Original-Research: ASMALLWORLD AG - from NuWays AG

Classification of NuWays AG to ASMALLWORLD AG

Company Name: ASMALLWORLD AG
ISIN: CH0404880129

Reason for the research: Update
Recommendation: BUY
from: 15.03.2024
Target price: 4.30
Target price on sight of: 12 Monaten
Last rating change:
Analyst: Henry Wendisch

FY'23 in line, growth investments to burden profitability; chg.

Topic: Yesterday, ASW released FY'23 results, in line on top line and slightly below estimate and guidance on EBITDA level. Moreover, the announcement of an 'investment year' should burden FY'24e profitability temporarily in return for member growth. In detail:

Sales came in at CHF 21.2m, +15% yoy (eNuW: CHF 21.1m; guidance: CHF 20-22m) driven by strong growth in both segments: Subscriptions grew by 13% yoy to CHF 14.8m while Services grew by 20% yoy to CHF 6.5m, thanks member growth by 6.4% to 70.2k coupled with ARPU growth of 6% yoy.

EBITDA came in slightly lower-than-expected at CHF 2.1m (down 16% yoy; eNuW: CHF 2.3m; guidance: CHF 2.2 - 2.4m) because the product mix shifted towards the Emirates Skywards program and away from the Lufthansa Miles and More program, leading to higher costs for member privileges of CHF 13.5m (+26% yoy).

Net income however rose by 6% yoy to CHF 1.53m due to the first time collection of GHA's dividend of CHF 0.3m, lifting the financial result accordingly from CHF -0.2m in FY'22 to CHF 0.1m, while EPS is diluted by the increased no. of shares following the recent capital increase.

Growth investments to burden profitability in the near-term: With last year's acquisition of JetBeds.com, ASW now offers the value luxury travel service value chain for its customers. Hence, the next logical step is to increase the customer base of the social network (see p. 2), which should be achieved by 1) expanding marketing efforts and 2) lowering the entry threshold with a 'freemium' version, which is currently under evaluation. Both has a short-term negative effect on profitability, but should ensure the basis for future growth. Thereafter, the strong operating leverage of ASW's business should let profitability rise again in FY'25e (eNuW: 11% vs. 4.5% in FY'24e). Moreover, new hires of tech-personnel should also burden profitability.

New guidance reflects growth investments: ASW guides for CHF 23-25m in sales (eNuW: CHF 24.4m) and an increased member base of 73 - 74k (eNuW: 73.7k), but a decline in EBITDA to CHF 1 - 1.2m (eNuW: CHF 1.1m; old: CHF 3.2m) due the investments mentioned above.

At current levels, ASW stock seems to price in the weak profitability for FY'24e, but the market seems to underestimate the operating leverage the business provides after this transition year. Hence, we reiterate our BUY recommendation, but reduce our PT to CHF 4.30 (old: CHF 4.90), as we decrease our bottom-line estimates and roll over our DCF model.

You can download the research here:
http://www.more-ir.de/d/29167.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 ++++++++++
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