Märkte & Kurse

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Original-Research: ASMALLWORLD AG - from NuWays AG

26.08.2024 / 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
result of this research does not constitute investment advice or an
invitation to conclude certain stock exchange transactions.

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Classification of NuWays AG to ASMALLWORLD AG

     Company Name:               ASMALLWORLD AG
     ISIN:                       CH0404880129

     Reason for the research:    Update
     Recommendation:             BUY
     from:                       26.08.2024
     Target price:               CHF 4.30
     Last rating change:
     Analyst:                    Henry Wendisch

H1 in the books, preparing for strategic shift in H2; chg. est.

Last Friday, ASW reported H1 results with muted profitability, as expected,
due to P&L effective investments into R&D, setting the grounds for positive
inflections in FY'25e.

Slow sales growth against a strong comparable base: Sales grew by 2% yoy to
CHF 11.8m, as H1'23 saw a strong recovery post COVID (+55% yoy), serving as
a tough comparable base. Nevertheless, ASW showed the ability to sustain the
elevated levels. The strong demand for First Class and More (FCAM) has
weakened, but has been compensated by upselling customers to travel services
(e.g. hotel bookings up 34% yoy), indicating a shift within the Services
segment (overall: +2% yoy; 35% of sales). Also, ASW's legacy business
(Subscription segment) grew slightly by 3% yoy (65% of sales) due to
unchanged demand for Prestige and Signature Memberships. EBITDA muted due to
P&L effective investments: as expected,

EBITDA came in muted at CHF 0.9m (-10% yoy; 8% margin) due to the weak
segment EBITDA in the Subscriptions segment of CHF 0.3m (-48% yoy). This is
due to (1) increasing R&D expenses (i.e., investments) into a rebranding and
the platform preparations for the free membership starting in Nov' 24e and
(2) increased competition for the miles packages. On the other hand, the
Service segment has improved profitability substantially by 55% yoy to CHF
0.6m segment EBITDA, which is due to the improved mix mentioned above, thus
partially offsetting the decline in the Subscriptions segment.

Weak H2 ahead: Although ASW reached already 90% of its FY'24e EBITDA
guidance of CHF 1.0-1.2m in H1, we do not expect H2 profitability at this
runway, but an even more muted H2 EBITDA of only CHF 0.1m due to increased
investments (R&D expenses), implying a FY'24e EBITDA estimate of CHF 1m (4%
margin).

Light at the end of the tunnel: The strategic rationale of offering low
entry barriers to the ASW ecosystems should start to bear fruit in FY'25e.
By adding a free membership (start in Nov'24), more mass-affluent ASW
members are prone to the higher margin Service segment which offers all
kinds of luxury travel services. Moreover, upselling potential to the
premium memberships (Subscription segment) also increases with a greater
community. Therefore, we expect a strong EBITDA (and FCF) rebound in FY'25e
due to a higher margin product mix and lower R&D expenses.

Cash flow down only temporarily: H1's CFO of CHF 0.6m was burdened by an
unfavorable timing of WC swings (CHF -1.7m), as a high build up in
receivables towards end of June tied up cash. However, this should have
already reverted back, supporting a positive CFO of 1.8m (eNuW) in H2 and
thus CHF 1.2m for FY'24e.

Debt level substantially decreased: Following last year's debt-to-equity
swap, ASW continued to decrease debt by CHF 1m to CHF 3.2m in H1. As FCF was
negative in H1 (described above), the disposal of obsolete financial assets
(CHF 1.2m cash inflow) has been used to repay COVID related government loans
of CHF 0.8m. Consequently, net debt remained stable at CHF 1.2m per H1 vs.
CHF 1.1m Y/E'23 and the equity ratio increased by 4pp to 32.6% per H1.

While we regard FY'24 as a transitional year burdened by the strategic
change in business model, we expect positive inflections to stem from this
as early as FY'25e. Consequently, on FY'24 financials, ASW shares do not
seem to be attractive, however, on a FY'25e basis, ASW shares offer an
attractive FCF yield of 13.5%.

Against this backdrop, we reiterate our BUY recommendation with unchanged PT
of CHF 4.30, based on DCF.

You can download the research here: http://www.more-ir.de/d/30613.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
Die Analyse oder weiterführende Informationen zu dieser können Sie hier
downloaden: www.nuways-ag.com/research.

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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1974393 26.08.2024 CET/CEST

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