The full-year revenues came in at SEK1.7m (SEK16.6m), operating expenses amounted to SEK-24.5m (SEK-26.1m), and EBIT came in at SEK-24.4m (SEK-11.0m). This can be compared to our sales estimate of SEK1.7m and EBIT of SEK-30.4m.

Moreover, Cash flow from operating activities was SEK-23.6m (SEK-8.4m), and by the end of the period, the cash and cash equivalents amounted to SEK20.5m. In our view, the current cash position is not sufficient to cover RLS’ future business activities. We, therefore, assume an equity issue during 2023 of SEK20m. However, future capital raisings depend on the launch of ChloraSolv and the ramp-up in sales; we, therefore, highlight the possibility of future capital raisings beyond 2023.

Overall, the report did not include any significant surprises; however, we argue quarterly reports will become more interesting during 2023 as we believe the sales will start ramping up.

In October, RLS announced a fully guaranteed rights issue of approximately SEK29.4m before issue costs, estimated to amount to SEK3m, of which approximately SEK0.9m was guaranteed compensation. The subscription price amounts to SEK3.0 per share, and the subscription period runned between the 28^th of October – the 11^th of November, 2022. Existing shareholders had a preferential right where one existing share in RLS held on the record date of 26^th of October, entitled one subscription right. Fifty subscription rights entitled the holder to subscribe seven newly issued shares.

We learned a couple of weeks later that the subscription breakdown showed that c.70% was subscribed with and without the exercise of subscription rights. Underwriters of the rights issue were allocated c.30% of the rights issue, and RLS Global obtained SEK29.4m before issue-related costs. As the issue was fully guaranteed, the company’s share capital increased by SEK1,108,431.98, corresponding to 9,809,170 new shares. The number of shares increased to 79,874,705, implying a dilution of 12.3%.

Moreover, we learned that around 60% of the added capital would be used as working capital for the company’s general operations through the ongoing launch phase. Approximately 40% would be used to accelerate the ongoing launch of ChloraSolv in existing markets, prepare the launch within expanded indications, and ensure an efficient supply chain for strong expected demand and increased volumes over the next few years.

In January, RLS announced that Lars Johansson had been nominated as the company's new chairman. Mr Johansson has great experience in the medtech and pharma industries, both from Sweden and abroad. He has close to three decades of experience from Johnson & Johnson as CEO of the Nordic region, where he had the responsibility for more than a hundred employees and several hundred million dollars in yearly revenues. Moreover, Mr Johansson is currently a board member of Schain Research AB and ProstaLund AB.

We expect more interesting quarterly reports during 2023 as we believe sales will start ramping up. We learn that Covatec continues the launch of ChloraSolv in Europe with a main focus on UK, The Nordics, and the Netherlands (however, we believe more effort will be put into the UK initially). Moreover, we learn from the report that RLS expects a launch in UAE during the first quarter of 2023, followed by Saudi Arabia and Qatar during Q2, which we look forward to. We expect total sales of SEK14.9m during 2023, where we believe in low numbers during the first half of the year (low sales from the Middle East); however, increase in sales during the year’s second half.

We have made some changes in our future OPEX estimates for 2023-2024e, as we do not expect OPEX to increase as much as previously estimated. Moreover, we do not believe the current cash position of SEK20.5m to be sufficient for future business activities; however, greatly dependent on the future ramp-up in sales. We anticipate an equity issue of SEK20m during 2023 (estimating H2 2023), assuming a subscription price with a 30% discount from current share price levels.

In our view, the RLS share is currently trading at low levels. We argue the company has great potential and highlight the collaboration with Convatec, which we believe is highly essential for the company and our investment case.

As mentioned, we have made changes in our OPEX assumptions and added a capital raising of SEKXm during 2023e. Moreover, we have updated the Redeye Rating, which changes the WACC from 12.5% to 13.5%. These changes result in a new fair value range, including a new base case of SEK8 (9) followed by a bull and bear case of SEK11 (12) and SEK2 (2), respectively.