Og Petter Kongslie i SB1 Markets har en helt annen tilnærming datert 16. feb.

+NOK10 per share in free cash flow to equity in 2023 (P/E 10x)

Conclusion
4Q22 was, very nicely said, a mess and it has taken us some time to update our model with new IFRS-15 accounting rules. Nevertheless, following limited negative estimate changes to EPS in 2023 and 2024 (-3%) and slightly positive OpFCF estimate changes in the same period (5%), we reiterate our Buy recommendation and NOK200 target price. CRAYN trades at 2023e and 2024e OpFCF yield (a very good proxy on FCF yield) of 8.6% and 11.7%, respectively, whereas our NOK200 target price is equal 5% on average in 2023/2024. Our investment case is based on the following.
Our analysis

1. The business model in CRAYN works similar to consultants in principal. Simply put, to make a point, look at CRAYN as a company with a business model where you have gross profit multiplied by # of seats (licenses) handled. Both gross profit per seat can go up and down and the same can # of seats under administration. That is not the point, the point is that CRAYN has accumulated more accounts during 2022 and moves into 2023 with significantly more accounts vs. the average in 2022 and hence, there is a overhang og growth moving into 2023 (therefore the reference to IT consultants, which has similar model with regards to # of consultants moving into the next year as compared to the average that generated earnings the previous year). Therefore, we believe the company has attractive visibility on the 20% organic gross profit growth for 2023 (we model 19% and they delivered 23% in 2022). For 2024 and 2025 we model 17.6% and 15.2% vs. medium-term guidance of 20%.

2. Moreover, as we eluded to with Link Mobility earlier today, majority of the growth steams from volume- and price increases net of churn (CRAYN has low single digit churn) on existing customers and hence, the growth should be EBITDA to gross margin accretive as well. The company guide a increase from 18.7% in 2022 to 20-21% in 2023 and gradual increase to 25% medium-term. We model 20% in 2023 for now (17% opex growth YoY) as we need more datapoints before we are comfortable moving that upwards. Supporting factors was found on slide 11 in the presentation where the company specifically comment a focus on cost control driven by both volume and cost efficiencies (i.e., lower rate of hiring), which is a new wording compared to previous. We model 21.2% and 22.5% for 2024 and 2025.

3. Also and the main point why we yelled “Buy on weakness” in our post 4Q22 webcast comment was uncertainty on working capital and hence FCF. Okay, FCF in 4Q22 landed at NOK430m. However, that numbers missed a NOK450m payment from the public sector in the Philippines (affecting all vendors) for Microsoft licenses, which CRAYN has paid Microsoft for at its end. All else equal, this would have increased FCF to close to NOK900m in 4Q22 and then the share would have started up 5-10% and not started down 5%. According to our understanding talking to the company and market participants, this cash is expected to be paid in 1H23 and consequently, we model FCF to equity per share (cash flow EPS) of NOK10.5 in 2023, which correspond to a multiple of 10x on the current market cap.

4. Nevertheless, even though it supports de-leveraging in 2023, we regard this as a one-off (negative for 2022 and positive for 2023) and we do not base our valuation on this. In 2024 and 2025 we model with normalized working capital dynamics (100% EBITDA reported to cash flow from operations conversion and not 135% as in 2023) and arrive at a FCF to equity per share of NOK9.3 and NOK12.2. This means that CRAYON trades at a cash flow P/E of 11.3x and 8.6x in 2024 and 2025 and our target equal 21.5x and 16x. Keep buying!