Original-Research: ASMALLWORLD AG (von NuWays AG)


Original-Research: ASMALLWORLD AG - from NuWays AG

Classification of NuWays AG to 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, 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
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.

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