Original-Research: ASMALLWORLD AG (von NuWays AG): BUY

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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

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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 (% 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: % 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

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Email: research@nuways-ag.com

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1974393 26.08.2024 CET/CEST

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