Initiating Coverage: Next Generation RegTech

Anemoi International Ltd (Anemoi) has acquired id4, a Swiss-based, young but fast-growing developer of RegTech software solutions for small- and mid-sized financial institutions. With an advanced modular product platform and a No-Code development approach, which allows the software to be configured by non-programmers, id4 is experiencing strong rates of customer adoption. Key customers include private banks and asset managers in Switzerland, id4’s home market. Sales expansion into the UK is underway. Our valuation analysis suggests an implied fair value for Anemoi of £10.8m vs. the current market cap of £5.3m.

• Acquisition of id4: In mid-December 2021, Anemoi completed the reverse takeover of id4, a specialist vendor of regulatory technology (RegTech) solutions to small- and mid-sized financial institutions. Anemoi was a cash shell, incorporated in the British Virgin Islands in May 2020.
• Modular SaaS solutions: id4’s target customers include regulated financial institutions such as brokers, IFAs, asset managers, private banks, insurance companies and law firms. Sold on a software-as-a-service (SaaS) basis, id4’s customer lifecycle management (CLM) products are sold in scalable modules.
• Strong market growth: RegTech end-markets are experiencing exceptional growth, secular in nature, as financial institutions across the size spectrum react to an intensifying regulatory burden. The global RegTech addressable market is expected to grow three- to five-fold by 2025, to between $16bn and $30bn.
• Favourable response: A key element of the investment case is the positive market response to id4’s product launches (three wins of two-year contracts in 2021), and high-profile industry awards. As part of the transaction, Anemoi raised c.£1.8m net of expenses, to be deployed primarily on sales & marketing.
• Strong growth in prospect: id4’s revenue scalability is potentially high, reflecting multiple potential growth drivers in the form of client acquisition stemming from existing and new functionality, especially advanced areas such as artificial intelligence, and geographical expansion.
• Investment summary: The private company valuation environment for fintech businesses remains buoyant, reflecting the immense scale of fintech end-markets globally. At present, Anemoi’s diminutive £5.3m market capitalisation may prove to be inconsistent with the healthy rate of customer acquisition, a relatively benign competitive landscape in the small institution segment, and its large revenue opportunity. Our DCF analysis suggests an implied fair EV of £11.8m and an implied fair equity value of £10.8m (6.9p per share).