Lang & Schwarz Broker GmbH

EANS-Research: Lang & Schwarz Broker GmbH Strong annual financial statements, estimates increased - new price target EUR 58 (with document)

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Analysts' Comments/Research-Update

Düsseldorf (euro adhoc) - Topic: Fiscal year 2010 figures from 28 February 2011

Yesterday reported its figures for the lapsed 2010 fiscal year. After the strong Q3, the company was again able to tap into the positive development in the final quarter. The reported figures well exceeded our expectations, which had already surpassed the company´s guidance (net income: EUR 4.5 m). The significant figures are as follows:

• Betting and gaming sales rose by around 59% over the previous year to
      EUR 1.476 bn
    • Gross gaming revenue (GGR) increased by roughly 54% to EUR 66.15 m
      (2009: EUR 42.92 m).
    • Net income amounted to EUR 10.47 m (2009: EUR 2.65 m).
    • Liquid assets (incl. customer funds of EUR 8 m) were increased
      significantly (+ EUR 15.5 m to EUR 36.23 m or EUR 10.35 per share).
    • The number of registered members climbed to 2.26 m (+ 116 thousand in

The major forces driving the outstanding top-line development in Q4 (GGR of EUR
18m) were:

    • The strong gain in new customers in the course of the 2010 World Cup and
      the reactivation of existing customers, who had a positive impact on the
      gambling activities in Q4.
    • A better market environment overall, due to the legal situation as well
      as the gradual opening up of sports betting / gambling markets.

The high degree of scalability of the business model combined with additional 

efficiency improvements in marketing expenditures (drop in the ratio of market expenditures to 56% after 73% in 2009) has had a mark on the disproportionately high profit trend. Net income of nearly EUR 5.9 m was generated in Q4/2010. The result overall is net income of roughly EUR 10.5 m.

Positive guidance for 2011

The Board of Directors offered its guidance for the current 2011 fiscal year in the scope of the reporting. The dynamic growth is expected to continue and, based on the more intense marketing activities, lead to a rise in GGR by at least 30% (implies GGR of >= EUR 86 m).

Forecasts lifted substantially has presented strong figures by taking advantage of the improved market environment (gradual opening up of gambling markets for private-sector providers, executing advertising efforts on the most important market of Germany made easier once again) as well as the "World Cup effect". Both thesales (GGR) and earnings figures beat our expectations. With the support of the existing base of members and the improved advertising environment (attractive conditions for online advertising, fewer restrictions by opening up markets), should continue to grow in the coming years. We have lifted our estimates significantly (see pdf).


In spite of the positive trend for the share price, the updated estimates show further upside potential. The new price target, derived using a DCF model, is EUR 58 (previously: EUR 31.65). We are reaffirming our Buy recommendation for the AG share.

Lang & Schwarz Broker GmbH Goetheplatz. 4 60311 Frankfurt am Main

Our recommendations are based on public information. We deem this information reliable but can guarantee neither this nor the completeness or accuracy thereof. We reserve the right to change our opinions expressed here at any time and without prior notice. The opinions and investment recommendations in our publications may not be suitable for some investors depending on the investment objective or with regard to investment risk, timeframe and/or overall position. The share price data and charts are derived from Bloomberg, Reuters and SystemSoft. The contents herein may only be reproduced, duplicated or electronically distributed with written consent by Lang & Schwarz Broker GmbH.

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Lang & Schwarz Broker GmbH

Branche: Banking
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