-
devices to handle and send SDI data. When introduced, the standards focused on
video carried in MPEG-2 transport streams and have since been expanded to
support other video formats, audio and data. The standards now support both
compressed and uncompressed video and focuses mainly on professional video
delivery over IP networks in or between production facilities. By embracing these
open standards for IP transport, different broadcasting solution vendors are creating
an environment where niche players can be featured.
2 https://devoncroft.com/2019/08/29/ip-tops-2019-ranking-of-most-important-commercial-trends-in-global-media-technology-sector/
3 https://www.matrox.com/graphics/media/pdf/press/guides/av-over-ip-
fundamentals/en_fundamentals_of_AV_over_IP.pdf
2019 Big Broadcast Survey
Source: Devoncroft, ABG Sundal Collier, company data
IP networking & content delivery
Multi-platform content delivery
4K / UHD
AI /ML
Automated workflows
5G
Cloud Computing / Virtualization
Transistion to multi-channel
File-based /tapeless workflow
Video compression efficiency
HDR
Cyber security
Remote production
VR
Targeted advertising
S-VOD
Centralized operations
Outsourced operationsNimbra addressed areas
Net Insight
2 December 2019 ABG Sundal Collier 11
With the progression of networking technology (mainly Ethernet), media transfer
over the internet protocol (IP) has emerged. However, this technology is harder to
implement in low-latency environments since media transport over the IP needs the
video-data to be packaged into packets before transfer. This makes the system
more fragile and prone to delays in the network. However, the strength of IP is
apparent. The ability to transfer media over WAN and the public internet enables
cheaper and more intelligent workflow. Modern cameras, production switchers,
audio devices and graphics devices already have IP-based interfaces to support a
fully IP based workflow.4
As the networks’ bandwidth capacity has increased, media transport over IP is
becoming more advantageous. Thereby the presence of IPs in studios and
broadcasting facilities is increasing.
While cloud solutions are widely used for on-demand media production, the live-
broadcasting sector has been slow in its technological development. This is
attributed to its time-critical workflow. The new standards break apart audio, video
and data into separate elementary streams, enabling these to be transported to
different devices in the network.
An obvious advantage of using IP is that media can be transported to people
outside the facility or the Local Area Network (LAN), compared to SDI, which is a
closed network. Anyone connected to the internet can be integrated to the media
workflow via WAN networks. This blurs the line between broadcasters’ central
facilities and other remote locations, and creates the concept “remote media
production”. Smart hardware is required for WAN data transportation. Net Insight
offers this through its Nimbra product portfolio.
Using remote media production is needed to broadcast live events in a cost-efficient
way. The concept focuses on using the at-home production studio to support live
broadcasts from other locations. The connection is enabled through a fast and
reliable VPN connection, a secure WAN and an efficient media transportation
method. By not needing full production capacity on site (only camera and audio
operators), the amount of staff and equipment at the venue is minimized. Remote
production has previously been executed via satellite links (using Satellite News
Gathering Trucks6) or leased landlines. However, these media transportation
4 https://www.thebroadcastbridge.com/content/entry/8678/smpte-st-2110-we-are-family,
https://tech.ebu.ch/news/2016/08/ip-production-infrastructure---is-it-ready-for-take-off 5 https://www.smpte.org/sites/default/files/users/user29811/SMPTE%20UK%20&%20SAM%20-%20ST%202110%20The%20Basics%20FINAL.pdf 6 https://en.wikipedia.org/wiki/Satellite_truck
Move from SDI to IP media transport
Source: SMPTE, ABG Sundal Collier, company data5
SDI
SDI over IP
Virtualisation and cloud-fit functions
2014 2019
Market
progress
Net Insight
2 December 2019 ABG Sundal Collier 12
methods are associated with high costs and low availability. This is an important
reason why the media currently is embracing IP. We believe that media
transportation via WAN and the public internet is what broadcasters have been
waiting for in order to utilise remote production fully.
The media research firm Devoncroft Partners concluded in a recent analysis that
the number of remote productions will increase going forward and that centralisation
of production hardware is just the beginning. Many broadcasters plan to take remote
production principles much further, believing they can deploy completely
decentralised production workflows where equipment and personnel in multiple
locations work together on a live event.7 This would reduce the need for large capex
investments at the live event, centralising the data into the production facilities
where expertise can be located.
Increased NFV focus
To support the move from SDI to IP media transportation, broadcasting solution
manufacturers have delivered integrated hardware and software solutions, so-called
“black-boxes”, to get the job done. These products often perform well, but since the
software is integrated into the hardware, configurability is limited and so is the
product’s lifetime.
The lack of configurability is the main reason why broadcasters have started to
favour transportation functions based on a virtualised infrastructure. Inspired by
Cloud Solutions Providers (CSPs), the concept of Network Function Virtualisation
(NFV) is being embraced in broadcasting. NFV describes the process of separating
the virtual from the physical part of a solution, separating software from hardware. In
IP media solutions, this means that hardware and software are not fixed, making it
possible to change the software used in the broadcasting workflow, while still using
the same hardware and vice versa.
As the alliances for IP media transport are constantly developing the transportation
methods, it seems logical to run the media transportation function virtually, in order
to easily update and upgrade. By having a virtualised solution, it is possible to run
the software on standardised commercial-off-the-shelf hardware (COTS). With the
7 https://devoncroft.com/2019/06/27/sony-acquires-45-stake-in-nevion-aims-to-take-remote-production-to-
the-next-level/
Satellite news-gathering truck: the old way of doing it
Source: ABG Sundal Collier, company data, Wikipedia
Net Insight
2 December 2019 ABG Sundal Collier 13
right software, COTS can produce the same functionality as the black-box solutions,
but at a lower price and with shorter implementation times. Short-term triggers for
the virtualised development are the cloud-computing players now entering the
market for cloud-based processing of media functions.
Nimbra is a group of products focusing on delivering media efficiently over long
distances. The solutions all utilise the internet protocol (IP) for its network functions.
The Nimbra product portfolio is mainly hardware-based, but because the
broadcasters are starting to embrace virtualised networking functions, Net Insight
has started to develop software-based solutions to support media delivery on COTS
(commercial-off-the-shelf) hardware as well.
The transition to remote and distributed production provides significant advantages for
customers. The fact that production personnel no longer need to travel to the physical
recording locations increases efficiency and generates large cost savings. Optimised
production resources and equipment also make it possible to produce better and more
content. Ultimately, operators can allocate more resources and focus to generating
high-quality live content, and less to the technical aspects of production.
The technological shift towards remote and distributed production also means that
the network becomes increasingly important in terms of reliability, capacity and
flexibility. Network technology is currently undergoing rapid transformation, with
increased transport over the internet and 5G in the near future, which continuously
increases capacity.
The company has released the Nimbra Edge, which is a cloud-based media pipeline
developed to perform the same media transportation functions via a private or public
cloud. Running on standardised hardware and supporting SRT and RIST (standards
for reliable transport of media signals over unreliable-networks) makes the Nimbra
Edge one solution for the future of broadcasting. Nimbra Edge simplifies the
operation of the media-transporting network, moving capex to opex (pay-per-usage
payment) and from hardware to software, since its cloud-based backend is
dynamically scalable. This results in cost savings for the customers.
In addition to the fully software-based solution, Net Insight has released its next-
generation WAN hardware transport platform, the Nimbra 1060, a high-capacity
terabit router. The solution is made to support third party-software and act as a host
platform for all of the broadcaster’s WAN software. Support for third-party vendors is
enabled through a virtualisation architecture, facilitating flexible deployment of
software functions as containers. Containers isolate software from its environment
and ensure that it works uniformly, despite differences, for instance, between
development and staging.
Nimbra enables remote and centralised production
Source: ABG Sundal Collier, company data
Nimbra
Location 1
SDI
Nimbra
Location 2
SDI
ProductionProduction
Internet
Internet
Nimbra
Net Insight
2 December 2019 ABG Sundal Collier 14
Customer case – SVT, the world’s largest remote production
For the February 2019 FIS Alpine World Ski Championships in Sweden, the national
public service television company Sveriges Television (SVT) wanted to utilise
remote production. It decided to order Nimbra hardware from Net Insight. The
championship was hosted in Åre, in the north of Sweden, while SVT’s production
facility was in Stockholm (600km away). Historically, SVT would have driven several
buses with production sites and personnel to Åre, produced the content next to the
live event, and distributed it via satellite or cable to households around Sweden. Net
Insight worked together with the US company Grass Valley (a Belden Brand), which
contributed high-resolution cameras to the live event.
To be able to have its main production remotely, SVT chose to use Net Insight’s
Nimbra products for media delivery over IP. The solution delivered to SVT was
based on the Nimbra 600 and Nimbra 1060 with its Terabit media transportation
capacity. The media was sent between the premises (cameras in Åre) and the
production facility (Stockholm) via Telia’s Ethernet Private Line (EPL), which is a
fibre network that supports low-latency media transport. Remote production is
dependent on the presence of fibre networks.
The Alpine World Ski Championships generated over 600 hours of TV, reaching 700
million viewers over 25 days. This was made possible by remote production, which
used the largest number of cameras and video, audio, and data feeds ever, making
it the world’s largest remote production to date, according to Net Insight. SVT’s main
reason for choosing remote production was based on cost, as it means that less
personnel and equipment were required on site.
After the event in Åre, SVT used its Nimbra products for the Biathlon World
Championship in Östersund (in March 2019). For Net Insight, that did not lead to a
follow-up sale as SVT bought and own the products, but more as a proof of concept
that remote production did work and has its role in improving efficiency and reducing
costs for live event media production.
Net Insight has been a key partner to SVT for a number of years: the first remote
production collaboration was at the London Summer Olympics in 2012. The solution
created for the 2019 FIS Championship showed how efficient live production
workflow could be, however, with a fast ethernet transportation backbone.
Financially, we estimate that Net Insight sold 2-3 Nimbra products for a few million
SEK up-front, coupled with a support and maintenance agreement worth around 5%
of the initial order value in annual support fees. In addition to product sales, Net
Insight also offers services in terms of personnel if needed, invoiced as a typical
service contract based on hours per person. Based on the underlying gross margin
on the Nimbra business of 75-80%, we estimate that the stand-alone EBIT margin is
~50% for this type of customer case (as it requires limited sales and marketing
efforts). If we assume that the SVT case generated SEK 5m for Net Insight, it
corresponded to ~5% of revenue for the Nimbra business unit in Q1’19.
Net Insight
2 December 2019 ABG Sundal Collier 15
The chart below illustrates that the pricing of ethernet line lease (fibre networks) in
most European countries and the US are about the same, and we believe that
remote production has good possibilities to grow in these countries. The Asian
market seems to have higher prices, which favours other media transportation
methods to support large-scale remote media production.8
8 https://www.wik.org/uploads/media/BT_EthernetLL_Benchmark_final.pdf
Nimbra 1060 enabled remote production for SVT
Source: ABG Sundal Collier, company data
National leased line charges, monthly price
Source: OECD & Teligen/Strategy Analytics ABG Sundal Collier, company data
Stockholm
(Production f acility )
Östersund
(Live event)
Nimbra 1060 in Åre, Östersund
Nimbra 1060 in Stockholm
600 km
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
USD
Inexpensive ethernet line lease
Net Insight
2 December 2019 ABG Sundal Collier 16
Sony acquired Nevion in 2019
Sony announced in June that it acquired a 45 % stake in the Norwegian
broadcasting solutions vendor Nevion.9 Nevion is, just like Net Insight, focused on
delivering media transport solutions over IP.
