ENLABS
ENLABS - Walking the walk in a challenging Q2 (ABG Sundal Collier)
2020-07-23 11:06
Cash flow positive, as mgmt. predicted
Active customer growth of 15% y-o-y in July
Peer EV/EBITDA valuation range of SEK 20-28 for ‘21e
Slightly better preliminary numbers vs. ABGSCe for Q2Enlabs released preliminary Q2 numbers on 17 July that indicated sales of EUR 6.0m and EBITDA of EUR 0.5m. This was EUR 0.5m ahead of ABGSCe on sales and EUR 0.3m on EBITDA. In addition, the operating cash flow was positive, just as management predicted it would be in conjunction with the Q1 report. We see two key strengths in this. First, management has demonstrated its ability to walk the walk; second, it shows that the cost base is flexible and the company can adapt quickly to a new environment. Remember that this was a quarter in which Enlabs’ biggest market, Latvia, could not be operational for two out of three months. When Latvia opened up in June, Enlabs experienced y-o-y growth of 21%. The y-o-y improvement was flat for the first two weeks in July, but the overall margin has so far been 25% lower than the previous year, as some large casino wins have distorted the comparison. A flat margin y-o-y would indicate over 30% y-o-y growth, but sports have been busier this July vs. 2019 as the major football league usually has a break during this period.
Quick operational rebound behind positive revisions
The quick rebound in activity following the restart and the positive deviation in Q2 lead us to raise our forecast by 8.4% in sales and 42.3% for EBIT in 2020e. The long-term revisions are more modest as we were already counting on a recovery in the coming years. Enlabs has certainly not relaxed since the June restart, having launched a new brand called Laimz on the Latvian market. Laimz is a pay-n-play brand with a gender-neutral approach. It has also launched e-sports betting from Everymatrix.
Growth case valued at a discount to peers
We continue to see healthy organic growth from Enlabs’ core markets in the Baltics and think the company will grow faster than its closest peers in th
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