Last week, beaconsmind announced the acquisition of a majority stake (51%) in Hannover-based Wi-Fi Hotspot service provider FREDERIX Hotspot. The transaction value amounts to € 2m, paid via the issuance of 155k new shares valued at € 13 per share (19% premium to the closing price of 18^th November). The deal is seen to be highly value accretive for beaconsmind, as the target generates € 3.5m in sales at a 14% EBITDA margin, indicating a reasonable 4x EV/EBITDA multiple paid. Moreover, Frederix comes with a debt-free balance sheet as well as positive cash flow generation. As majority shareholder, beaconsmind will fully consolidate Frederix, which should more than double the current revenue run-rate from € 2.5m to almost € 6.0m (eNuWays). Against this backdrop, beaconsmind looks well on track to reach profitability in 2023E (eNuWays € 0.5m net income), followed by a significant margin expansion in the midterm given a highly scalable business model.

In addition, we expect strong revenue synergy effects, as Frederix is offering its Wi-Fi solutions to various industries, including among others healthcare, hospitality and retail. Especially regarding the latter we expect significant sales synergies, as Frederix boasts a strong customer base comprising >100 shopping centers and >1,000 retail stores in Europe and the US, including among others the flagship customer Lidl. Those clients should be keen to extract more value from Wi-Fi log-ins, thanks to beaconsmind’s technology such as tracking in-store movement and implementing targeted marketing campaigns. Conversely, beaconsmind should also be able to offer its retail customers the hotspot Wi-Fi solution as an add-on. The offering will be further supplemented by eKomi’s (main shareholder in Frederix) review platform, which offers end-to-end solutions for B2B customers like Check24. 

Separately, beaconsmind recently announced a major customer win. One of the world’s largest pizza chains will start using beaconsmind’s LBM solutions in Dubai, UAE. Going forward, the goal is to deploy the solution to other markets in the Middle East, where the pizza chain operates more than 300 restaurants and has more than 500k app users (eHAIB € 1m revenue potential assuming a 20% analytics penetration).

BUY with an unchanged PT of € 30 based on DCF.