Rubean : Alster Research Bericht (Mai 2023)

Rubean AG

Germany | Technology | MCap EUR 20.2m

9 May 2023

2023 starts off on a positive note; hyper- scaling is set to start now

What's it all about?

Rubean AG issued a press release yesterday announcing a strong start to the new financial year. The news caused some confusion as it was merely the English translation of a press release issued at the end of April. In any case, Rubean appears to be on track to meet its financial targets for 2023 with increasing orders and additional customer wins. As a result, we believe that hyper-scaling of revenues could start as early as this year. In this context, management also reaffirmed its guidance of EUR 2m in revenues, which effectively represents a 2.5x year-on-year increase. In addition, Rubean announced the successful completion of a 10% capital increase, bringing in much-needed funds to bridge the gap before becoming cash-flow positive in 2024E (eAR). We reiterate our BUY rating with an unchanged PT of EUR 12.00.

IMPORTANT. Please refer to the last page of this report for "Important disclosures" and analyst(s) certifications.

UPDATE

BUY (BUY)
Target price	EUR 12.00 (12.00)
Current price	EUR 6.75
Up/downside	77.8%

MAIN AUTHOR

Thomas Wissler [e-mail] [phone]

alsterresearch.com

This research is the product of AlsterResearch, which is registered with the BaFin in Germany.

AlsterResearch

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Rubean AG

Germany | Technology | MCap EUR 20.2m | EV EUR 19.2m

BUY (BUY)	Target price	EUR 12.00 (12.00)	MAIN AUTHOR
Thomas Wissler
	Current price	EUR 6.75
	Up/downside	77.8%	[e-mail]
			[phone]

'23 starts off on a positive note; hyper-scaling is set to start now

2023 starts with rising order situation Rubean has made a good start to the new financial year. In recent months, the company has received orders from various sectors for the implementation of its mobile payment software solution 'PhonePOS'. In this segment, Rubean sells indirectly via partners such as BBVA, Sparkassen or Global Payments. In the UK, for example, the company says it is preparing to launch the solution for a major fundraising organization. On the other hand, Rubean's B-to-Bsolution "GetPAYD" targets corporate customers via direct sales in the logistics, retail and hospitality sectors, which also saw an increase in orders.

Hyper-scalingstarts in 2023 With its existing customers and the newly won customers, Rubean is likely to start hyper-scaling as early as 2023, as customers begin to appreciate and perceive the company's smart payment solutions. As a result, management also reiterated its FY23 guidance of at least EUR 2m in sales - which would effectively mean a 2.5x yoy increase in sales. To put this into perspective, it should be noted that BBVA alone aims to sell 300K licenses by 2024, which alone would be good for around EUR 2.5m in annual recurring sales. Adding the potential of all other existing customers therefore underlines the significant hyper-scaling potential for Rubean in the coming years and most importantly its ability to become cash positive as early as 2024E.

Source: Company data, AlsterResearch
High/low 52 weeks	7.95 / 4.40
Price/Book Ratio	26.9x
Ticker / Symbols
ISIN	DE0005120802
WKN	512080
Bloomberg	R1B:GR

Changes in estimates

Successful capital increase In addition Rubean announced that it has successfully completed a 10% capital increase. The company raised EUR c. 1.6m through a private placement. The share capital therefore increased by 0.271m shares to 2.99m. The funds will be used to grow the business in Germany and abroad and which should therefore help to bridge the gap before getting cash flow positive by 2024E (eAR).

Conclusion Although the development of the new payment software and the establishment of structures and partnerships has been challenging and somewhat frustrating for investors due to the moderate share price performance, we believe Rubean is well on track to achieving its operational breakthrough soon. Also, the share price seem to have found a bottom, with the stock up c. 25% since the beginning of the year. We therefore confirm our BUY rating with unchanged PT of EUR 12.00.

