Topic: After having the stock under review for some time (following the delay of the audited FY21 figures, several revisions of FY21 prelims and limited visibility regarding NAGA´s crypto holdings), we decided to become more constructive on the case again as audited FY21 figures have been published.

Final FY21 figures unveil a significantly elevated cost base: Since cost of sales (€ 8.5m; 16% of sales vs eNuW: € 6.4m, 12% of sales) and marketing spendings (€ 44.4m; 84% of sales vs eNuW: € 20.1m; 36% of sales) are significantly higher than suggested, profitability came in far lower than anticipated.

H1´22 figures mark a new low point in terms of EBIT: Massive marketing spending (€ 31.1m vs € 20.3m in H1´21), devaluation of crypto investments (€ 14m), a ramped-up personnel (€ 5.5m, +64% yoy), R&D (€ 4.5m, +292% yoy), and other operating expenses (€ 5.4m, 86% yoy), lead to an EBIT of € -18.6m.

For the FY22, we expect NAGA to even extend its losses due to 1) the very weak topline development (eNuW: € 15m in H2; -50% yoy) as the result of the challenging macro environment and the “clean-up” of NAGA Global (European customers opened accounts offshore; 90% of sales now in Europe) and 2) high marketing expenses (eNuW: € 12m in H2). Furthermore, the roll-out of NAGAX (2% of sales) and NAGA PAY (1% of sales) is off the table as part of the started restructuring and cost-cutting process.

Positively, the Q1´23 perlims, published last week, came in stronger than expected with € 11.6m sales (-36% yoy) and € 1.7m EBITDA. Sales were driven by an uptick in transactions (2.9m; +46% yoy) that compensated for lower revenues per transaction (€ 4.0; -56% yoy). Against the sentiment, number of active customers increased by 30% yoy to 21.25k and AuC to € 35m (from € 24m in H1 22; € 1,600 AuC per active customer).

Despite the promising start into the year, we remain cautious for the FY23, only expecting € 40m sales (eNuW: -20% yoy) and € -1.6m EBIT (vs FY22e: € -29.8m), as Q1 has been the seasonally strongest quarter and the sentiment in still weak. Positive newsflow could come from re-entering the UK market (€ 17m sales in FY21) and several product launches (i.e. NAGA Capital and NAGA Institutional).

Playing it conservative and reflecting the current negative sentiment in the brokerage space, we re-instate the coverage with HOLD and a new PT of € 1.80, based on DCF.