ZEAL Network SE
ISIN: DE000ZEAL241
WKN: ZEAL24
21 March 2024 09:01AM

Original-Research: ZEAL Network SE (von NuWays AG): BUY

ZEAL Network SE · ISIN: DE000ZEAL241 · EQS - Analysts
Country: Germany · Primary market: Germany · EQS NID: 19211

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: 21.03.2024
Target price: 51.00
Target price on sight of: 12 Monaten
Last rating change:
Analyst: Henry Wendisch

Elevated sales growth & Games gaining traction; chg. est.

Topic: Yesterday, ZEAL released Q4 results and issued a strong FY'24e sales guidance, well above expectations. Here are our key takeaways:

Blow-out sales guidance: ZEAL guides for sales of € 140-150m (eNuW old: € 135m; eCons: € 128m) and an EBITDA of € 38-42m (eNuW: € 45.3m; eCons: € 43m) with marketing expenses of € 40-45m (eNuW: € 42m). The elevated sales growth should stem from a growing billings margin (sales in % of billings) to above 15% by H2'24e (FY23: 12.8%; eNuW for FY'24e: 12.7%) thanks to 1) proactive shifting of players towards higher margin products (e.g., lottery clubs), 2) thintroduction of another highmargin social lottery next to 'freiheit+' and most importantly 3) going for price discrimination of users regarding the service fees as lottery players are very price insensitive. This is a strong leverage for ZEAL, given the high amount of billings, but on the other hand requires additional indirect expenses and marketing, burdening short-term profitability.

Q4'23 in line and FY targets reached: Lottery billings amounted to € 210m, 2% yoy (eNuW: € 208m), while sales developed accordingly to € 30m, -2% yoy (eNuW: € 28.8m; eCons: € 29.6m) and EBITDA came in at € 9.8m, +1.5% yoy (eNuW: € 11.8m; eCons: € 11.4m). On a FY basis, ZEAL recorded Lottery billings of € 843m (guidance: € 800-830m; eNuW: € 841m), sales of € 116m (guidance: € 110-120m; eNuW: € 115m) and an EBITDA of € 32.9m (guidance: € 30-35m; eNuW: €33.4m) with marketing expenses of € 36m (guidance: € 34-39m; eNuW: € 38.8m) - see p. 2 for details.

Upbeat Games adoption: while Q3'23 already showed a better-than-expected Games contribution, Q4 lifted the bar even higher. Games contributed with billings of € 25m (eNuW: € 19m) and sales of € 1.8m (eNuW: € 1.9m), meaning that the average Games customer (Q4: 18k) spends c. € 92 on Games (APPU) per month, generating revenues for ZEAL of € 33 per player and month (vs. € 7.80 ARPU at Lottery) and yielding a 36% pay-in margin (sales in % of pay-in). For now, this contributed with 6% of Q4 sales, but once scaled, the Games business should become a second strong pillar of growth and profitability for ZEAL, next to Lottery.

Squeeze-out of Lotto24 by mid'24e: ZEAL intends to squeeze-out the remaining shareholders of Lotto24 (acquired back in 2019) after having entered an agreement to acquire 0.6% of additional shares, raising the ownership to 95.45%. This should have value accretive effects due to 1) being able to form a corporate tax group allowing ZEAL to offset the high profits of Lotto24 with losses on holding level, especially as Lotto24's tax loss carry forward is used up now and 2) avoiding minority interest going forward. It should also lead to a normalization of ZEAL's elevated tax rate (FY'23e 39%, +12pp yoy) to 32% after the squeeze-out. The purchase price for the additional 0.6% of shares remained undisclosed and the squeeze-out price will be set by an independent auditor, hence uncertainty prevails regarding the total SO payment. Regarding financing, the company plans to take on additional debt, which we regard as unproblematic, given the strong net cash position (Y/E'23: € 30m).

In sum, we continue to like ZEAL's upbeat growth story and the strong operating leverage ZEAL's business provides. This, coupled with increasing contributions from Games should lead to notable margin expansions going forward. Moreover, our conservative CLTV estimate of ZEAL's total Lottery customer base (€ 726m, see below) even exceeds the company's current market capitalisation, albeit not including the expected billings margin expansion to above 15% and also not including the potential stemming from Games.

Consequently, we reiterate our BUY recommendation with an unchangend PT of € 51.00, based on DCF.

You can download the research here:
http://www.more-ir.de/d/29211.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. 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.

Boersengefluester.de (BGFL) provides an overview of the key figures on sales, earnings, cash flow and dividends to help you better assess the fundamental development of the respective companies. All information is entered manually in our database - the source is the respective annual reports. All estimates for future figures are provided by BGFL.

The most important financial data at a glance
  2018 2019 2020 2021 2022 2023 2024e
Sales1 154,75 113,48 87,02 83,33 105,20 116,05 182,00
EBITDA1,2 38,31 17,91 17,33 27,73 31,66 32,91 58,00
EBITDA-Margin3 24,76 15,78 19,92 33,28 30,10 28,36 31,87
EBIT1,4 38,31 9,07 5,38 19,05 22,93 23,65 48,00
EBIT-Margin5 24,76 7,99 6,18 22,86 21,80 20,38 26,37
Net Profit (Loss)1 26,66 1,72 7,89 11,40 16,57 13,72 31,00
Net-Margin6 17,23 1,52 9,07 13,68 15,75 11,82 17,03
Cashflow1,7 38,20 5,30 5,37 26,16 28,49 25,57 0,00
Earnings per share8 3,18 0,09 0,37 0,48 0,72 0,59 1,43
Dividend per share8 1,00 0,80 0,90 2,10 3,60 1,10 1,10
Quelle: boersengefluester.de and Company information
Explanation

1 in Mio. Euro; 2 EBITDA = Earnings before interest, taxes, depreciation and amortisation; 3 EBITDA in relation to sales; 4 EBIT = Earnings before interest and taxes; 5 EBIT in relation to sales; 6 Net profit (-loss) in relation to sales; 7 Cashflow from operations; 8 in Euro; Source: boersengefluester.de

Auditor: Ernst & Young

All relevant valuation ratios, dates and other investor information on your share at a glance. Good to know: All data comes from boersengefluester.de and is updated daily. This means you are always up to date. You can get brief explanations of the key figures by moving the cursor or mouse over the relevant field.

INVESTOR-INFORMATION
©boersengefluester.de
ZEAL Network
WKN ISIN Legal Type Marketcap IPO Recommendation Plus Code
ZEAL24 DE000ZEAL241 SE 1.039,79 Mio € 12.10.2005 Halten 9F5FHXJG+9R
* * *
PE 2025e PE 10Y-Ø BGFL-Ratio Shiller-PE PB PCF KUV
41,38 20,32 2,04 50,21 4,42 40,67 8,96
Dividends
Dividend '2022
in €
Dividend '2023
in €
Dividend '2024e
in €
Div.-Yield '2024e
in %
3,60 1,10 1,10 2,29%
Financial calendar
Annual General Meeting Q1-figures Q2-figures Q3-figures Annual press conference
21.05.2025 07.05.2025 06.08.2025 06.11.2024 26.03.2025
Performance
Distance 60-days-line Distance 200-days-line Performance YtD Performance 52 weeks IPO
Last Price (EoD)
-0,62%
48,00 €
ATH 59,47 €
+16,58% +30,95% +44,14% +54,84% +134,15%

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