Both Net Insight and Nevion are partly changing their businesses from historical
black-box hardware solutions to NFV solutions supporting open transportation
frameworks. This change has required large investments in R&D, explaining the
lack of profitability in recent years.
We believe the main reason that Sony is investing in Nevion is due to the
company’s focus on IP media delivery as well as its expertise in virtualised media
solutions. Compared with Net Insight, it seems that Nevion has historically had a
more specific focus on virtualisation, although both of the companies now seem to
fully focus on this.
“Through this strategic partnership, we will be able to expand our end-to-
end IP solution offerings that allow customers to produce live content
connecting multiple locations,” (Mikio Kita, senior GM, Media Solution
Business Division, Professional Products & Solutions Group, Sony Imaging
Products & Solutions Inc.)10
Sony’s broadcasting segment has its base in cameras, while also delivering other
on-site broadcasting hardware. The company has clear insight into how its
customers are planning to invest and develop their broadcasting ecosystems. We
believe that Sony, which has been supporting high-level remote production solutions
with its hardware products, acknowledges the demand for these services and will
start to develop a new offering including IP media software, creating an end-to-end
live broadcasting solution. The acquisition makes us believe that the market for Net
Insight’s Nimbra portfolio will continue to be important in broadcasting.
Growth drivers The main underlying growth drivers for the Nimbra business are the volume (hours)
of live content transported over media networks and the quality of this content (e.g.
HD, 4K, 8K). Both these factors are increasing, which means that broadcasters
need higher capacity for media transportation, a field that Net Insight targets with its
Nimbra product portfolio. Net Insight estimates that the traditional Nimbra market
grows 3-5%. Net Insight also targets the Internet-based transporting of media with
its products Nimbra 400 (previous VA), and estimates that this market grows around
15% annually. In addition, the market for transporting media in the cloud is still
small, but has significantly higher growth rates than other market segments.
Competitive landscape Net Insight’s most mature product category is the Nimbra brand. In the area of
remote production, the entry barriers are higher than for the software-based
solutions Sye and ScheduALL. The competitors have been constant for a long
period, but market activity has been high.
Evertz Microsystems
Evertz Microsystems is a global manufacturer of broadcasting equipment and
solutions. Evertz is mainly active in professional IP media transport, but also in IPTV
and other content distribution (including Live OTT). In IP media transport, the
9 https://devoncroft.com/2019/06/27/sony-acquires-45-stake-in-nevion-aims-to-take-remote-production-to-the-next-level/ 10 https://pr.sony.eu/pr-saas-api/press-release?hostApp=psa&locale=ue-us&prName=nevion-ip-solutions-
partnership
Net Insight
2 December 2019 ABG Sundal Collier 17
company offer solutions for production, post-production and transmission of TV
content. Evertz Microsystems is a member of RIST. The company has products for
IP media transportation, including gateways, encoders and switches. In this
category, it states that some of its products are virtualised.
Nevion
Nevion is a company focused on real-time media broadcasting transport. Its
customers are, just like Net Insight’s Nimbra products, mainly broadcasters and
media service providers. The company focuses on delivering virtualised solutions,
and it is shifting focus from hardware-based solutions to a more NFV/SDN-like
environment. However, Nevion also offers integrated hardware and software boxes
handling compression, ending and transport. In June, Nevion announced that Sony
had acquired part of the company (a deal referred to by Sony as a strategic
partnership), described on the previous page.
LiveU
LiveU is a company that focuses on providing live video streaming, with a patented
audience participation technology. The company offers both hardware and software,
which are designed to enable live streaming from and to different locations and
settings in high quality. The company has historically been a supplier to global
broadcasters and news agencies during high-profile events like the US Presidential
election and the FIFA World Cup.
TVU
TVU is a global live streaming provider with a focus on transforming broadcasters’
SDI-based operations to make them IP-based. With its proprietary IS+ technology,
the company’s solutions are able to deliver low-latency, HD video from and to most
locations globally by using any combination of cellular, satellite, microwave, Wi-Fi
and ethernet IP connections. ESPN, CNN, Sky Sports and NFL are examples of
customers in its more than 2,500 customer base.
Net Insight
2 December 2019 ABG Sundal Collier 18
Resource optimisation – ScheduALL As explained above for Nimbra, broadcasters and TV companies need to produce
more and better content at a lower price due to the changing market environment.
Today, many broadcasters use a manual approach to schedule upcoming and
ongoing production, which is inefficient and costly. Net Insight addresses this with
its ScheduALL software technology.
Released in 1989, the software solution ScheduALL has been a market-leading
solution in enterprise resource management (ERM) for the media, broadcasting and
transmission industry. In October 2015, Net Insight acquired the software, widening
its offering from IP media delivery. Development has continued since the launch,
and ScheduALL now consists of different modules, creating a highly customisable
product, optimising resource and schedule management for broadcasters.
The foundation of ScheduALL is in scheduling and resource management for
broadcasting. The software connects to and controls external hardware and
software sources, enabling an automated broadcasting workflow. In addition to
handling the scheduling and planning, the system can be customised with other
features. Since the software is developed to support planning, integration of
personnel, contract and labour managers are popular. Additionally, the solution
provides powerful real-time business insight for executives and line managers.
ScheduLINK delivers a transmission management solution, a platform to plan the
different transmission signals that a broadcaster uses. For a broadcaster this
typically includes cable network, satellite bandwidth and mobile communication.
All the software solutions in this product category are developed to support the daily
orchestration of broadcasting and media management.
Customer case – US broadcaster
In 2018, a US broadcasting network selected Net Insight’s ScheduALL solution and
integrated with Nimbra VA11. The background was the broadcaster’s expansion of
coverage, production of live news and international video flows. The combined
ScheduALL and Nimbra solution enabled the customer to organise, optimise and
centralise operations during expansion.
The expansion generated a threefold increase in demand in news production, and
the volume increase meant that each member of staff and every resource needed to
be optimised as far as possible. By introducing ScheduALL as a central hub for
optimising transmission and production planning, operations, price and cost
tracking, as well as analysis and reporting, the broadcaster was able to guarantee
seamless broadcasts to its 25.7m viewers in 22 countries.
11 Net Insight 2018 annual report
ScheduALL modules
Source: Net Insight, ABG Sundal Collier, company data
Net Insight
2 December 2019 ABG Sundal Collier 19
This client also used the Nimbra VA for live video transport over IP between the
company’s global offices and head office.
Competitive landscape
The shift from hardware-integrated software to fully software-based solutions has
increased the competition faced by ScheduALL.
Skyline Communications
The company offers solutions in network management, mainly for broadcasters and
telecommunications operators. Skyline’s flagship solution is DataMiner, which is
similar to Net Insight’s ScheduALL. DataMiner enables broadcasters to view and
manage their operational chain. The solution is deployed by broadcasters including
Arqiva, Discovery networks and Al Jazeera.
Xytech Systems
Xytech Systems is the developer behind MediaPulse, which is a software solution
providing resource, work order and asset management for broadcasters. Large
broadcasters including CBS, NBC Sports, Paramount and Deluxe use the solution.
Net Insight
2 December 2019 ABG Sundal Collier 20
To-consumer live streaming – Sye Content owners like sports associations are moving their positions in the value
chain, to capture more of direct live streaming to end consumers. This clear trend
has driven up prices for product rights, and has put pressure on traditional
broadcasters to produce better content at a lower price. The development has been
enabled by the advancement of technological solutions for content owners to
directly stream their content at a low cost with low latency through the public cloud.
Net Insight offers a software technology on a volume business model to enable this,
with low latency and high quality. The offering is called Sye Streaming Solutions.
Solutions for to-consumer media distribution is Net Insight’s newest product
category. In this area, the company has its Sye brand, which is a technology
focused on delivering low-latency streaming to a multi-device ecosystem. To be
able to deliver low-latency streaming globally Sye uses a public cloud, or a Content
Delivery Network (CDN), which acts as a global distributor of the media. The
solution has support for multiple CDNs. However, the end-to-end streaming service
offered by Net Insight specifically uses the Microsoft Azure CDN. Cisco estimates
that live internet video will account for 17% of Internet video traffic by 2022,
meaning it will grow 15-fold from 2017 to 2022.12 With live streaming increasing its
market share of total internet video traffic, streamers will focus on low-latency
streaming, an area where Net Insight’s Sye is market leading, according to the
company.
33% CAGR in internet video data usage…
Source: Cisco
…and live streaming growing 15x or 70% CAGR
Source: Cisco
Trends in live content consumption
Historically, content from TV productions has been distributed to consumers through
satellite discs (DTH), cable TV or IPTV over broadband to watch live events on the
TV. Today, the development is moving into streaming solutions, watching live
events at a laptop, tablet or smartphone. This causes higher latency as the
technology is so far not as good. For example, the Swedish broadcaster Viasat can
show a live event with a few seconds lag on television, but on the streaming solution
Viaplay, the lag can be up to 30-45 seconds. This makes the user experience
worse, and linking a live event, for example, to live sport betting becomes irrelevant.
Sye enables the streaming to have high quality and low latency, reducing the lag to
less than two seconds, according to the company.
12 https://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/white-
paper-c11-741490.html#_Toc532256800
0
50
100
150
200
250
300
2017 2018 2019 2020 2021 2022
Exabyte
s p
er m
onth
Short-From Internet VoD Long-From Internet VoD
Live Internet Video Video Surveilance
36
10
17
28
48
+70%
0
10
20
30
40
50
60
70
2017 2018 2019 2020 2021 2022
Exabyte
s p
er m
onth
Live Internet Video
Net Insight
2 December 2019 ABG Sundal Collier 21
By utilising IP for media delivery instead of competing technology, the initial costs of
setting up a live streaming service are reduced. This has made it possible for smaller
market players (which do not own any infrastructure) to create their own live streaming
service, cutting out the traditional broadcasters, which essentially only deliver
infrastructure for modern content delivery. Recent examples of this are Formula 1 and
NBA, which have launched their own to-consumer live streaming services.
In the area of low-latency live streaming (e.g. live sports, live quizzes and live
betting), a limited number of suppliers can provide broadcaster-grade quality and
sync via IP. Net Insight’s Sye streaming service was developed to handle these
demanding streaming tasks while keeping a constant lag, giving all consumers the
exact same experience.
The reason for broadcasters to embrace IP-based broadcasting for their end
consumers is clear: advertising. Thanks to the fact that most IP-streaming services
support cookies and live ad-insertion, the possibility to target marketing to specific
customers emerges (programmatic ads). As TV ads are an important source of
revenue for broadcasters, we believe that IP-based broadcasting has considerable
market growth ahead.
Global programmatic ad spend
Source: ABG Sundal Collier, MAGNA
Global advertising spending
Source: ABG Sundal Collier, Statista
Sye’s solution
Sye, a fully featured streaming solution, facilitates the streamer with all parts of the
streaming process, from transcoding to the client. The solution is developed for
users in need of low-latency live streaming. Net Insight says that the solution has
been developed for live sports, live-events, live betting and live-auctions.
