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Friday 29 November, 2019

The NAGA Group AG

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

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: Research Note
Empfehlung: BUY
Kursziel: 1.75 Euro
Kursziel auf Sicht von: 31/12/2020
Letzte Ratingänderung:
Analyst: Dario Maugeri, Cosmin Filker

As expected, The NAGA Group AG (NAGA) reported a significant decline in revenues in the first half of 2019. At the time the 2018 Annual Report was published, NAGA's management had already announced an almost complete loss of service revenues, which in the past financial year were generated primarily from the sale and settlement of the NAGA Coin (NGC). At the same time, trading revenues from brokerage business also fell sharply to EUR 1.35 million (previous year: EUR 4.63 million). Firstly, lower market volatility led to a general decline in business. Secondly, new ESMA rules led to declining margins in CFD trading, which also had a negative impact on trading revenues.

The first six months of 2019 at NAGA were also dominated by the restructuring programme announced and launched in April 2019, which, according to the company, was largely implemented and completed by the end of the reporting period. In this respect, operational activities were centred at the main site in Limassol, Cyprus, and staff numbers were reduced at the Hamburg and Spanish sites. In addition, there has been a streamlining at management level. The aim is to achieve total cost savings of 60-70% (based on operating costs for the 2018 financial year). In addition to the restructuring measures that were introduced, a new strategy was also implemented at product level. NAGA products are now offered via a uniform platform, with a strong focus on traditional securities trading and on the company's own social trading platform 'NAGA Trader'.

As expected, the restructuring measures were accompanied by significant one-off costs (severance and compensation payments, etc.). In addition, the savings achieved have not yet taken full effect, with the result that EBIT fell sharply to EUR -6.77 million (previous year: EUR -0.06 million) on the basis of significantly lower revenues.

It had already been communicated in advance by NAGA's management that a significant decline in revenue and earnings was to be expected for the first half of 2019. However, revenue and, as a result, operating profit declined more sharply than we had expected, which is why we are lowering our previous forecasts for the current financial year. Overall, however, we anticipate a significant improvement in trading income in the second half of 2019 and that the cost-saving effects from the restructuring of the company, which have largely already been implemented, will have more of an impact.

The improvement in trading revenues is expected to be bolstered, among other things, by the international roll-out of the NAGA platform, which has already been launched. Initial success has already been seen as part of a market offensive in Thailand, Malaysia, Indonesia and Vietnam. In these regions, for example, monthly deposits climbed to EUR 3.52 million (previously: around EUR 1.8 million), monthly transactions rose by more than 65% to 388,000 and the average monthly trading volume rose from EUR 2.5 billion to EUR 4.6 billion. Positive sales and earnings growth is expected from these newly developed regions both in the second half of the year and in the coming financial years.

We generally expect an increase in the number of new customers in the next financial years. The partner programme, which is currently being stepped up, plays a key role in this. The aim is to keep customer acquisition costs low and to market the NAGA Trader on a global scale. We expect a strong increase in trading revenues in the next two financial years and, building on this, a gradual improvement in the earnings situation.

It is also important for the company to secure further financing. The move announced by Fosun to take over the majority of the shares and to carry out further financing is thereby essential, in our view. According to an announcement dated 29/08/2019, the major shareholder Fosun has increased its stake in order to become the majority shareholder. As part of Fosun's investment, the NAGA management team intends to acquire a significant number of shares from other shareholders. The shares will be sold by the former shareholders of Hanseatic Brokerhouse Securities AG to Fosun, the NAGA management team and other investors. As a result of this announcement, Fosun then intends to make further growth capital of EUR 5 million available to the company. EUR 3 million will be invested via a shareholder loan and EUR 2 million via a convertible bond. The transaction requires the approval of the regulatory authorities and is expected to be completed at the beginning of the fourth quarter of 2019.

As part of the DCF valuation model adjusted by the reduced 2019 forecasts, we have set a new stock price target of EUR 1.75 per share (previously: EUR 1.86). We assign a BUY rating to the stock.

Die vollständige Analyse können Sie hier downloaden:

Kontakt für Rückfragen
Jörg Grunwald
Halderstraße 27
86150 Augsburg
0821 / 241133 0
[email protected]
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:
Date (Time) of completion: 28/11/19 (4:22 pm) Date (Time) first distribution: 29/11/19 (9:00 am)

-------------------übermittelt durch die EQS Group AG.-------------------

Für den Inhalt der Mitteilung bzw. Research ist alleine der Herausgeber bzw. Ersteller der Studie verantwortlich. Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss bestimmter Börsengeschäfte.

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