Original-Research: The NAGA Group AG - von GBC AG

Einstufung von GBC AG zu The NAGA Group AG

Unternehmen: The NAGA Group AG
ISIN: DE000A161NR7

Anlass der Studie: GBC Research FactSheet
Empfehlung: BUY
Kursziel: EUR 2.90
Kursziel auf Sicht von: 31.12.2024
Letzte Ratingänderung: 
Analyst: Cosmin Filker

Strong earnings growth achieved in the first nine months of 2023, lower
sales growth but increase in profitability expected, price target: EUR 2.90,
rating: BUY
The NAGA Group AG recently published its annual report for the 2022
financial year, which is therefore late. The delayed publication is mainly
due to a change of auditor, the inclusion of new business activities and
new subsidiaries, but above all due to the clarification of valuation
issues regarding the cryptocurrency portfolio.
Although it is clear from the annual report that the company recorded
further sales growth of 8.9% to EUR 57.60 million (previous year: EUR 52.88
million) in the past 2022 financial year, EBIT of EUR -36.86 million
(previous year: EUR -9.55 million) was significantly below the previous
year's level. In particular, write-downs on cryptocurrencies held long-term
and intended for trading totalling EUR 18.57 million and a bad debt provision
of EUR 1.45 million led to the significant decline in earnings, as expected.
The write-downs on cryptocurrencies are related to the sharp fall in the
price of NAGA Coin (NGC). Even adjusted for these special effects, NAGA
would have reported a negative EBIT of EUR -16.84 million. This reflects the
strategy of strong customer and sales growth pursued until the 2022
financial year, which was accompanied, for example, by unchanged high
marketing expenses of EUR 28.35 million (previous year: EUR 30.97 million). In
order to reach the operating break-even point, these high expenses must
generate higher sales growth. However, this was offset by a generally
difficult market environment, which was characterised by a significant
decline in cryptocurrency prices on the one hand and falling transaction
figures on the other.
In response to developments in the past financial year 2022, NAGA's
management changed its strategy and initiated a reorganisation. The focus
was shifted from sales growth to profit growth and the corporate and cost
structures were adjusted accordingly. This change in strategy benefits the
'one-stop-shop' approach of the Naga app, which has now been fully
developed and introduced to the market. With the introduction of Naga Pay
and NAGAX, the aspects of a NeoBank, a NeoBroker and social investing are
combined with a crypto ecosystem within one app or application.  
The development of the current financial year 2023 reflects the success of
the strategic realignment that has been introduced. According to
preliminary nine-month figures, EBITDA of EUR 4.2 million (previous year: EUR
-11.2 million) was already noticeably higher than the previous year's
figure despite a significant decline in sales to EUR 28.7 million (previous
year: EUR 46.7 million). The EBITDA margin was 14.6% after a negative figure
in the previous year. The main reason for this development was the
reduction in total expenses. Marketing and sales expenses in particular
were reduced to EUR 3.7 million (previous year: EUR 26.1 million). In this
context, the costs per customer acquired fell significantly to EUR 181. In
the past financial year, they still peaked at over EUR 1,650. In addition to
customer acquisition in foreign markets, which is associated with lower
costs, this sharp fall in costs is due to deliberate cost savings in the
area of marketing. Inefficient measures were discontinued and all
agreements in this area were scrutinised.
Despite the cost savings in customer acquisition, the number of active
customers rose to 20,700 as at 30/09/2023 (30/09/2022: 17,700). This was
accompanied by an increase in the number of trades in the first nine months
to 10.9 million (previous year: 8.4 million), although sales per trade fell
due to market conditions, which explains the decline in sales. 
Based on the nine-month development, a visible decline in sales to EUR 39.17
million (previous year: EUR 57.60 million) should be reported in the current
financial year 2023, but EBITDA should, according to our estimates, reach EUR
5.13 million (previous year: EUR -13.73 million), the best figure in the
company's history.
We also anticipate lower growth momentum in the coming financial years
compared to previous years, although we expect a further improvement in
profitability. On the one hand, the cost-cutting measures taken, which are
also attributable to a sharp reduction in the number of employees to 117
(31/12/22: 171), are likely to have a full impact in the coming financial
year. On the other hand, the development of the so-called Super-app has
been completed, meaning that significantly lower development costs can be
expected in the coming financial years. Finally, the NAGA technology will
also be offered to third parties as a white label solution, a high-margin
business model. A first regulated online brokerage company from Kuwait will
soon launch a social trading product based on NAGA technology.
For the coming financial years 2024 and 2025, we expect sales growth of 10%
each to EUR 43.08 million (2024) and EUR 47.39 million (2025) respectively.
NAGA should break even in the coming financial year due to the expected
reduction in total costs at all earnings levels. The EBITDA margin should
rise to 15.4% and to 19.4% in the 2025 financial year.
As part of our DCF valuation model, we have determined a new price target
of EUR 2.90 (previously: EUR 3.60). The reduction in the price target is due in
particular to our reduced sales growth momentum. Although we expect a
general increase in profitability, the absolute earnings figures are below
our previous estimates. We continue to rate the share as BUY.

Die vollständige Analyse können Sie hier downloaden:

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Date (time) completion: 20/11/23 (09:32 am)
Date (time) first transmission: 20/11/23 (11:30 am)

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