RE top picks osti 8% painolla salkkuun..
Evolution (initiating an 8% position)
Top Picks initiates a position in Evolution after the stock price has fallen quite substantially since earlier highs at the beginning of the summer. Most Nordic investors are quite familiar with the name, as it has been one of the best-performing stocks (and companies) in the past ten years.
Evolution is a market leader in the online live casino supplier segment (B2B) and is well-positioned for continued growth as the global casino market transitions from offline to online. It boasts more than 600 customers, and it has the most comprehensive product portfolio in the market. This product portfolio includes slots, live casinos, and game shows, often provided in local languages with real people. The company has built a strong position by delivering high-quality and innovative products, which helps it to stay ahead of the competition.
Evolution has a strong track record of growth and profitability. The company has increased revenue from EUR75m in 2015, when it was listed, to around EUR1.4bn in 2022, mainly from organic growth. It has also increased profitability from an EBITDA margin of 36% in 2015 to around 70% (!) in 2022. In Q3 2023, Evolution reported revenue of EUR453m (whereof live casino constituted 85% and RNG constituted the other 15%). The EBITDA margin was 70% in the quarter as well. The strong track record supports the view that Evolution can continue to capture growth from the ongoing transition from offline to online casinos. The overall online gambling penetration was around 25% in 2022, with mature markets like Sweden and the UK at around 50-60%, implying a significant remaining growth potential for the total market. Redeye’s analysts expect Evolution to continue its growth journey, driven by immature markets such as North America, Latin America and Asia, while the more mature European market will see slower growth.
So, why are we investing in Evolution now? Mainly due to the price factor and because its CEO, Martin Carlesund, invested heavily (SEK100m) a few days ago, thereby adding to his already sizeable position. The market has traded down Evolution substantially from the highs in 2021 (close to SEK1700 per share) mainly because the growth trend has paced downward in recent quarters and since some more uncertain markets in Asia have driven a lot of the actual growth. Some of these markets are so-called grey markets with additional regulatory uncertainty, which the stock market soundly does not like as much as so-called white markets, where the regulatory landscape is clearer. There has also been some nervousness since the short report last year, we believe, which points have not materialised, but still form doubts. And then there is the never-ending debate whether Evolution’s past is too good to be true, with unsustainably high margins that will whither with increased competition over time. Nevertheless, Evolution grew by c20% in Q3 2023 (albeit down from 28% in Q2 and 32% in Q1), and thus, it is a slowdown, not a complete stop. Redeye’s analysts estimate that Evolution will report sales of EUR2.1bn in 2024e and EUR2.4bn in 2025, i.e., growth rates of around 16% with a near-term EBITDA margin that is sustained at 70%. Thus, they anticipate a continued slowdown but still growth. Meanwhile, Evolution’s multiples have contracted significantly, and it is now trading at a P/E of 17.5x on 2024e and 15x on 2025e. We believe this is too low, given the company’s market-leading position and general qualities, such as being at the forefront of product development and capturing a greater audience that has not yet tested live casino. Redeye’s base case is SEK1500, and we believe it can trade upward over time. Lastly, Mr Carlesund is a savvy investor and the last time he bought shares, he more or less “created the bottom
Third quarter of 2023 (Q3 2022)
- Operating revenues increased by 19.6% to EUR 452.6 million (378.5)
- EBITDA increased by 22.1% to EUR 318.6 million (261.0), corresponding to a margin of 70.4% (69.0)
- Profit for the period amounted to EUR 272.8 million (221.3)
- Earnings per share amounted to EUR 1.28 (1.04)
- Operating revenues increased by 26.1% to EUR 1,323.3 million (1,049.3)
- EBITDA increased by 27.6% to EUR 930.5 million (728.9), corresponding to a margin of 70.3% (69.5)
- Profit for the period amounted to EUR 788.0 million (619.9)
- Earnings per share amounted to EUR 3.69 (2.91)
Evolta Q3 ulkona.
Varma kesän merkki, kun Nokia ilmoittaa aloittavan YT-NEUVOTTELUT.
Ilmeisesti Jack Ma paluu Kiinaan otettiin hyvin vastaan BABA pressä 7% plussalla..
Pientä valon pilkahdusta..
Pitkästä aikaa myönteistä uutista Smarteye:n osalta. Kurssikin näytti piristyneen.
Smart Eye receives one new Driver Monitoring System (DMS) design win from one of Europe’s largest OEMs. The estimated revenue of the order is SEK 50 million based on estimated product life cycle projections. The potential of further design wins on this new platform is estimated at SEK 500 million.
Smart Eye, the leading developer of AI-based DMS software to the automotive industry, has received a major order from a global Tier-1 supplier for delivering to a major European OEM, one of the largest automotive brands in a group of car manufacturers. Together, this group is one of the largest vehicle producers in the world, focusing on cars in the mid-segment.
The new nomination means Smart Eye will deliver its driver monitoring software, compliant with recent regulation, to one new car model on a new platform. The model to include Smart Eye’s DMS software is estimated to go into production in mid-2024. The car is intended for the mass-market segment.
“Yet another large carmaker is now secured for our automotive software offering, after a long and competitive procurement. We are confident that this order will not only lead to more deals on the same car platform, but also to put us in pole position for more business in the group to which this OEM belong. Furthermore, Smart Eye’s market leadership for DMS creates a strategic foothold which we intend to use for Interior Sensing, the next large industry trend,” said Martin Krantz, CEO of Smart Eye. “This win reinforces that the industry – driven by regulatory tailwind – is rapidly sourcing these critical safety system that will save lives on roads around the world.”
Smart Eye has now received a total of 90 design wins from 14 OEMs. The combined estimated lifetime value from current design wins is now larger than SEK 2,325 million. Estimated value over the product lifecycle from possible additional design wins with the car manufacturers on existing platforms is now SEK 4,475 million.
Yleisöanti on ylimerkitty ja keskeytetty 9.12. klo 16.00.