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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: Kaufen
from: 24.04.2024
Target price: EUR 51.00
Target price on sight of: 12 Monaten
Last rating change:
Analyst: Henry Wendisch

Q1 preview: EuroJackpot to deliver remarkable top-line

Topic: Q1 results are due May 8th 2024 and we expect ZEAL to show a
remarkable top-line thanks to a superb jackpot environment, leading to
elevated user activity. In detail:

Thanks to the EuroJackpot peaking 4x at the start of Q1, the nationwide
stakes amounted to EUR 2.07bn in Q1 (EuroJackot and Lotto 6aus49 together),
which are 16% above the quarterly average of EUR 1.79bn and 12% higher than
Q1'23 (see p. 2). For ZEAL, this should translate into increased user
activity with 1.26m MAUs (+15% yoy) and an ABPU of EUR 62.00 (+2% yoy), thus
elevating Lottery billings to EUR 234m (+17% yoy), according to our
estimates.

Lottery sales are seen at EUR 31m (+24% yoy) thanks to the elevated billings,
but also driven by our estimate of an improving billings margin of 13.2%
(eNuW; +0.8pp yoy), as during high jackpot environments, ZEAL's product mix
usually shifts towards higher margin products like lottery clubs.

For Games, we conservatively expect a slight pick-up in MAUs to 20k (Q4'24:
18k), as the roll-out should have remained slightly burdened by later than
expected regulatory approvals of each new game. Also, assuming a constant
pay-in to billings ratio of 4.9x and a constant billings-margin of 7.5%,
billings from Games are hence expected at EUR 25m and sales at EUR 1.9m
respectively.

In sum, Q1 sales should arrive at EUR 34.8m (+30% yoy), showing a remarkable
top-line dynamic. On the other hand, we expect a significant marketing push
of EUR 14m (vs. EUR 7m in Q1'23 with no peak jackpot) to burden profitability
with an EBITDA of EUR 5.1m (15% margin; -20pp yoy).

In return, this should have led to a strongly increased user base, as ZEAL
usually gains c. 100k new registrations per peak jackpot. We hence expect
c. 300-400k new registrations and c. 75-100k new MAUs (25% conversion rate)
for the Lottery business, adding some EUR 47-63m in CLTVs to ZEAL's total
Lottery user base; CLTV of EUR 726m as of Y/E'23. This looks set to more than
compensate the EUR 14m expected marketing expense, showing the
value-accretive nature of ZEAL's customer acquisition strategy.

Against this backdrop, we expect ZEAL to capitalize strongly from Q1's
jackpot environment as the company's value accretive performance marketing
drives user intake and market share gains. Reiterate BUY with unchanged PT
of EUR 51.00, based on DCF.

You can download the research here:
http://www.more-ir.de/d/29509.pdf
For additional information visit our website
www.nuways-ag.com/research.

Contact for questions
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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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.
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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.

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