Research report: Sinch AB (SFB: SINCH)

NINGI Research is short Sinch AB (Ticker: SINCH.ST) because, in our opinion, the company acquired nocuous assets and misstated its accounts to beat analysts’ estimates and pump its share price. We have found material misstatements within the company’s current assets and think the annual report for the full year of 2021 does not present an accurate or fairly picture of the financial position of Sinch AB. We question Deloitte’s unqualified opinion for the 2021 annual report.

In our opinion,

  • the financial position of the company is misstated and to no extent presents an accurate picture of the business.
  • key business metrics like interest coverage ratio, net profit, and EBIT have been misstated by millions of Swedish kronor. Reconciliation of ROE, ICR, and EBIT lead to a delta of SEK 34m for net profit and SEK 22m for EBIT respectively.
  • by booking accrued revenue as unbilled accounts receivables instead of accrued revenue from contracts with customers the line item accrued revenue has been misstated to conceal the aggressive revenue recognition by the company. In reality, accrued revenue grew by 332% instead of a decline of 25% as implied by the published numbers.
  • Deloitte found material weaknesses at Sinch’s Indian subsidiary and the executive management never disclosed this matter despite Group COO Anders Olin, Group CFO Roshan Saldanha, and board member Bjorn Zethraeus being directors at the subsidiary.
  • Deloitte stated that due to material weaknesses, the trade receivables could be materially misstated.
  • the financial assets of the group are overstated by billions of dubious receivables.
  • one Australian subsidiary has been out of business since 2016, however, reaping millions of Swedish kronor in revenue and another Australian subsidiary does not exist in the first place.
  • all unbilled and overdue accounts receivables, as well as accrued revenue, could be owned by less credit-worthy customers. Only the already invoiced not-due receivables are from Sinch’s top five customers with IG ratings.
  • The company’s credit risk management approach has been lightened to a questionable extent.
  • key company metrics are overstated due to the misstatements and in reality EBITDA, EBIT and EPS are negative for the full year of 2021.

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