THE NAGA GROUP AG Original-Research: The NAGA Group AG (von GBC AG): BUY

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20/11/2023 11:32

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: € 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 € 57.60 million (previous year: € 52.88 million) in the past 2022 financial year, EBIT of € -36.86 million (previous year: € -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 € 18.57 million and a bad debt provision of € 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 € -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 € 28.35 million (previous year: € 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 € 4.2 million (previous year: € -11.2 million) was already noticeably higher than the previous year's figure despite a significant decline in sales to € 28.7 million (previous year: € 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 € 3.7 million (previous year: € 26.1 million). In this context, the costs per customer acquired fell significantly to € 181. In the past financial year, they still peaked at over € 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 € 39.17 million (previous year: € 57.60 million) should be reported in the current financial year 2023, but EBITDA should, according to our estimates, reach € 5.13 million (previous year: € -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 € 43.08 million (2024) and € 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 € 2.90 (previously: € 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: http://www.more-ir.de/d/28343.pdf

Kontakt für Rückfragen
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86150 Augsburg
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG und Art. 20 MAR. Beim oben analysierten Unternehmen ist folgender möglicher Interessenkonflikt gegeben: (5a,11); Einen Katalog möglicher Interessenkonflikte finden Sie unter: http://www.gbc-ag.de/de/Offenlegung
Date (time) completion: 20/11/23 (09:32 am) Date (time) first transmission: 20/11/23 (11:30 am)

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