						Sales		EBIT			EPS
	2022P		old			0.8		-4.6			-1.75
			∆			0.0%		na%			na%
	2023E	old	2.5	-2.5		-0.94
			∆	0.0%		na%		na%
	2024E		old			5.0		0.6			0.12
			∆			0.0%		0.0%			-9.1%

Key share data
Number of shares: (in m pcs)	2.99
Book value per share: (in EUR)	0.25
Ø trading volume: (12 months)	500

	Rubean AG		2019	2020		2021	2022P	2023E		2024E	Major shareholders
	Sales	0.4	0.5	0.7	0.8	2.5	5.0
	Growth yoy	40.1%	10.0%	45.6%	23.3%	194.1%	100.0%	Founders	11.0%
	EBITDA	-0.9	-1.4	-3.9	-4.3	-2.5	0.8	Management & staff	7.0%
	EBIT	-1.2	-1.6	-4.1	-4.6	-2.5	0.6	BMK Holding GmbH	15.0%
	Net profit	-1.3	-1.7	-4.2	-4.8	-2.6	0.3	CCV	30.0%
	Net debt (net cash)	1.5	0.8	-1.2	4.1	4.9	4.8	Free Float	37.0%
	Net debt/EBITDA		-1.6x	-0.6x		0.3x	-0.9x	-2.0x		5.6x
	EPS recurring	-1.08	-1.05	-1.60	-1.75	-0.86	0.11	Company description
	DPS	0.00	0.00	0.00	0.00	0.00	0.00	Rubean AG is a Germany-based Fintech
	Dividend yield	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	that develops software for banks and
	Gross profit margin	78.0%	70.4%	57.9%	60.0%	80.0%	90.0%	online payment companies. It develops
	EBITDA margin	-213.0%	-288.8%	-567.3%	-503.7%	-100.0%	17.0%	the payment acceptance	solution
	EBIT margin	-284.6%	-347.5%	-594.4%	-538.4%	-99.3%	13.0%
	phonePOS, which turns smartphones
	ROCE	-183.8%	-143.7%	-459.0%	-2,437.1%	-186.3%	21.3%
	into merchant terminals at the point of
	EV/EBITDA		-23.6x	-15.3x		-4.9x	-5.7x	-10.4x		31.4x
				sale (POS). Rubean partners with the
	EV/EBIT		-17.7x	-12.7x		-4.7x	-5.4x	-10.5x		41.1x
				German saving banks "Sparkassen" as
	PER		-6.3x	-6.4x		-4.2x	-3.9x	-7.9x		60.2x
				well as BBVA and Global Payments.
	FCF yield	-3.8%	-16.7%	-14.3%	-28.0%	-9.5%	3.4%

Source: Company data, AlsterResearch; historic numbers are pro-forma consolidated

AlsterResearch

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Investment case in six charts

Business model PhonePOS

Market potential

Customers

2024E sales by white label channel in %

Sales development in EURm

Major shareholder (after capital measures)

CCV 30%

Free Float 37%

BMK Holding

GmbH

15%

Management	Founders
& staff	11%

7%

Source. Company data; AlsterResearch

AlsterResearch

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Acquisition of intellectual property

The chart below displays the IP Rubean has acquired from CCV and integrated into the group.

Accepptance vs. Monitoring Server

Source: AlsterResearch

AlsterResearch

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SWOT Analysis

Strength

• 20 years of track record of working at the neuralgic interfaces of large banks, enabling them to connect with all kinds of legacy banking peripherals
• Software know-how which conforms to the most demanding quality and safety standards
• Very close partnership with EU market leader CCV
• Significant research and development initiatives of EUR 14m occurred during the last 5 years
• Powerful white label clients with the German Savings Bank organization
  "Sparkassen", Global Payments and BBVA
• Accredited with PCI SSC, the global head organization that develops standards and defines common security levels
• Accredited with Deutsche Kreditwirtschaft the head organization of the issuing institutes in Germany…
• … as well as with the two major credit card institutes - Visa and Mastercard
• Talented and well incentivized management and employees

Weaknesses

• Relatively "small fish in a large pond"
• Lack of a real international footprint
• Dependency on a few large white label banking partner
• Still loss making

Opportunities

• Increasing the share-of-wallet with own B2C Micro Merchant solution
• International expansion
• Potential takeover candidate
• Covid-19induced structural change in payment behaviour of clients - card payments increasingly substitute cash payments - even for smaller amounts, could drive additional growth
• Potential future growth financing via capital markets- no banks needed

Threats

• Currently, Rubean's App only runs on Android systems. Apple could remain a closed shop
• Execution risks of building up the necessary organizational structure