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Original-Research: ZEAL Network SE - from NuWays AG

07.11.2024 / 09:11 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 ZEAL Network SE

Company Name: ZEAL Network SE

ISIN: DE000ZEAL241

Reason for the research: Update

Recommendation: Buy

from: 07.11.2024

Target price: EUR 57.00

Target price on sight of: 12 months

Last rating change:

Analyst: Henry Wendisch

Q3: improved KPIs and share buyback announced; chg. est

Yesterday, ZEAL released final Q3 results, in line with preliminary sales

and EBITDA figures, announced a EUR 25m share buyback offer and showed

improved KPIs.

Share repurchase at a premium: From 18th - 29th Nov.'24, ZEAL offers to buy

back c. 568k shares at EUR 44 per share, which implies a solid 10% premium on

yesterday's closing price. Through that, EUR 25m (i.e. 3% yield on Tuesday's

market cap) are being returned to shareholders, which comes on top of

dividends (EUR 23.8m for FY'23; eNuW: EUR 26m for FY'24e), showing that

management not only focuses on value creation but also on its distribution

to shareholders.

Reduction of shares: as of today, ZEAL owns 3.2% in treasury shares, which

will be subsequently be canceled. Following the share buy back (assuming

568k shares are tendered), another 2.5% of future treasury shares are to be

cancelled. In sum, this should reduce the share count by 5.7% to 21.09m

(from now: 22.4m) by Nov. 29th (end of acceptance period), positively

affecting EPS and DPS.

Superb start of new product: Following the launch of 'Traumhausverlosung'

(eng.: Dream House Raffle) in mid-Q3, 417k customers (334k cross-sold from

Lotto24 & 83k new customers acquired via D2C) have spent some EUR 8.6m in

billings on the first draw (ABPU: EUR 20), which ended on Nov. 4th. With a

stellar billings margin of c. 43% (vs. 1517%

in lottery brokerage), the first draw should have generated some EUR 3.7m in

sales (eNuW, thereof c. 50% in Q3, i.e. EUR 1.9m). Mind you, the sales figure

is seen as net sales, meaning after costs for prizes (c. EUR 1.3m this draw),

charities (EUR 1.7m, 20% of billings), lottery taxes (EUR 1m, 11% of billings)

and VAT (EUR 0.43m; 5% of billings).

Further improvement an all fronts: In Q3, MAU grew by 10% yoy to 1.33m MAU,

while the ARPU climbed by a staggering 30% following the price increases in

the lottery brokerage business, which was visible in a strong billings

margin of 16.8% (+ 4.1pp yoy). Moreover, the strong user intake of H1 was

largely maintained at 215k new registrations in Q3 (thereof c. 40-50k from

'Traumhausverlosung', eNuW), despite the absence of peak jackpots. This

should stem from ZEAL's marketing shift towards brand awareness and reduces

jackpot dependencies. (see p.2 for details)

All in all, ZEAL clearly shows the positive effects of compounding and

operating leverage. Therefore, we reiterate our BUY recommendation with

unchanged PT of EUR 57.00, based on DCF.

You can download the research here: http://www.more-ir.de/d/31201.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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2024403 07.11.2024 CET/CEST

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