Märkte & Kurse

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Original-Research: ZEAL Network SE - from NuWays AG

25.07.2024 / 09:01 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of EQS
Group AG.
The issuer is solely responsible for the content of this research. The
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invitation to conclude certain stock exchange transactions.

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Classification of NuWays AG to ZEAL Network SE

     Company Name:               ZEAL Network SE
     ISIN:                       DE000ZEAL241

     Reason for the research:    Update
     Recommendation:             BUY
     from:                       25.07.2024
     Target price:               EUR 54.00
     Last rating change:
     Analyst:                    Henry Wendisch

Lotto24 squeeze-out to be value-accretive; chg. est.

Topic: Last week, ZEAL specified the squeeze-out request for Lotto24, which
should turn out to be highly value-accretive for ZEAL, in our view. In
detail:

SO payment: Based on a company valuation conducted by KPMG AG and approved
by the court-appointed auditor ADKL AG, Lotto24 is worth EUR 798m, implying a
squeeze-out payment of EUR 36.3m for the remaining 4.55%, which is broadly in
line with our initial expectation of EUR 33m.

Debt financing not a concern: The SO payment should be fully financed by
debt. Given the a net cash position of EUR 25m at the end of Q1'24 as well as
the strong cash generation (eNuW: EUR 30m FCF in '24) an additional EUR 36.3m
debt draw should not be harmful to ZEAL.

Substantial savings to outweigh costs: According to our NPV calculation of EUR
143m (or EUR 6.40 per share; see p. 2), the SO should turn out to be highly
value accretive for ZEAL, thanks to several costs savings outweighing the
incurred costs: 1) due to the formation of a consolidated tax group (German:
'steuerliche Organschaft'), going forward we expect the effective tax rate
to decrease to 32% (from 39% in 2023). Mind you, the one-time deferred tax
asset recognition on the back of the SO announcement in Q1'24 led to a
positive tax effect of EUR 17.2m which will be reversed over time with future
taxable income. Additionally, we expect savings from 2) the elimination of
minority interest and 3) the reduction of overhead costs (eNuW: EUR 0.2m
p.a.), mainly due to the elimination of double costs for audit, legal, etc.
The only costs associated with the SO are one-off legal costs (eNuW: EUR 1m)
and the loan whose terms are undisclosed but for which we assume a 5%
interest p.a. and a 7y duration.

Timeline: On Lotto24's AGM on Aug' 27th 2024, the SO resolution should be
passed. We expect the SO to be executed when the time for appeals (4 weeks
after the AGM) has passed.

Action: While the deferred tax assets have already been recognized in Q1'24,
we already include the positive tax effect in our model. On the other hand,
we include neither the debt draw nor the elimination of minority interest in
our model before the SO is executed.

In light of the high NPV of the SO on top of the stellar operating
performance, we reiterate our BUY recommendation with an unchanged PT of EUR
54.00, based on DCF

You can download the research here: http://www.more-ir.de/d/30285.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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1953599 25.07.2024 CET/CEST

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