The solution is cloud-based, it can be supported by multiple CDNs and it comes with
the Sye client Software Development Kit (“SDK”) which enables integration of
streaming to apps and websites. Sye revenues are recurring and largely depend on
the volume of video content streamed through the platform.
6
10
16
20
25
31
37
44
51
+31%
0
10
20
30
40
50
60
70
2013 2014 2015 2016 2017 2018 2019 2020 2021
US
Dbn
+4%
0
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
US
Dbn
Trends in live event distribution
Source: ABG Sundal Collier, company data
Streaming
IPTV (over broadband)
Satellite disc (DTH)
Cable TV
History Future
Net Insight
2 December 2019 ABG Sundal Collier 22
Sye Streaming Service delivers low-latency to-consumer media streaming, and its
main application is broadcasting of live sports and betting. Historically, satellite
technology has dominated live sports production and distribution, but if the C-band
relocation goes through, broadcasters will need to find alternative technologies, thus
increasing the demand for the Sye service. In February 2019, Net Insight
announced that one Fortune 500 company would be using Sye. We do not know
which one, but it is likely to be a company changing from its current satellite focus to
testing other technologies.
Sye Streaming Service
In addition to delivering over-the-top (OTT) live streaming solutions, Net Insight
offers a fully featured streaming service, Sye Streaming Service.
Complementing the service, additional Sye functions can be added, such as
synchronised metadata, Sye-On-Prem and ad insertion. Synchronised metadata
creates a more dynamic tool to work with the livestream. That means being able to
send metadata to the SDK-Client (real-time data, text and media can be integrated
to the user experience without being rendered into the stream). Sye-On-Prem is an
option to ensure that the low-latency stream is maintained from the source to the
cloud where Sye Streaming Service resides.
Sye solution
Source: Net Insight, ABG Sundal Collier, company data
Sye Streaming Service
Source: Net Insight, ABG Sundal Collier, company data
The growing market for live streaming including live streaming is an opportunity for
the Sye streaming service.
We believe that the Fortune 500 company mentioned above, which is about to
release its new live streaming product based on the Sye Solution, is one of the
broadcasters or telecom operators. It seems likely that the customer has historically
used satellite-based solutions but is now trying out competing technology, possibly
due to the C-band relocation.
Net Insight recently announced that the Hong Kong-based professional video
solutions provider Mediatech has implemented Sye on top of its own CDN network.
Mediatech delivered the Sye-based solution to The Hong Kong Jockey Club, Hong
Kong’s largest betting operator with a turnover of HKD 234bn.13 Companies in
sports and betting seem to be the ones which value low-latency the most.
Customer case – Primetime
Sye was used in the Swedish trivia app Primetime (launched in 2018 as a copycat
of the US mobile trivia game HQ Trivia). The solution was used by Trippel Media, a
Swedish app-developer. The app was particularly popular at the end of 2018,
reaching more than 800,000 active users.14
13 https://www.scmp.com/news/hong-kong/society/article/2162085/hong-kong-jockey-club-hits-record-high-hk234-billion-turnover 14 https://www.breakit.se/artikel/18023/primetime-har-fatt-hundratusentals-svenskar-att-spela-nu-lanserar-
de-i-danmark
Net Insight
2 December 2019 ABG Sundal Collier 23
The main challenge in live quiz or live betting is to guarantee that all participants
receive the same video stream and questions (in this case) simultaneously.
Traditional streaming solutions do not provide a simple solution for this. In this case,
the client also wanted to include a chat functionality in the app to enable dialog
between the host and the audience, to create a sense of community and belonging.
Quizzes such as Primetime are extreme in that hundreds of thousands of users log
into the app simultaneously to participate, and the show has a duration of 10-15
minutes, after which all users log out again. The large number of users places
enormous demand on the stability and scalability of the underlying streaming
service. Sye is based on the public cloud Microsoft Azure, and has been designed
to be dynamically scaled up or down to match demand before, during and after each
competition.
According to Daniel Weilar, the founder of the Primetime app, he was looking for a
streaming service with perfect synchronisation, ultralow latency, and scalability. Sye
was at that point in time the only solution that could guarantee all three.
Demand for live apps like HQ Trivia and Primetime seems to be relatively short in
duration. HQ Trivia used another solution for streaming, which according to Net
Insight had a longer time lag and less quality. There are many solutions for
streaming out in the market, at different levels of quality. Net Insight argues that Sye
is the most advanced and can be used in larger scale.
Primetime live quiz app
Source: Dagens Media
Net Insight
2 December 2019 ABG Sundal Collier 24
Competitive landscape
Historically, to utilise low-latency, live streaming proprietary hardware solutions were
needed. In live streaming today, most solutions utilise the Content Delivery
Networks (CDNs) created by global server constellations owned by cloud
companies such as:
Akamai (has an own-streaming solution)
Maxcdn
Cloudflare
Amazon CloudFront
Limelight Networks (has an-own streaming solution)
Level 3
Microsoft Azure
These private CDN operators deliver video (content) efficiently over long distances,
minimising the latency time to stream on-demand or live.
Wowza Media Systems
The company mainly provides services for video streaming, including low-latency
livestreaming solutions. The services are built on the CDN delivered by Akamai.
Wowza supports multiple encoding formats and streaming protocols, including the
ones used to achieve low-latency streams.
Haivision
Founded in 2004 in the US, Haivision delivers enterprise video streaming
technologies. The company is the developer of the media transport protocol SRT,
which was made open source in 2017. Haivision competes with Net Insight on in-
production media delivery and to-consumer media delivery, including low-latency
livestreaming solutions. The company’s Makito X Series hardware and software
solutions are similar to Net Insight’s Nimbra boxes. Haivision also has its Video
Cloud, enabling low-latency livestreaming via the Akamai CDN.
Phenix
Phenix Real Time Solutions, a global provider of real-time IP video solutions, is
primarily focused on shortening latency and Time To First Frame (TTFF). It
developed SyncWatch, which enables users to watch real-time and VOD content in
the same frame, independent of device, location or Operating System (OS).
HQ Trivia and Primetime popularity
Source: Google Trends
0
20
40
60
80
100
120
tre
nd in
dex
HQ Trivia (US) Primetime (Sweden)
Net Insight
2 December 2019 ABG Sundal Collier 25
Forecasts
Business model Net Insight’s business model varies between its segments. We describe each model
below:
Nimbra – Nimbra generates sales from hardware, software licenses, support and
consulting services. According to the company, the share of revenue from licenses
and support has increased significantly in recent years, although we are under the
impression that this originates from a low base. A typical customer usually starts
with a limited number of Nimbra units (throughout a limited number of locations).
Furthermore, it gradually buys more units in order to cover more
locations/geographies.
ScheduALL – Net Insight’s sales from ScheduALL are a function of software
licenses, in addition to support and consulting services. A customer’s initial step is
usually to buy a limited number of licenses, which Net Insight helps to implement at
the customer premises through its support and consulting services. Given that Net
Insight offers several modules/solutions, the company can thereafter conduct
upselling of products, which involves both adding new functionalities and connecting
more users to the system.
Sye – the lion’s share of Sye sales are based on the volume of video content
streamed through the platform, and are generated on a recurring basis.
Furthermore, Net Insight charges for implementation and support, in addition to
services like ad insertion and synchronised metadata.
Estimates We derive our group sales estimates from each business unit, as the company
started with that split during 2019. Our thoughts are below:
Nimbra – Even though the market is growing at 3-5%, according to the company,
Net Insight has not been able to capture this underlying growth. It has delivered an
estimated organic growth of -3-10% in the first three quarters of 2019, and we
estimate that the most recent years have been around flat growth or slightly
negative. As a result of that, we stick to a conservative view that seeing is believing,
and forecast a 0% FX adjusted growth in Q4’19e and 2020e. From 2021e, we
forecast 2% growth. EBIT wise, Nimbra reached a margin of 10-23% during 2019.
ScheduALL – ScheduALL’s sales have been declining since Net Insight acquired
the company, which we think is a result of the current conversion from version 5 to
version 6 (a cloud-based solution). This is also driving opex higher, meaning that
Overview of business unit potential
Source: ABG Sundal Collier, company data
Business potential Nimbra ScheduALL Sye
Growth Medium Medium High
Margins Medium High High
Competition Medium Medium High
Competitive advantage High quality - Low latency
Hardware/Software Hardware & software Software Software
Share of 2018 sales 83% 16% 0%
Net Insight
2 December 2019 ABG Sundal Collier 26
the EBIT contribution has been negative between SEK 5-10m per quarter during
2019. We estimate the opex level to remain relatively high, as R&D and sales &
marketing should continue in the product conversion, while sales may be under
pressure although capturing back a bit of the losing momentum as client contacts
are retained. We estimate a 0% FX adjusted growth in Q4’19e, 5% throughout
2020e and then 7% per year from 2021e. We estimate improved losses in the
coming years, although not reaching profitability in our forecast period, as we argue
that sales growth need to ramp up to +20% to reach that. This is nothing we have
seen in the last years; hence, it is yet to be seen.
Sye – As sales have been SEK 9m YTD 2019 (+435% growth y-o-y), it is still at a
low level. We estimate continued high y-o-y growth in Q4’19e and reaching SEK
21m in sales in 2020e (+88% FX adjusted vs 2019e). Beyond that, we forecast an
annual growth rate of 50% in 2021e-2022e. The high growth is driven by recent
orders and activities from Primetime, the Hong Kong Jockey Club, and the as-yet-
undisclosed Fortune 500 company. As revenues will be a result of volumes, users
and data in the streaming platform, it is very difficult to do a sophisticated approach
in terms of both amount and timing. The revenue model will be recurring, but also
consist of many moving parts such as a downward trend in revenue per volume as
volumes increases. We also want to emphasise that any new orders that may be
presented during 2020 will most likely take 1-2 years before showing any significant
revenues, as the lead times and ramp up process is relatively long. We estimate
that the underlying volume based revenues will come with a ~95% gross margin, but
the streaming service will have a COGS to CDNs for using the networks. In that
revenue stream, we estimate a 60% gross margin (40% COGS). As a result, we
think that a reasonable gross margin for Sye is around 75%, even though this may
fluctuate significantly depending on individual contracts.
Sales composition
Today, the lion’s share of sales stems from Nimbra, accounting for 82% of Q3’2019
sales. The other product groups, which comprises ScheduALL and Sye, accounted
for 17% and 1%, respectively, for the corresponding period. In our forecasts, we
have pencilled in 0-3% organic growth for Nimbra for 2019e-2022e, 5-7% for
ScheduALL and 50-90% for Sye.
Key estimates
Source: ABG Sundal Collier, company data
Key estimates (SEKm) 2018 2019e 2020e 2021e 2022e
Sales per segment
Nimbra 375 379 387 394 406
ScheduALL 74 77 82 87 94
Sye 2 11 21 32 47
Group sales 452 466 489 513 547
sales grow th 6% 3% 5% 5% 7%
organic sales grow th 2% -2% 3% 5% 7%
Group gross margin 58% 60% 61% 62% 63%
Group adj. opex -301 -289 -293 -304 -314
Group EBIT -75 -8 5 14 30
non-recurring items -39 0 0 0 0
Group adj. EBIT -37 -8 5 14 30
adj. EBIT margin -8% -2% 1% 3% 6%
Net income -58 -7 4 11 24
FCF -85 -19 -7 -2 8
Net Insight
2 December 2019 ABG Sundal Collier 27
Sales split and Sye’s share of sales
Source: ABG Sundal Collier, company data
Sales growth and share of sales
Source: ABG Sundal Collier, company data
Mixed historical performance, with large yearly fluctuations
Looking back some years, Net Insight has reported solid growth, with a 9% sales CAGR
between 2007 and 2016. As a reflection of its business model, where larger orders have
large impact and occur without any clear seasonality, the yearly fluctuations have been
high. Even so, for the same period, the adjusted EBIT margin has generally been held
up at high levels, with an average EBIT margin of 10% for 2007-2016. In 2017,
however, operations started to take a negative turn, with a –15% sales decline
compared with 2016, and the adjusted EBIT margin fell from 10% to -2%.
