Zwipe: Busy Q1
Redeye Research Note 2020/05/07
We see a strong confirmed interest that verifies the product market fit. Zwipe is in direct dialogue or projects with over 40 of the top 50 smart card manufacturers (SCMs). We are eager to learn more what this means, but as we understand it at this point, these dialogues are in various stages. We are not talking about cold calls, and in some cases it is a lot more than just meetings and confirmed interest.
Zwipe says the Corona virus has so far not delayed the company in any way. However, the pandemic has highlighted the hygiene advantages of going 100% contactless (no touching of pin pads), and thus drives the contactless payments across the world. It also makes a compelling case for true (biometric) contactless, without any caps or limits.
The start of 2020 has been super busy for Zwipe. IDEX joined the Zwipe and Idemia Pay ONE platform and its first chips were manufactured and successfully powered on (see our previous associated notes; here and here). The strong inflow of new partners, in our view, suggests that the market is progressing rapidly. As a quick reminder, below we list the new, important partnerships with smart card manufacturers (SCMs).
- Masria Digital Payments – one of the largest SCMs in the Middle East and Africa (March 25)
- Toppan Forms – the strongest local SCM in Hong Kong and Macau (April 22)
- Asia Credit Card, a specialist SCM based in Hong Kong (April 28)
The streamlining program announced and implemented in November 2019 is on track, with full effect from Q2. The company has reached a monthly cash burn of NOK 5.9m, which in relation to the cash of NOK 55m implies a 9 month run rate (10 months including the approved grant from a Norwegian government run R&D tax incentive scheme of NOK 5m).
We notice that the interest in the stock and the volumes have started to return. Together with reduced pressure from guarantors this makes the stock look interesting from a technical analysis perspective. We believe our base case of NOK 9 per share is within reach, and we think it will not take much to close the gap. It could e.g. be done by one or a few pilots.
We plan to interview Zwipe’s CEO, André Løvestam, later today.