Redeye Research Note 2020/04/08
Zwipe today, in a joint press release with Idemia and IDEX, announced that the first samples of the new secure elements have been received. The first power-on tests were successful, suggesting no hardware issues. Zwipe says the progress has "… […] strengthened our conviction that this project will meet not only the time schedule, but also the targeted unit cost reductions on biometric payment cards". We concur. The outcome was in our expectations. Nevertheless, it is a major milestone that significantly de-risks the project and the case even more, compared to our fresh research update yesterday, where we also described a reduction in risk.
In our initating coverage report, we identified news around the progress of the project as one of the stock catalysts in order for shares to approach our base case of NOK 9. This also seems to be the case. Shares are currently up in double digit percentages on decent volumes, suggesting that any guarantor overhang left is decreasing.
IDEX has been selected by Idemia to supply fingerprint sensors for the solution. This agreement is also important for commercial roll-outs as it shifts the supplier power balance slightly. It lowers the large dependence on Fingerprint Cards, which we believe is important for card costs to come down.
Zwipe reiterated that it targets a commercial roll-out in 2021 and pilots in 2020. We are still a bit uncertain around how long the pilot phase needs to be, and if a card price of USD ~10 is low enough for the banks to do major roll-outs. In our assumptions, 2022 is the year of the breakthrough, with pilots going on far into 2021 and larger orders in late 2021 for delivery in 2022. We believe these are reasonably conservatie timing estimates.