375 379 387 394 406
74 77 82 87 94 2 11
21 32
47
0%
2%
4%
6%
9%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
-
100
200
300
400
500
600
2018 2019e 2020e 2021e 2022e
Nimbra ScheduALL Sye Sye share of sales
Sales CAGR % of 22e
Business unit 18-'22e sales
Nimbra 2% 74%
ScheduALL 6% 17%
Sye 118% 9%
Announced orders 2018-2019
Source: ABG Sundal Collier, company data
Date Title Product Sales channel Size/value (SEKm) Delivery
Sep-19 MEDIATECH’S CDN IMPLEMENTS NET INSIGHT'S SYE FOR THE
HONG KONG JOCKEY CLUB
Sye Mediatechs dynamic Q2/Q3'19-onwards
Sep-19 RTVE väljer Net Insight för nytt nationellt IP-medianät Nimbra MoMe 7 studios Q3'19
Sep-19 Mobilelinks wins new contract and expands Nordic IP media
network with Net Insight
NImbra Mobilelinks n.a. Q2/Q3'19
Jul-19 NEP Connect has selected Net Insight’s media transport solutions
for a new live sports contribution network in the UK.
Nimbra 72 stadiums Q2'19
Jul-19 Input Media selects Net Insight for remote production of FIFA
Women’s World Cup France 2019
Nimbra 27 Games Q2'19
Jul-19 Net Insight selected by Swisscom Broadcast for core media network
expansion
Nimbra n.a. Q2'19
May-19 NEP Switzerland deploys Net Insight’s Nimbra media transport
solution
Nimbra n.a. Q2'19
Apr-19 Net Insight enables seamless video production for LinkedIn Corp Nimbra n.a. Q1'19
Apr-19 Net Insight selected by Aldea Solutions for Pan American Games
Lima 2019
Nimbra 17 arenas Q1'19
Feb-19 Net Insight enables largest Remote IP Production ever, produced by
SVT
Nimbra 150 camera operators Q1'19
Feb-19 Net Insight signs key Sye agreement for live streaming Sye dynamic Q1'19-onwards
Dec-18 Movistar+ implements Net Insight’s Remote production solution for
Spanish Basketball League
Nimbra MoMe n.a. Q3/Q4'18
Nov-18 Net Insight AB: Net Insight wins significant order for nationwide
media over internet distribution in Eurasia
Nimbra Local partner >1 EURm Q4'18
Aug-18 Net Insight selected for next-generation media network connecting
stadiums for Austria Football Bundesliga
Nimbra 12 Stadiums Q3'18
Jun-18 Net Insight AB: Net Insight wins significant order from European
partner for Video Assistant Referee network
Nimbra >1 EURm Q3'18
Apr-18 Net Insight wins order for multi-sport event in Asia Nimbra PT Transtel Universal n.a. Q2/Q3'18
Apr-18 Trippel Media chooses Net Insight's Sye Streaming Service,
powered by Microsoft Azure, to handle live streaming for their
interactive trivia and live event app platform Primetime.
Sye n.a. Q2'18
Feb-18 NBC OLYMPICS SELECTS NET INSIGHT AS TRANSMISSION
SCHEDULING MANAGEMENT SOLUTIONS PROVIDER FOR ITS
PRODUCTION OF 2018 OLYMPIC WINTER GAMES IN
PYEONGCHANG
ScheduALL n.a. Q1'18
Jan-18 Gearhouse Broadcast partners with Net Insight to enable Remote
Production in Australia
Nimbra >80 feeds Q1'18
Net Insight
2 December 2019 ABG Sundal Collier 28
Costs composition (SEKm)
Source: ABG Sundal Collier, company data
Costs composition of sales (%)
Source: ABG Sundal Collier, company data
-350
-300
-250
-200
-150
-100
-50
02013 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Selling and marketing costs Product development costs Admin costs
37.3%
28.5%32.6%
27.2%33.9%
40.1%
31.3% 30.5% 30.2% 29.2%
13.7%
10.8%
11.7%14.9%
14.6%
14.4%
16.5% 17.2% 17.3% 17.0%
8.2%
7.8%
10.8%10.8%
11.6%
12.2%
13.0% 12.3% 11.8% 11.3%
0%
10%
20%
30%
40%
50%
60%
70%
2013 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Selling and marketing costs Product development costs Admin costs
Historical overview – sales (SEKm) and adj. EBIT margin (%)
Source: ABG Sundal Collier, company data
Gross margin to stabilise and increase going forward
Source: ABG Sundal Collier, company data
229
274
233
288 295 280 281
379 376
504
427452 466
489513
547
14% 14% 15% 15% 15%
1%-3%
14%
5%10%
-2%
-8%
-2%1% 3%
6%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
0
100
200
300
400
500
600
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Sales Adj. EBIT margin
9% CAGR
5% CAGR
60%
56%
61%60%
63%
58% 58%60%
61%62%
63%
74%73%
75% 75% 75%
72%71%
72%73%
74% 75%
50%
55%
60%
65%
70%
75%
80%
2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Gross margin Adj. Gross Margins (ex. amortisations on capitalised R&D)
Net Insight
2 December 2019 ABG Sundal Collier 29
Annual breakdown of forecasts
Source: ABG Sundal Collier, company data
Interim breakdown of forecasts
Source: ABG Sundal Collier, company data
Annual overview (SEKm) 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Revenue 379 376 504 427 452 466 489 513 547
Other income 0 0 0 0 0 0 0 0 0
Opex -178 -207 -266 -255 -337 -287 -293 -304 -314
EBITDA 108 76 113 64 26 70 87 97 116
Depreciation & amortisation -54 -57 -63 -71 -101 -79 -82 -83 -86
Operating result (EBIT) 54 19 49 -8 -75 -8 5 14 30
Non-recurring items (NRI) 0 0 0 0 -39 0 0 0 0
Adj. EBIT 54 19 49 -8 -37 -8 5 14 30
Net f inancial items 2 -13 -5 13 1 -1 0 0 0
Pretax profit 55 7 44 5 -74 -9 5 14 30
Taxes -14 -5 -9 -2 16 2 -1 -3 -7
Net income 42 2 35 4 -58 -7 4 11 24
Metrics 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
EBITDA margin 28% 20% 22% 15% 6% 15% 18% 19% 21%
EBIT margin 14% 5% 10% -2% -17% -2% 1% 3% 6%
Adj. EBIT margin 14% 5% 10% -2% -8% -2% 1% 3% 6%
Net profit margin 11% 1% 7% 1% -13% -1% 1% 2% 4%
Tax rate 25% 71% 20% 33% 21% 25% 22% 22% 22%
Reported grow th y-o-y 35% -1% 34% -15% 6% 3% 5% 5% 7%
EBIT grow th y-o-y -654% -64% 157% -115% 901% -89% -162% 178% 116%
Adj. EBIT grow th y-o-y -654% -64% 157% -115% 387% -78% -162% 178% 116%
Sales breakdown 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Nimbra 375 379 387 394 406
ScheduALL 74 77 82 87 94
Sye 2 11 21 32 47
Group sales 452 466 489 513 547
Sales growth by segment 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Nimbra 1% 2% 2% 3%
ScheduALL 3% 7% 7% 7%
Sye 428% 90% 50% 50%
Group sales 3% 5% 5% 7%
Sales breakdown % 2014 2015 2016 2017 2018 2019e 2020e 2021e 2022e
Nimbra 83% 81% 79% 77% 74%
ScheduALL 16% 16% 17% 17% 17%
Sye 0% 2% 4% 6% 9%
Group sales 100% 100% 100% 100% 100%
Quarterly overview Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19e
Revenue 110 120 115 106 111 129 112 114
Other income 0 0 0 0 0 0 0 0
Opex -63 -84 -75 -115 -77 -73 -66 -71
EBITDA 19 2 11 -5 8 23 23 17
Depreciation & amortisation -17 -15 -15 -55 -20 -19 -20 -20
Operating result (EBIT) 2 -13 -4 -60 -12 3 3 -3
Non-recurring items (NRI) 0 0 0 -39 0 0 0 0
Adj. EBIT 2 -13 -4 -22 -12 3 3 -3
Net f inancial items 2 1 -1 0 1 -1 -1 0
Pretax profit 4 -12 -5 -61 -11 3 2 -3
Taxes -1 3 1 13 2 0 0 1
Net income 3 -9 -4 -48 -9 2 2 -2
Metrics Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19e
EBITDA margin 17% 2% 9% -5% 7% 18% 20% 15%
EBIT margin 2% -11% -4% -57% -11% 3% 3% -2%
Adj. EBIT margin 2% -11% -4% -20% -11% 3% 3% -2%
Net profit margin 3% -8% -3% -45% -8% 2% 2% -2%
Tax rate -25% -23% -20% -21% -20% -15% -8% -22%
Reported grow th y-o-y 0% 25% 10% -8% 1% 7% -2% 7%
EBIT grow th y-o-y -64% -40% -164% -8595% -587% -126% -172% -96%
-64% -40% -164% -3167% -587% -126% -172% -88%
Sales breakdown Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19e
Nimbra 92 105 95 83 94 107 90 88
ScheduALL 18 14 19 23 15 18 20 24
Sye 0 1 1 0 3 3 3 2
Group sales 110 120 115 106 111 129 112 114
Sales growth by segment Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19e
Nimbra 2% 2% -5% 6%
ScheduALL -19% 26% 3% 6%
Sye na 410% 182% 406%
Group sales 1% 7% -2% 7%
Sales breakdown % Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19e
Nimbra 84% 88% 83% 78% 84% 83% 80% 77%
ScheduALL 16% 12% 17% 22% 13% 14% 18% 21%
Sye 0% 1% 1% 0% 2% 3% 2% 2%
Group sales 100% 100% 100% 100% 100% 100% 100% 100%
Net Insight
2 December 2019 ABG Sundal Collier 30
Valuation
Net Insight’s share price has been volatile over the last five years. Hopes were
initially high for an early launch of Sye, and the underlying business was profitable.
The launch took longer than expected, however, and a slower market uptick at the
same time as ScheduALL was struggling contributed to the group making a loss.
Growth has been low (and even negative recently), which has put even more
pressure on the share.
In 2019, Net Insight announced that it is looking into strategic options for
ScheduALL. Moreover, it wants to raise capital for continued Sye investments. This
has put pressure on the share, but also provided relief (the price recently doubled).
We have also seen a few of the company’s largest shareholders decreasing their
holdings in recent quarters, most likely putting more pressure on the share.
