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Analysis, FrontOffice: High expected return

Detta är en betald analys på uppdrag av Front Ventures utförd av analysföretaget Jarl Securities på uppdrag av Analysguiden.

FrontOffice is an investment company focusing on turnarounds and growth investment. A Turnaround involves taking a company out of a negative trend and make it profitable. The expected return on a turnaround investment is high, but so is the risk.

The investment company, FrontOffice Nordic AB (FrontOffice, the company or FO) invests in listed and non-listed, small and medium sized companies. Investments are made in turnaround cases as well as in growth companies. The subsidiaries KROSS and Svensk Företags­rekonstruktion (SFR) helps companies with insolvency issues. Through the two, the group screen a large amount of companies in need of a turnaround and may select the few with good potential and high expected return on investment.

The company also do growth investments with focus on Fintech-companies with technology that enables faster, more secure money flows at lower cost compared to today’s standard systems. These systems are built around blockchains. The Fintech-holdings consist of FTCS and Quickbit, both with good prospects to establish a substantial market positions on their respectively market. FTCS´s agreement with Banko BS2 valued up to 300 MSEK per year demonstrate FTCS´s ability. We derive a theoretical value increase on investments in FTCS to almost 100 percent. QuickBit is a Swedish public company developing technical solutions for crypto currencies and blockchains. Holdings in Fintech has thus so far been good investments.

In an attempt to value FrontOffice we have summed the value of the groups; (i) investment portfolio and (ii) value of the consultancy services. In our base case, the investment portfolio makes up for about 81 percent out of the sum. To estimate the shareholder value per share we have reduced the sum with net debt and estimated centralized costs for the next 12 months. Using this method, we value the share to 2.6 kronor for the next 6 - 12 months. This corresponds to a discount of 5 percent relative our estimation of the investment portfolio’s net value plus value of the consultancy operations. Other listed investment companies traded at an average discount to its net asset value of 9 percent. The deviation is motivated by the group’s consultancy operations and slim organization.

Författare Markus Augustsson

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