Original-Research: LAIQON AG (von NuWays AG): Buy

Classification of NuWays AG to LAIQON AG

Company Name:	LAIQON AG
ISIN:	DE000A12UP29
Reason for the research:	Update
Recommendation:	Buy
from:	10.09.2024
Target price:	EUR 7.10
Target price on sight of:	12 months
Last rating change:
Analyst:	Henry Wendisch

Mixed H1 due to divestment and growth investments; chg. est.

LAIQON released mixed reported H1´24 figures which are burdened by the disposal of the non-core legacy business, but showed top-line growth in line with AuM growth across its core segments. However, LAIQON should remain unprofitable on EBITDA level and cash burning in FY'24e, before positive effects of the Union Investment cooperation come into effect next year.

Reported sales declined by 7% yoy to € 14.7m, due to the divestment of a non-core business unit (LLOYD FONDS Real Assets; € 2m sales in H1'23) at the end of FY'23. Adjusting H1'23 for the sale, H1'24 sales would have risen by 7% yoy.

Top-line growth and stable sales margins in core business segments: Asset Management grew by 6% yoy (AuM: + 9% yoy to € 4.4bn), followed by Wealth Management, which grew by 12% yoy (AuM: +3% yoy to € 1.6bn) and Digital Wealth (includes LAIC and growney) which grew sales by 27% yoy (AuM: +20% yoy to € 0.6bn). Consequently, LAIQON's sales margin on AuM (excl. segment 'Group') remained stable at 0.42% (+0.01pp yoy; annualized). 

Moderate AuM growth in line with market growth: While AuMs grew by 8% yoy, sequential growth stood only at 1.5% qoq in Q2 (6% annualized) vs. 5% qoq in Q1. The slowing momentum is partially stemming from the muted small- and midcap performance in Q2 (SDAX: + 1.1% qoq). Going forward, AuM growth should return to higher momentum following the launch of 'WertAnlage' (product in cooperation with Union Investment) in Oct. 2024 (eNuW: € 300m by Y/E'24 and € 930m by Y/E'25e).

Profitability muted due to growth investments: While reported EBITDA came in at negative € -2.9m (vs. € -1.9m in H1'23) due to the decline in reported sales, adjusted EBITDA would have improved by € 0.8m (H'1 23: € -3.7m adj. vs. € -1.9m reported). However, excluding the € 1m of highly profitable performance fees (vs. none in H1'23), adj. EBITDA would have declined by € 0.2m, indicating a decline in underlying profitability, stemming from initial ramp-up costs for the upcoming launch of 'Wertanlage'.

Cash burn to continue ... As of H1, cash stood at € 4.3m (vs. € 7.1m per Y/E'23), showing a H1 cashburn of € -8m before financing (€ -3m after financing) due to € -4.7m in negative WC swings stemming mostly from an increase in deferred tax assets which will eventually have a positive cash effect with increasing pre-tax profitability. For Y/E'24, we expect LAIQON to show a cash position of € 8.4m (eNuW) thanks to the latest capital measures (see update; € 7.2m cash inflow) and an lower cash burn before financing of € -3.5m in H2.

... but enough cash runway to execute key growth project: This should give LAIQON enough room to maneuver into H1'25 in order to execute the go-live of 'Wertanlage', which starts in mid-Q4'24.

Mid-term targets to be reached at lower-end: LAIQON's GROWTH 25 mid-term targets of € 8-10bn in group AuM by Y/E'25e should be reached at the low-end (eNuW: € 8bn), which requires a moderate AuM growth of c. 7% in Asset and Wealth Management and substantial additions of € +1bn in the segment Digital Wealth, whereof € 930m should stem from the Union Investment cooperation (eNuW). For the latter, LAIQON expects € 1.5bn by Y/E'25e, hinting towards upside to our estimates.

EBITDA break even in FY'25e likely: Based on (1) average AuMs of € 615m from 'Wertanlage' in FY'25e, (2) an expected 0.4% sales margin on AuMs and (3) an estimated 75% incremental EBITDA margin, the cooperation should add some € 1.8m in incremental EBITDA for FY'25e. This, coupled with decreasing OPEX on group level (ramp-up costs are incurred this year), should lead to group EBITDA break-even in FY'25e (eNuW: € 0.3m).

Despite mixed results, we regard the potential from Union Investment as a major share price catalyst going forward, as it has the potential to put LAIQON back to positive EBITDA levels and stop the cash burn. First tangible results of that cooperation are due with FY'24e figures, until which LAIQON has enough cash-runway.

Therefore, LAIQON remains a BUY with a new PT of € 7.10 (old: € 9.10), based on DCF.

You can download the research here: http://www.more-ir.de/d/30747.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
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
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