We have valued Net Insight using three different valuation methods, and arrived at
the following valuation ranges:
Peer group: SEK 1.34-5.18
SOTP: SEK 1.24-7.91
DCF: SEK 1.02-7.77
Share price and valuation ranges
Source: ABG Sundal Collier, company data
0
1
2
3
4
5
6
7
8
9
10
Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19
Net Insight B OMXS30 rebased
CEO change CEO change
Initial hopes on Sye
Decliningdevelopment in
ScheduALL and a slow uptake of Sye
Announced planned capital raise and
strategic movesPeers
SOTP DCF
5.18
1.34
7.91 7.77
1.241.02
Net Insight
2 December 2019 ABG Sundal Collier 31
Peer group
We currently classify Net Insight as a “loss-making technology company”. By
looking at comparable listed peers, we find a median EV/Sales range of 1-4x. On
our estimates, Net Insight (as a group) trades at ’19e-’21e EV/Sales of 2.1-2.3x,
based on ~5% annual group growth. Applying 1-4x ’20e EV/Sales on Net Insight on
a group level yields corresponding share prices of SEK 1.34-5.18.
3-year sales CAGR and EV/Sales (2020e)
Source: FactSet consensus
Narrowed view at growth between 0-10%
Source: FactSet consensus
-20%
0%
20%
40%
60%
80%
0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x
3-y
ear S
ale
s C
AG
R
EV/Sales (2020)
We expect Net Insight to grow º~5% in the coming years
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x
3-y
ear S
ale
s C
AG
R
EV/Sales (2020)
EV/Sales around 1-4x for companies growing 3-9% CAGR
Peer group
Source: ABG Sundal Collier, FactSet consensus, ABGSC for Net Insight estimates
Valuation scenario on group level EV/Sales (2020e)
Source: ABG Sundal Collier, company data
Nordic Tech
Mcap
(SEKm) Share price
YTD (total
return)
5-year
return
Net debt (+) /
net cash (-)
YE'18
EV/Sales
(2019)
EV/Sales
(2020)
EV/Sales
(2021)
EV/EBIT
(2019)
EV/EBIT
(2020)
EV/EBIT
(2021)
P/E
(2019)
Div.
yield
(2019)
3-year
Sales
CAGR
3-year EBIT
CAGR
Loss-making peers
Edgeware 175 6 -52% na -168 0.2x 0.2x 0.2x -1.4x -6.8x 3.2x -10.9x 0.0% -1% -206%
PowerCell 7,770 150 326% na -49 111.5x 58.1x 19.2x 15.8x -140.1x 215.3x -123.1x 0.0% 84% -182%
Napatech 374 4 103% -27% 37 1.5x 1.3x 1.1x -14.0x 63.1x 16.8x -13.8x 0.0% na na
GomSpace 643 12 21% na -233 3.6x 3.3x 2.1x -5.9x -12.8x 110.1x -6.6x 0.0% 20% -135%
Smart Eye 1,504 100 46% na -84 23.6x 12.8x 5.4x -14.2x -18.1x 44.1x -16.1x 0.0% 69% -181%
Bioservo 233 16 88% na -26 5.4x 3.5x 1.4x -6.6x -8.2x 18.7x na na na na
Veoneer 16,858 153 -32% na -30 0.6x 0.5x 0.4x -2.2x -2.9x -4.6x -3.1x 0.0% 5% 7%
Acconeer 382 19.9 16% na -9 47.3x 15.8x 5.7x -4.2x -4.1x -5.6x -5.7x 0.0% 268% 13%
Tobii 3,692 37 38% na -192 2.6x 2.2x 1.8x -30.2x -206.6x 29.4x -28.4x 0.0% 19% -188%
Average 21.8x 10.8x 4.1x -7.0x -37.4x 47.5x -25.9x 0.0% 66% -125%
Median 3.6x 3.3x 1.8x -5.9x -8.2x 18.7x -12.3x 0.0% 20% -181%
Mature peers
HMS Networks 6,901 147 21% 314% 319 4.7x 4.5x 4.0x 27.5x 23.6x 19.9x 35.9x 1.3% 10% 14%
RTX 2,216 174 9% 248% -183 2.3x 2.0x 1.8x 15.7x 13.9x 12.3x 32.0x 0.8% 15% 12%
Allgon 616 11 115% -24% 236 1.5x 1.3x 1.2x 12.1x 10.3x 8.6x 19.0x 0.0% 30% 72%
JLT Mobile Computers 183 6 69% 262% -44 1.0x 1.0x 0.9x 10.6x 9.3x 8.7x 16.8x 4.7% 7% 9%
Mips 4,316 171 59% na -243 16.3x 10.3x 8.2x 40.4x 23.1x 18.0x 51.9x 1.7% 39% 47%
Tomra 39,803 255 33% 464% 1,128 4.4x 4.2x 3.9x 35.5x 32.7x 30.0x 46.0x 1.1% 6% 6%
Mycronic 16,117 165 42% 765% -827 3.8x 3.8x 3.5x 14.5x 17.4x 15.3x 19.7x 1.9% 5% -1%
Invisio 4,233 96 70% 599% -62 9.5x 7.3x 6.1x 45.8x 29.8x 22.3x 59.3x 1.0% 25% 44%
Fingerprint Cards 4,673 15 47% 106% -541 2.8x 2.4x 2.1x 282.7x 61.6x 31.2x 414.7x 0.0% 9% -161%
Nordic Semiconductor 10,286 54 88% 41% -899 3.5x 2.7x 2.1x 117.1x 33.5x 17.8x 176.9x 0.0% 22% 62%
Pricer 1,835 17 84% 187% -171 1.7x 1.5x 1.3x 17.0x 15.5x 13.5x 17.4x 4.2% 3% 13%
Troax 6,720 112 34% na 469 3.6x 3.4x 3.2x 17.5x 16.3x 15.2x 24.5x 2.0% 6% 7%
Ovzon 2,116 63 51% na -40 6.9x 4.1x 2.8x 43.5x 27.3x 11.8x 37.5x 0.0% 42% 152%
Average 4.8x 3.7x 3.2x 52.3x 24.2x 17.3x 73.2x 1.4% 17% 21%
Median 3.6x 3.4x 2.8x 27.5x 23.1x 15.3x 35.9x 1.1% 10% 13%
Net Insight (ABGSCe) 1,014 3 -3% -10% -93 2.1x 2.0x 1.9x -120.3x 194.8x 70.1x -150.0x 0.0% 4% -157%
Valuation scenario (group level)
Sales (2020e) 489
Sales grow th (2020e) 5%
EV/Sales (2020) 1x 2x 3x 4x
EV 489 979 1,468 1,957
Net debt ex. leasing (2020e) -24
Mcap 514 1,003 1,492 1,982
Number of shares 383
Value per share 1.34 2.62 3.90 5.18
Net Insight
2 December 2019 ABG Sundal Collier 32
SOTP
Net Insight has three different business units. Nimbra is a stable and profitable
business, we believe. ScheduALL has been declining (and is currently loss-making),
with sales growth yet to be seen. Net Insight is investing in Sye, which it hopes will
achieve high sales growth in the coming years.
Because the investor base in Net Insight is predominantly Nordic/Swedish, we
argue that Nordic alternative investments with similar characteristic are the most
comparable assets, even though the operational and market overlap is close to
zero. Comparing the three different business areas with different categories of the
peer group, we reach these conclusions:
Nimbra: Medium growth, good profitability, mature business, similar sales and
earnings growth as HMS Networks (4.5x 2020 EV/Sales), JLT Mobile Computers
(1.0x 2020 EV/Sales), Tomra (4.2x 2020 EV/Sales), Pricer (1.5x 2020 EV/Sales)
and Troax (3.4x 2020 EV/Sales). The low to high-end value of these multiples would
imply SEK 387m-1,739m.
ScheduALL: Currently low growth, non-profitable business with investment needs,
similar to Edgeware (0.2x 2020 EV/Sales) and Veoneer (0.5x 2020 EV/Sales). The
low to high-end value of these multiples would imply SEK 16m-41m.
Sye: Low absolute sales, high expected growth, non-profitable, similar to PowerCell
(58.1x 2020 EV/Sales), Smart Eye (12.8x 2020 EV/Sales), Acconeer (15.8x 2020
EV/Sales) and Tobii (2.2x 2020 EV/Sales). The low to high-end value of these
multiples would imply SEK 46m-1,224m.
Adding the low and high-end range of the different units results in a share price
range of SEK 1.24-7.91.
The share has historically been trading between 1-3x NTM EV/sales
Source: FactSet
SOTP scenario on EV/Sales (2020) per business area
Source: ABG Sundal Collier, company data
0x
1x
2x
3x
4x
EV/Sales f12m (x) Avg.
No estimates
SOTP 2020 sales growth
Nimbra 387 2% 1 4.5 387 1,739
ScheduALL 82 7% 0.2 0.5 16 41
Sye 21 90% 2.2 58.1 46 1,224
SOTP 449 3,004
Net debt ex. leasing (2020e) -24
Mcap 473 3,029
Number of shares 383
Value per share 1.24 7.91
2020 EV/Sales EV
Net Insight
2 December 2019 ABG Sundal Collier 33
DCF
We have also conducted a DCF analysis, in which we assess the individual
characteristics of Net Insight’s business model. In all scenarios, we have used a
three-stage model, which comprises the periods ’19e-’22e, ’22e-’30e, and ’30e and
beyond (terminal value). We have applied a 10% WACC (of which 11% cost of
equity and 2% cost of debt).
Each scenario has different inputs on sales growth, profit margins, and FCF
margins. We end up with three different scenarios yielding implied share prices of
SEK 1.02-7.77.
Sales per scenario
Source: ABG Sundal Collier, company data
FCF and FCF margin per scenario
Source: ABG Sundal Collier, company data
0
500
1,000
1,500
2,000
2,500
2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2028e 2029e 2030e
Scenario 1 Scenario 2 Scenario 3
-3%
2%
7%
12%
17%
22%
27%
-100
0
100
200
300
400
500
2019e2020e2021e2022e2023e2024e2025e2026e2027e2028e2029e2030e
FCF Scenario 1 FCF Scenario 2 FCF Scenario 3
FCF margin Scenario 1 FCF margin Scenario 2 FCF margin Scenario 3
DCF scenarios
Source: ABG Sundal Collier, company data
DCF overview
Source: ABG Sundal Collier, company data
DCF Scenario 1 DCF Scenario 2 DCF Scenario 3
PV (FCF) stage 1 -54 PV (FCF) stage 1 -19 PV (FCF) stage 1 77
PV (FCF) stage 2 110 PV (FCF) stage 2 265 PV (FCF) stage 2 690
PV (TV) 254 PV (TV) 621 PV (TV) 1,889
EV 310 EV 867 EV 2,656
(-) Net debt ex. leasing 46 (-) Net debt ex. leasing 46 (-) Net debt ex. leasing 46
Other adjustments 0 Other adjustments 0 Other adjustments 0
Equity value 356 Equity value 913 Equity value 2,702
No. of shares (m) 382.8 No. of shares (m) 382.8 No. of shares (m) 382.8
Value per share 1.02 Value per share 2.63 Value per share 7.77
Weighted Cost of Capital - WACC Scenario 1 Scenario 2 Scenario 3
Risk free yield 2% CAGR / avg. '19e-'22e CAGR / avg. '19e-'22e CAGR / avg. '19e-'22e
Market risk premium 5% Sales CAGR 1.0% Sales CAGR 5.5% Sales CAGR 12.0%
Equity beta 100% EBIT CAGR -100.0% EBIT CAGR -254.7% EBIT CAGR 114.2%
Extra risk factor 4% EBIT margin -1.0% EBIT margin 1.9% EBIT margin 8.0%
Company specif ic risk premium 9%
Cost of equity (Re) 11% CAGR / avg. '22e-'30e CAGR / avg. '22e-'30e CAGR / avg. '22e-'30e
Sales 2.0% Sales 5.8% Sales 16.9%
EBITA tax rate 22% EBIT na EBIT 27.4% EBIT 24.9%
Cost of debt after tax (Rd) 2% EBIT margin 1.1% EBIT margin 8.2% EBIT margin 15.0%
Capital w eights and WACC DCF value per share 1.02 DCF value per share 2.63 DCF value per share 7.77
Equity 87%
Debt 13%
Implied net debt/equity 15%
WACC 10%
Net Insight
2 December 2019 ABG Sundal Collier 34
Risks
Technology and competition risk
Net Insight is operating in a demanding technology market, which is traditionally
slow-moving but also dependent on new technology. It is therefore facing both
competition from legacy technology and emerging technology, which could appear
in a short time period. Net Insight is building its products as proprietary solutions,
and there is a risk that the market prefers standardised solutions instead.
