Original-Research: ZEAL Network SE - from NuWays AG Classification of NuWays AG to ZEAL Network SE Company Name: ZEAL Network SE ISIN: DE000ZEAL241 Reason for the research: Update Recommendation: BUY from: 06.03.2024 Target price: 51.00 Target price on sight of: 12 Monaten Last rating change: Analyst: Henry Wendisch Q4 preview: tough comp for lottery, games still small Topic: ZEAL should release final FY'23 figures on March 20th.
06.03.2024 - 09:06:36Original-Research: ZEAL Network SE (von NuWays AG): BUY
Original-Research: ZEAL Network SE - from NuWays AG Classification of NuWays AG to ZEAL Network SE Company Name: ZEAL Network SE ISIN: DE000ZEAL241 Reason for the research: Update Recommendation: BUY from: 06.03.2024 Target price: 51.00 Target price on sight of: 12 Monaten Last rating change: Analyst: Henry Wendisch Q4 preview: tough comp for lottery, games still small Topic: ZEAL should release final FY'23 figures on March 20th. Here's what we expect for Q4'23e: Tough comp for lottery: Against a strong Q4'22 (peaking EuroJackpot), total German lottery spending (on & offline) has declined by 9% yoy in Q4'23 (+3% yoy for FY'23; Source: DLTB). For ZEAL it should also be hard to exceed its strong Q4'22, as we expect a slight yoy decline of 3% to EUR 208m in billings in Q4'23e. On a a FY'23e basis however, solid billings growth of 11% yoy to EUR 841m (guidance: EUR 800-830m) should be in the cards thanks to 1.15m MAU (eNuW; +7.5% yoy) and an ABPU of EUR 61.00 (eNuW; +3.2% yoy). With an average Lottery gross margin of 12.6% (eNuW), FY'23e sales from Lottery should grow accordingly by of 6% yoy to EUR 106m (Q4: EUR 26.8m, -9% yoy). Next data point of Games roll-out: While the new segment 'Games' showed strong KPIs in its first quarter after introduction (Q3'23), we expect further improvements in Q4, as more games were added and lottery players should have been cross-sold. However, as regulatory approval takes more time than anticipated, we expect conservative sales of EUR 1.9m (vs. EUR 1.2m in Q3), based on an slightly increased pay-in for games of EUR 3.9m (vs. EUR 3.3m for Q3'23) and a constant pay-in to billings ratio. Guidance well in reach: We expect ZEAL to exceed its lottery billings guidance of EUR 800-830m (eNuW: EUR 841m) while the sales (EUR 110-120m; eNuW: EUR 115m) and EBITDA (EUR 30-35m; eNuW: EUR 33.4m) guidance should be reached at mid-point. Promising FY'24e outlook: While we expect Lottery sales to grow by 12% yoy to EUR 119m (driven by continuous marketing driven user intake), the Games business should also have first meaningful sales contribution of EUR 10m, implying total sales growth of 18% yoy. As ZEAL currently targets existing lottery players for its Games business, we model no marketing expenses for Games while EUR 42m should be spent on Lottery for brand awareness & customer acquisition. However, as user KPIs for Games look attractive (Q3'23 ARPU: EUR 7.67 at Lottery vs. EUR 22.02 at Games), additional EUR 3-8m of marketing expenses could be spent on Games in return for more user intake during FY'24e. Against this backdrop, the recent share price weakness should be a buying opportunity, especially as Q1'24 saw extraordinary strong jackpots already, indicating a promising start into a strong growth year. Reiterate BUY with unchanged PT of EUR 51.00, based on DCF. You can download the research here: http://www.more-ir.de/d/29071.pdf For additional information visit our website www.nuways-ag.com/research. Contact for questions Die Analyse oder weiterführende Informationen zu dieser können Sie hier downloaden www.nuways-ag.com/research. Kontakt für Rückfragen NuWays AG - Equity Research Web: www.nuways-ag.com Email: research@nuways-ag.com LinkedIn: https://www.linkedin.com/company/nuwaysag Adresse: Mittelweg 16-17, 20148 Hamburg, Germany ++++++++++ Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss bestimmter Börsengeschäfte. Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse. ++++++++++ -------------------transmitted by EQS Group AG.------------------- The issuer is solely responsible for the content of this research. The result of this research does not constitute investment advice or an invitation to conclude certain stock exchange transactions.
