The Q2 numbers were in line with last week's pre-announcement (EBITA -50% vs. ABGSCe). What stood out was a tad weaker organic growth (0.5% vs. ABGSCe 5%), which makes us a bit more cautious, and weak EBITA in the Loyalty segment. Loyalty EBITA was SEK 12m (23m), a significant decline y-o-y. SEK 1m came from lower SAS Eurobonus sales, SEK 1.7m from lower breakage and a significant unknown loss in Connex (ABGSC est. SEK 5-7m). According to management, Connex profitability is heavily skewed towards the Gift Cards part of the unit. Adjusted for these factors, we estimate that the core Loyalty segment increased EBITA slightly y-o-y. Gift Card EBITA of SEK 2.1m (4.8m) was impacted negatively by SEK 10m lower MBXP sales y-o-y, but offset by a strong contribution from Connex. The FCF was strong at SEK 18m, supported by a positive WC development in Q2. The R12m FCF was SEK 92m. Despite short-term headwinds, we expect a solid SEK 93m in FCF for 2023e.
Estimate changes
We cut '23e sales by 1% and raise opex by 4%, leading to an EBITA cut of 16%. We expect EBITA to improve by SEK 9m sequentially in Q3 to SEK 24m, mainly driven by a higher contribution by Connex (only contributed SEK 1m EBITA in Q2), lower losses from high redemption rates on B2B experience gift cards in MBXP and a reduction of consultants. This corresponds to 14% EBITA growth, vs. 27% sales growth y-o-y in Q3e. For 2024e-25e, we cut EBITA by 8% and 7%, factoring in a stabilisation in MBXP and a slight boost to profitability from cost savings in DACH, although small (we have not discounted mgmt's target of SEK 15-20m).
Implied valuation
On our new estimates, the share is trading at 8x P/FCF and 6x EV/EBITA on 2023e. The company is well-capitalised and positioned to continue its consolidation.
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