Liquidity risk
Net Insight is currently loss-making and has a small cash position, so it is
dependent on the capital markets either in divesting assets or raising further capital
if the operations do not turn around into profitable territory again.
Execution risk
Net Insight is a technology company with good quality products, but it has not been
successful at launching the solutions to the market and gaining sales traction. This
is a risk that may persist. Although the company has set out an agenda to drive the
organisation towards commercial thinking, this is a risk.
Net Insight
2 December 2019 ABG Sundal Collier 35
Appendix
Nimbra product portfolio For in-production media transport over IP, Net Insight has its Nimbra brand, which
contributes ~80% of Net Insight’s revenue. Looking at the revenues in this segment,
hardware makes up for ~50%. Its virtualised products (including the Nimbra 400,
Nimbra 1060 and Nimbra 600) are the main drivers of sales growth, according to the
company.
The Nimbra 1060 is Net Insight’s new flagship media transport platform, designed
with a virtualisation architecture supporting multiple networking functions.
The Nimbra 600 can be configured as a media access solution or as an edge-
processing unit to support the Nimbra 1060. We believe the latter is its main sales
driver.
The Nimbra 400 is made to fit most broadcasting needs, including usage in space-
constrained remote sites and flight kits. It supports RIST and SRT, meaning it can
efficiently transport media over the public internet.
Nimbra platforms
Source: Net Insight
Net Insight
2 December 2019 ABG Sundal Collier 36
Management
Holdings in Net Insight: None.
Holdings in Net Insight: 50,000 class B shares and 150,000 synthetic options
Holdings in Net Insight: 37,000 class B shares and 150,000 synthetic options.
Holdings in Net Insight: 17,000 class B shares.
Christer Fritzon – Incoming CEO (H1 20’)
Pelle Bourn – Chief Financial Officer
Education and Professional Experience:
- M.Sc. In Business Administration,
Lund University.
- Previous CFO roles at Aditro, Kemetyl Group and Ortivus Group among others.
Ken Graham– Interim VP Resource Optimization
Education and Professional Experience:
- Bachelor of Applied Science in
Computer Science, University of South Alabama.
Filippa Hasselström – VP Streaming Solutions
Education and Professional Experience:
- M.Sc. in Physics, KTH Royal Institute
of Technology.
Marcus Sandberg – VP MARCOM
Education and Professional Experience:
- M.Sc. In Finance and Accounting,
Stockholm School of Economics.
- Currently member of the Board in Belatchew Arkitekter AB.
Ulrik Rohne – VP Media Networks
Education and Professional Experience:
- M.Sc. In Electrical Engineering, KTH
Royal Institute of Technology.
Katarina Dufvenmark – Head of People
Education and Professional Experience:
- M.Sc. In International Business,
Marketing and Management.
- Previously Head of HR Operations
Sweden at If P&C Insurance.
Holdings in Net Insight: 60,000 class B shares and 150,000 synthetic options.
Holdings in Net Insight: None.
Holdings in Net Insight: 138,434 synthetic options
Education and Professional Experience:
- Graduate in Marketing Economics,
Nordic School of Marketing.
- Excecutive Management Program, INSEAD.
- Former CEO and President of Teracom Group, Boxer, Executive VP
Global Marketing & Sales of AllgonSystems. Several senior positions in
Motorola.
Anders Harrysson– Interim CEO
Education and Professional Experience:
- M.Sc. In Engingeering Physics,
Linköping Institute of Technology.
- Former CEO of Birdstep Technology ASA and has experience from IBM and Sun Microsystems.
Holdings in Net Insight: 8,000 class B shares.
Net Insight
2 December 2019 ABG Sundal Collier 37
Board of Directors
Gunilla Fransson– Chairman of the Board
Education and Professional Experience:
- M.Sc. in Chemical Engineering.
- Licentiate of Technology in Nuclear
Chemistry, KTH Royal Institute of Technology.
- Other Missions: Board member of Trelleborg AB, Nederman AB, Eltel
AB, Enea AB and some unlisted companies, including Chairman in
Novare Peritos AB.
Jan Barchan – Member of the Board
Education and Professional Experience:
- B.Sc of Business Administration.
- Other Missions: CEO of Briban
Incest AB, Chairman in AudiodevAB, Västraby Gård and VästrabyGård Energi AB. Member of the
Board of Directors in Assistera AB, Studsvik AB, Trianon AB and
Trialbee AB.
Mathias Berg– Member of the Board
Education and Professional Experience:
- M.Sc. In Business Administration,
Stockholm School of Economics.
- Other Missions: COO of Bonnier Broadcasting Sweden, TV4 and C More.
Charlotta Falvin – Member of the Board
Education and Professional Experience:
- M.Sc. In Business Administration and
Economics, Lund University.
- Other Missions: Member of the Board in Bure Equity, InvisioCommunications and CLX
Communications. Chairman of IdeonScience Park, Lunds Tekniska
Högskola and Handelsbankens Södraregionstyrelse.
Christer Fritzon – Member of the Board
Education and Professional Experience:
- Graduate in Marketing Economics,
Nordic School of Marketing.
- Excecutive Management Program, INSEAD.
- Other missions: CEO and President of SJ AB. Board member of
Systembolaget.
Anders Harrysson– Member of the Board
Education and Professional Experience:
- M.Sc. In Engingeering Physics,
Linköping Institute of Technology.
- Other Missions: Board member of Precise Biometrics AB and Chairman of Aditro Group AB, Ewalie AB and
Qmatic AB.
Holdings in Net Insight: 48,052,491 class B shares through BribanInvest AB.
Previous Missions: Member of Saab AB’s Group management and held senior positions in the Ericsson group.
Holdings in Net Insight: 142,000 class B shares.
Previous Missions: Previous experience from TDC, MTG and multiple positions within the TV4 Group.
Holdings in Net Insight: 30,000 class B shares.
Previous Missions: Board member of Doro AB, Axis Communications. Chairman of Barista Fair Trade Coffee.
Holdings in Net Insight: None.
Previous Missions: Former CEO and President of Teracom Group, Boxer, Executive VP Global Marketing & Sales of Allgon Systems. Several senior positions in Motorola.
Holdings in Net Insight: 17,000 class B shares.
Previous Missions: CEO of Birdstep Technology ASA. Previously worked at IBM and Sun Microsystems.
Holdings in Net Insight: 8,000 class B shares.
Stina Barchan– Member of the Board
Education and Professional Experience:
- PhD, University College London
- Other missions: Board member of
Briban Invest, Deputy Board member of Trailbee and member of the nomination committee in Studsvik
Holdings in Net Insight: None.
Net Insight
2 December 2019 ABG Sundal Collier 38
Shareholders
History
Shareholders
Source: ABG Sundal Collier, company data, Holdings 26 November 2019
Overview of historical events
Source: ABG Sundal Collier, company data (AGM 2017)
# Owner NETI A NETI B Value (MSEK) Capital Votes Country Verified
1 Jan Barchan 0 48,052,491 126.4 12.3% 12.0% Sw eden 31/10/2019
2 Lannebo Fonder 0 25,191,322 66.3 6.5% 6.3% Sw eden 30/09/2019
3 Alecta Pensionsförsäkring 0 24,000,000 63.1 6.2% 6.0% Sw eden 31/10/2019
4 Avanza Pension 0 20,047,955 52.7 5.1% 5.0% Sw eden 04/11/2019
5 Nordnet Pensionsförsäkring 0 11,867,760 31.2 3.0% 3.0% Sw eden 31/10/2019
6 Net Insight AB 0 7,175,000 18.9 1.8% 1.8% Sw eden 31/10/2019
7 Handelsbanken Fonder 0 7,000,000 18.4 1.8% 1.8% Sw eden 31/10/2019
8 Lars Bergkvist 0 6,582,000 17.3 1.7% 1.6% Sw eden 31/10/2019
9 Hanna Barsum 0 4,264,730 11.2 1.1% 1.1% Sw eden 31/10/2019
10 Nordea Liv & Pension 0 4,200,907 11.0 1.1% 1.1% Sw eden 31/10/2019
11 Edgar Sesemann 0 3,788,500 10.0 1.0% 0.9% Latvia 31/10/2019
12 Bajram Nuhi 0 2,874,000 7.6 0.7% 0.7% Sw eden 31/10/2019
13 Otto Nordhus 0 2,604,978 6.9 0.7% 0.7% Sw eden 31/10/2019
14 Dimensional Fund Advisors 0 2,134,627 5.6 0.5% 0.5% USA 30/09/2019
15 Abboud Malkoun 0 2,115,126 5.6 0.5% 0.5% Sw eden 31/10/2019
16 Dan Hemström 0 2,071,800 5.4 0.5% 0.5% Sw eden 31/10/2019
17 Lars Gauffin 600,000 1,469,930 5.4 0.5% 1.9% Sw eden 31/10/2019
18 XACT Fonder 0 2,065,784 5.4 0.5% 0.5% Sw eden 31/10/2019
19 SEB Fonder 0 1,971,263 5.2 0.5% 0.5% Sw eden 31/10/2019
20 Andra AP-fonden 0 1,932,738 5.1 0.5% 0.5% Sw eden 31/10/2019
1997
Net Insight is founded by Christer Bohm,
Lars Gauffin and Per Lindgren
2004
EBU selects Net Insight
2006
First DTT customer in Telenor/Norkring
2008
Olympic Games in Beijing
2012
Launch of media over internet solution
2016
Launch of Sye
2015
Launch of Live OTT
Acquisition of
ScheduALL
Net Insight
2 December 2019 ABG Sundal Collier 39
Glossary
Access Network: The part of the public network closest to end-users. Consists of
copper lines in the telephone network and coaxial cable for cable TV. Fiber and
wireless solutions are also becoming more widespread.
Bandwidth: Measure of how much information can be transmitted. Measured in bits
per second, bps.
Broadcast: Transmission from a single sender to all possible recipients in a
network.
Catch up TV: To watch a recent TV program after it has been broadcast.
