Recently, NAGA finally reported its audited FY22 figures, which reflect a particularly challenging year for the company. In detail:

• Sales stand at € 57.6m (+9% yoy), above our estimates of € 50.1m, as we have not considered NGC trading revenues of € 6.8m. While trading activity should have declined from 520 to 434 trades per active customer and the overall number of trades to 8.1m (-19% yoy), number of active customers should have remained largely stable (-3% yoy; 18.7k at YE). An increased avg. revenue per trade of € 7.10 (+34% yoy) compensated for the weaker customer activity resulting in a stable top line.
• EBITDA came in strongly negative at € -13.9m (eNuW: € -10.6m), heavily burdened by marketing expenses of € 28.3m that were necessary to keep top line stable throughout a weak year in the overall brokerage space. Further, personnel expenses, R&D costs and other operating expenses (i.e. depreciations of NGC and receivables of € 4.9m), drove EBITDA into negative terrain. € 23m of D&A (€ 15.3m from devalued crypto assets on the balance sheet) burdened the group's EBIT further, which came in at € -36.9m 

In a nutshell, 2022 was terrible year for NAGA and all other players in the brokerage space as customer activity fell off the cliff and cryptos accross the board faced sharp corrections.

Looking forward, 2023 can be seen as a transition year for the company and NAGA should return to annual top line and bottom-line growth from FY24e onwards due to the strategic shift towards global growth across so far under-penetrated regions (sales split as of 9M´23: Europe: 90%; Other: 10%), new acquisitions, expansion of the license base paired with ongoing cost discipline, leaner operations and increasing efficiency (i.e. marketing).

While we see the potential of such a business model, the market environment is currently not favourable for CFD brokers: Trading activity stabilize on low levels and regulatory requirements are tightening, especially in Europe.

We remain cautious, yet restarting coverage with HOLD and a new PT of € 1.30 based on DCF. Once the strategic initiatives result in profitable topline growth, we can return to a more favourable vote.