CDN: (Content Delivery Networks), an overlay network of customer content,
distributed geographically to enable rapid, reliable retrieval from any end-user
location.
Content: TV content that is distributed in the network.
Contribution: Communication for production and processing of material before it is
transmitted to the end-user.
Core: Larger transport networks between cities and backbone networks.
DTT: (Digital Terrestrial Television), name of digital terrestrial TV to regular TV sets
equipped with set-top boxes. Also called DVB-T.
ERM: (Enterprise Resource Management), software that lets an enterprise manage
its network resources efficiently.
Ethernet: The most common technology for communication in local area networks,
LANs. Transmission speeds of 10/100 mbps,1 Gbps and 10 Gbps.
Gigabit Ethernet: Development of the Ethernet primarily used in large LANs and
backbone networks. Can process transmission speeds of up to 1,000 mbps.
HD/HDTV: (High definition/TV), high resolution/TV.
UHD/TV: (Ultra High Definition/TV), ultra High resolution TV. Available digital video
formats are 4K and 8K.
Headend: A master facility for receiving television signals for processing and
distribution over a cable television system.
Linear TV: Linear TV is a real-time television service that broadcasts scheduled
programs, conventionally over the air or through satellite/cable, not streamed to a
specific user.
IP: (Internet Protocol), protocol used for data transmission over the internet. All
internet traffic is transmitted in IP packets.
IPTV: Television that is broadcast over IP (broadband).
MPLS: (Multi Protocol Label Switching), protocol for the efficient management of
connections over a package-switched network.
MSR: (Media Switch Router), MSR is a platform specially designed to handle media
services.
Net Insight
2 December 2019 ABG Sundal Collier 40
Node: A unit that is connected to a network, either as a sender/ receiver, or to
connect different networks.
NPS: (Net Promotor Score), is both a measure and a survey method that provides a
value on how loyal a company's customers or employees are.
Orchestration: Automated coordination of virtual resources, functions and people.
OTT: (Over-The-Top), internet-based distribution of TV.
Post Production: Post production of TV shows or films, for example.
Protocol: An agreed set of rules for how different network equipment should
communicate.
QOS: (Quality of Service), name for the quality of service (that can be provided by a
network). Video and speech require higher QoS. QoS is achieved in a network
either by separating traffic so that interference cannot occur or by prioritization
where the highest-priority traffic is sent first.
Real Time: Immediate transmission of material without delay.
Remote Production: Also called centralised production or at-home production.
Camera feeds are transported via media networks and the studio production is
made remotely.
Router/Switch: A unit to guide and forward data packets, over the internet, for
example.
Routing: Guiding and forwarding data packets through a computer network.
SDN: (Software Defined Networking), networking technology that makes media
networks more agile and flexible to support for example automated, customer
provisioned networks and the increased use of virtualization and data centre
technologies within the media industry.
SLA: (Service Level Agreement), is a part of a service contract where the level of
service is formally defined.
Streaming/Streamed Media: Playing sound and video files on a computer or
mobile phone simultaneous with transmission over a LAN or WAN, such as the
internet. Used for playing stored files from websites and for live events over the
internet.
Uplink Station/Teleport: Station where media content in a terrestrial network is
transferred to a satellite network for further distribution.
VOD: (Video on Demand), to select and watch video content anytime when needed.
Net Insight
2 December 2019 ABG Sundal Collier 41
Source: ABG Sundal Collier, Company data
Income Statement (SEKm) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019e
Sales 110 120 115 106 111 129 112 114
COGS -45 -49 -44 -52 -46 -53 -43 -46
Gross profit 66 71 71 54 65 76 69 68
Other operating items -47 -69 -61 -60 -57 -53 -47 -51
EBITDA 19 2 11 -5 8 23 23 17
Depreciation and amortisation -17 -15 -15 -55 -20 -19 -20 -20
EBITA 2 -13 -4 -60 -12 3 3 -3
EO items 0 0 0 -39 0 0 0 0
Impairment and PPA amortisation 0 0 0 0 0 0 0 0
EBIT 2 -13 -4 -60 -12 3 3 -3
Net financial items 2 1 -1 -0 1 -1 -1 0
Pretax profit 4 -12 -5 -61 -11 3 2 -3
Tax -1 3 1 13 2 -0 -0 1
Net profit 3 -9 -4 -48 -9 2 2 -2
Minority interest 0 0 0 0 0 0 0 0
Net profit discontinued 0 0 0 0 0 0 0 0
Net profit to shareholders 3 -9 -4 -48 -9 2 2 -2
EPS 0.01 -0.02 -0.01 -0.13 -0.02 0.01 0.00 -0.01
EPS Adj 0.01 -0.02 -0.01 -0.13 -0.02 0.01 0.00 -0.01
Total extraordinary items after tax 0 0 0 -39 0 0 0 0
Tax rate (%) 25.5 23.2 19.7 21.0 20.1 14.7 8.2 22.0
Gross margin (%) 59.6 59.2 61.9 51.2 58.3 59.1 61.7 60.0
EBITDA margin (%) 17.2 1.8 9.2 -5.1 7.1 17.5 20.3 15.3
EBITA margin (%) 2.2 -10.8 -3.7 -56.7 -10.7 2.6 2.7 -2.3
EBIT margin (%) 2.2 -10.8 -3.7 -56.7 -10.7 2.6 2.7 -2.3
Pretax margin (%) 3.6 -10.2 -4.2 -57.0 -9.6 2.0 1.7 -2.3
Net margin (%) 2.7 -7.8 -3.3 -45.0 -7.7 1.7 1.6 -1.8
Growth rates Y/Y Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019e
Sales growth (%) 0.1 25.0 9.9 -8.4 0.8 7.5 -2.4 7.2
EBITDA growth (%) -14.7 370.4 -55.4 -chg -58.4 924.9 115.4 +chg
EBIT growth (%) -64.0 +chg -chg -chg -chg +chg +chg +chg
Net profit growth (%) -73.6 +chg -chg -chg -chg +chg +chg +chg
EPS growth (%) -73.6 +chg -chg -chg -chg +chg +chg +chg
Adj earnings numbers Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019e
EBITDA Adj 19 2 11 33 8 23 23 17
EBITDA Adj margin (%) 17.2 1.8 9.2 31.2 7.1 17.5 20.3 15.3
EBITA Adj 2 -13 -4 -22 -12 3 3 -3
EBITA Adj margin (%) 2.2 -10.8 -3.7 -20.5 -10.7 2.6 2.7 -2.3
EBIT Adj 2 -13 -4 -22 -12 3 3 -3
EBIT Adj margin (%) 2.2 -10.8 -3.7 -20.5 -10.7 2.6 2.7 -2.3
Pretax profit Adj 4 -12 -5 -22 -11 3 2 -3
Net profit Adj 3 -9 -4 -9 -9 2 2 -2
Net profit to shareholders Adj 3 -9 -4 -9 -9 2 2 -2
Net Adj margin (%) 2.7 -7.8 -3.3 -8.8 -7.7 1.7 1.6 -1.8
Net Insight
2 December 2019 ABG Sundal Collier 42
Source: ABG Sundal Collier, Company data
Income Statement (SEKm) 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Sales 280 281 379 376 504 427 452 466 489 513
COGS -113 -124 -147 -150 -188 -179 -189 -188 -191 -195
Gross profit 167 156 232 226 316 248 262 279 298 318
Other operating items -123 -117 -124 -150 -203 -184 -236 -208 -213 -221
EBITDA 44 39 108 76 113 64 26 71 86 97
Depreciation and amortisation -42 -49 -54 -57 -63 -71 -101 -79 -81 -83
Of which leasing depreciation 0 0 0 0 0 0 0 -11 -11 -11
EBITA 3 -10 54 19 49 -8 -75 -8 5 14
EO items 0 0 0 0 0 0 -39 0 0 0
Impairment and PPA amortisation 0 0 0 0 0 0 0 0 0 0
EBIT 3 -10 54 19 49 -8 -75 -8 5 14
Net financial items 2 2 2 -13 -5 13 1 -1 0 0
Pretax profit 5 -8 55 7 44 5 -74 -9 5 14
Tax 7 -2 -14 -5 -9 -2 16 2 -1 -3
Net profit 12 -9 42 2 35 4 -58 -7 4 11
Minority interest 0 0 0 0 0 0 0 0 0 0
Net profit discontinued 0 0 0 0 0 0 0 0 0 0
Net profit to shareholders 12 -9 42 2 35 4 -58 -7 4 11
EPS 0.03 -0.02 0.11 0.00 0.09 0.01 -0.15 -0.02 0.01 0.03
EPS Adj 0.03 -0.02 0.11 0.00 0.09 0.01 -0.05 -0.02 0.01 0.03
Total extraordinary items after tax 0 0 0 0 0 0 -39 0 0 0
Leasing payments 0 0 0 0 0 0 0 -11 -11 -11
Tax rate (%) 133.2 21.2 24.7 71.2 20.0 33.3 21.0 24.9 22.0 22.0
Gross margin (%) 59.7 55.7 61.2 60.2 62.7 58.0 58.1 59.8 61.0 62.0
EBITDA margin (%) 15.9 13.9 28.5 20.2 22.4 14.9 5.8 15.1 17.5 18.9
EBITA margin (%) 1.0 -3.4 14.1 5.1 9.8 -1.8 -16.6 -1.8 1.0 2.7
EBIT margin (%) 1.0 -3.4 14.1 5.1 9.8 -1.8 -16.6 -1.8 1.0 2.7
Pretax margin (%) 1.8 -2.7 14.5 1.8 8.7 1.3 -16.3 -1.9 1.0 2.7
Net margin (%) 4.2 -3.3 10.9 0.5 7.0 0.8 -12.9 -1.4 0.8 2.1
Growth rates Y/Y 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Sales growth (%) -4.8 0.2 35.0 -0.9 34.0 -15.2 5.8 3.3 4.9 4.9
EBITDA growth (%) -62.4 -12.2 176.4 -29.6 48.3 -43.5 -58.7 168.6 21.5 13.0
EBIT growth (%) -93.6 -455.1 654.3 -64.2 157.3 -115.2 -901.3 89.1 161.8 177.8
Net profit growth (%) -76.2 -177.7 549.2 -95.4 1,752.6 -89.8 -1,716.7 88.6 159.3 177.8
EPS growth (%) -76.2 -177.7 549.2 -95.4 1,752.5 -89.8 -1,716.7 88.4 159.3 177.8
Profitability 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
ROE (%) 4.7 -1.9 8.1 0.4 6.4 0.6 -11.2 -1.3 0.8 2.2
ROE Adj (%) 4.7 -1.9 8.1 0.4 6.4 0.6 -3.8 -1.3 0.8 2.2
ROCE (%) 1.1 -1.9 10.3 3.5 8.4 -1.3 -13.8 -1.5 0.9 2.4
ROCE Adj(%) 1.1 -1.9 10.3 3.5 8.4 -1.3 -6.7 -1.5 0.9 2.4
ROIC (%) 4.4 -4.2 16.5 1.9 10.8 -1.3 -15.4 -1.4 0.8 2.2
ROIC Adj (%) 4.4 -4.2 16.5 1.9 10.8 -1.3 -7.5 -1.4 0.8 2.2
Adj earnings numbers 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
EBITDA Adj 44 39 108 76 113 64 65 71 86 97
EBITDA Adj margin (%) 15.9 13.9 28.5 20.2 22.4 14.9 14.4 15.1 17.5 18.9
EBITDA lease Adj 44 39 108 76 113 64 65 60 75 86
EBITDA lease Adj margin (%) 15.9 13.9 28.5 20.2 22.4 14.9 14.4 12.8 15.3 16.7
EBITA Adj 3 -10 54 19 49 -8 -37 -8 5 14
EBITA Adj margin (%) 1.0 -3.4 14.1 5.1 9.8 -1.8 -8.1 -1.8 1.0 2.7
EBIT Adj 3 -10 54 19 49 -8 -37 -8 5 14
EBIT Adj margin (%) 1.0 -3.4 14.1 5.1 9.8 -1.8 -8.1 -1.8 1.0 2.7
Pretax profit Adj 5 -8 55 7 44 5 -35 -9 5 14
Net profit Adj 12 -9 42 2 35 4 -20 -7 4 11
Net profit to shareholders Adj 12 -9 42 2 35 4 -20 -7 4 11
Net Adj margin (%) 4.2 -3.3 10.9 0.5 7.0 0.8 -4.3 -1.4 0.8 2.1
Net Insight
2 December 2019 ABG Sundal Collier 43
Source: ABG Sundal Collier, Company data
Cash Flow Statement (SEKm) 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
EBITDA 44 39 108 76 113 64 26 71 86 97
Net financial items 2 2 2 -13 -5 13 1 -1 0 0
Paid tax 0 0 -0 -0 -1 -0 -0 2 -1 -3
Non-cash items 110 -4 2 1 19 -21 -7 0 0 0
Cash flow before change in WC 157 37 111 64 126 56 21 72 85 94
Change in WC -97 30 22 -3 -14 16 2 -9 -3 -3
Operating cash flow 60 66 133 61 112 71 23 63 82 91
CAPEX tangible fixed assets -2 -1 -1 -2 -2 -3 -32 -2 -5 -5
CAPEX intangible fixed assets -68 -48 -41 -55 -80 -95 -76 -80 -84 -89
Acquisitions and disposals 0 0 0 -98 0 0 0 0 0 0
Free cash flow -10 18 91 -94 30 -26 -85 -19 -7 -2
Dividend paid 0 0 0 0 0 0 0 0 0 0
Share issues and buybacks 0 0 0 -8 -10 -11 -1 0 0 0
Lease liability amortisation 0 0 0 0 0 0 0 -11 -11 -11
Other non cash items 183 5 -0 -21 -17 19 8 -53 -4 -11
Decrease in net IB debt 182 15 89 -123 4 -16 -81 -84 -22 -24
Balance Sheet (SEKm) 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Goodwill 4 4 4 59 64 58 63 63 63 63
Other intangible assets 186 185 174 234 255 271 248 270 294 321
Tangible fixed assets 5 4 3 4 3 5 34 26 22 17
Right-of-use asset 0 0 0 0 0 0 0 60 60 60
Total other fixed assets 39 37 24 24 16 19 35 35 35 35
Fixed assets 234 231 206 321 338 353 381 455 475 496
Inventories 50 43 44 56 47 44 46 44 46 49
Receivables 97 81 79 100 130 123 130 135 142 149
Other current assets 0 0 0 0 0 0 0 0 0 0
Cash and liquid assets 186 204 294 194 215 178 93 68 46 22
Total assets 567 559 624 670 730 697 650 703 709 716
Shareholders equity 503 494 537 532 565 546 494 494 494 494
Minority 0 0 0 0 0 0 0 0 0 0
Total equity 503 494 537 532 565 546 494 494 494 494
Long-term debt 4 3 3 23 43 20 18 18 18 18
Pension debt 0 0 0 0 0 0 0 0 0 0
Convertible debt 0 0 0 0 0 0 0 0 0 0
Leasing liability 0 0 0 0 0 0 0 59 59 59
Total other long-term liabilities 0 0 0 0 0 0 0 0 0 0
Short-term debt 0 3 4 6 4 6 4 4 4 4
Accounts payable 20 15 15 21 15 73 88 79 83 87
Other current liabilities 40 44 65 88 103 52 46 49 51 54
Total liabilities and equity 567 559 624 670 730 697 650 703 709 716
Net IB debt -221 -235 -311 -188 -184 -171 -106 -23 -1 24
Net IB debt excl. pension debt -221 -235 -311 -188 -184 -171 -106 -23 -1 24
Net IB debt excl. leasing -182 -198 -287 -164 -168 -152 -71 -46 -24 0
Capital invested 292 261 227 346 384 381 390 474 495 520
Working capital 97 67 46 48 62 47 45 54 56 59
EV breakdown 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Market cap. diluted (m) na na 1,209 3,236 3,470 1,844 1,043 1,018 1,018 1,018
Net IB debt Adj -221 -235 -311 -188 -184 -171 -106 -23 -1 24
Market value of minority 0 0 0 0 0 0 0 0 0 0
Reversal of shares and participations 0 0 0 0 0 0 0 0 0 0
Reversal of conv. debt assumed equity 0 0 0 0 0 0 0 0 0 0
EV na na 898 3,048 3,286 1,673 937 995 1,017 1,042
Capital efficiency 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Total assets turnover (%) 98.8 49.9 64.1 58.1 71.9 59.8 67.0 68.9 69.3 72.0
Working capital/sales (%) 17.3 29.3 14.9 12.5 11.0 12.7 10.1 10.5 11.2 11.2
Financial risk and debt service 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Net debt/equity -0.44 -0.48 -0.58 -0.35 -0.33 -0.31 -0.22 -0.05 -0.00 0.05
Net debt/market cap na na -0.27 -0.15 -0.07 -0.07 -0.07 -0.02 -0.00 0.02
Equity ratio (%) 88.8 88.4 86.1 79.3 77.4 78.3 76.0 70.2 69.6 69.0
Net IB debt adj./equity -0.44 -0.48 -0.58 -0.35 -0.33 -0.31 -0.22 -0.05 -0.00 0.05
Current ratio 5.54 5.29 5.00 3.02 3.22 2.61 1.95 1.75 1.59 1.42
EBITDA/net interest -18.75 -19.08 -71.97 6.03 20.87 -4.94 -18.79 106.53 high high
Net IB debt/EBITDA -4.97 -6.02 -2.88 -2.47 -1.63 -2.68 -4.04 -0.32 -0.01 0.24
Net IB debt/EBITDA lease Adj -4.10 -5.06 -2.66 -2.16 -1.49 -2.38 -1.09 -0.78 -0.33 0.00
Interest cover -1.15 4.72 -35.73 1.52 9.15 0.58 53.64 -12.32 nm nm
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2 December 2019 ABG Sundal Collier 44
Source: ABG Sundal Collier, Company data
Valuation and Ratios (SEKm) 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Shares outstanding adj. 390 390 390 390 390 390 390 383 383 383
Fully diluted shares Adj 390 390 390 390 390 390 390 383 383 383
EPS 0.03 -0.02 0.11 0.00 0.09 0.01 -0.15 -0.02 0.01 0.03
Dividend per share Adj 0 0 0 0 0 0 0 0 0 0
EPS Adj 0.03 -0.02 0.11 0.00 0.09 0.01 -0.05 -0.02 0.01 0.03
BVPS 1.29 1.27 1.38 1.36 1.45 1.40 1.27 1.29 1.29 1.29
BVPS Adj 0.81 0.78 0.92 0.68 0.70 0.61 0.50 0.46 0.39 0.32
Net IB debt / share -0.5 -0.5 -0.7 -0.4 -0.4 -0.4 -0.2 0.0 0.1 0.2
Share price na na 3.10 8.30 8.90 4.73 2.68 2.66 2.66 2.66
Market cap. (m) na na 1,209 3,236 3,470 1,844 1,043 1,018 1,018 1,018
Valuation 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
P/E na na 29.1 1,703.3 98.6 512.3 -17.9 -153.4 258.7 93.1
EV/sales na na 2.37 8.11 6.53 3.92 2.07 2.13 2.08 2.03
EV/EBITDA na na 8.3 40.1 29.2 26.3 35.6 14.1 11.9 10.7
EV/EBITA na na 16.8 158.8 66.5 -223.1 -12.5 -121.8 201.6 74.3
EV/EBIT na na 16.8 158.8 66.5 -223.1 -12.5 -121.8 201.6 74.3
Dividend yield (%) na na 0 0 0 0 0 0 0 0
FCF yield (%) na na 7.5 -2.9 0.9 -1.4 -8.1 -1.9 -0.7 -0.2
Lease adj. FCF yield (%) na na 7.5 -2.9 0.9 -1.4 -8.1 -3.0 -1.8 -1.3
P/BVPS na na 2.25 6.09 6.14 3.38 2.11 2.06 2.06 2.06
P/BVPS Adj na na 3.36 12.28 12.74 7.81 5.31 5.84 6.77 8.22
P/E Adj na na 29.1 1,703.3 98.6 512.3 -53.2 -153.4 258.7 93.1
EV/EBITDA Adj na na 8.3 40.1 29.2 26.3 14.4 14.1 11.9 10.7
EV/EBITA Adj na na 16.8 158.8 66.5 -223.1 -25.7 -121.8 201.6 74.3
EV/EBIT Adj na na 16.8 158.8 66.5 -223.1 -25.7 -121.8 201.6 74.3
EV/cap. employed na na 1.6 5.4 5.4 2.9 1.8 1.7 1.8 1.8
Investment ratios 2012 2013 2014 2015 2016 2017 2018 2019e 2020e 2021e
Capex/sales 25.0 17.3 11.1 15.2 16.3 22.9 23.8 17.7 18.2 18.2
Capex/depreciation 167.8 99.8 77.7 100.9 129.4 137.0 105.9 121.7 127.6 130.2
Capex tangibles/tangible fixed assets 41.1 22.5 36.4 48.7 68.3 62.7 94.3 7.6 23.2 30.2
Capex intangibles/definite intangibles 37.2 25.9 23.7 26.6 34.9 37.6 32.4 31.4 30.0 28.9
Depreciation on intangibles/definite intangibles22.1 25.6 30.6 26.4 26.4 24.1 25.0 22.8 21.4 20.2
Depreciation on tangibles/tangibles 25.8 34.7 43.3 44.8 90.4 226.5 128.1 35.6 45.2 59.9
Net Insight
2 December 2019 ABG Sundal Collier 45
Analyst certification I/We, Daniel Thorsson, Simon Granath, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and securities
covered in this report.
Analyst valuation methods ABG Sundal Collier analysts may publish valuation ranges for stocks covered under Company Sponsored Research. These valuation ranges rely on various valuation methods. One of the most frequently used methods is the valuation of a company by calculation of that company's
discounted cash flow (DCF). Another valuation method is the analysis of a company's return on capital employed relative to its cost of capital. Finally, the analysts may analyse various valuation multiples (e.g. the P/E multiples and the EV/EBITDA multiples) relative to global industry peers. In special cases, particularly for property companies and investment companies, the ratio of price to net asset value is considered.
Valuation ranges may be changed when earnings and cash flow forecasts are changed. They may also be changed when the underlying value of a company's assets changes (in the cases of investment companies, property companies or insurance companies) or when factors impacting the required rate of return change.
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