Following the H1 results and the first months of the new CEO Richardson, we take the opportunity to take a closer look at ASW. Here's our view:
H1 results look worse than they are: Reported sales declined by 25% yoy to CHF 8.8m due to (1) reduced demand for subscriptions like "Prestige" and "Signature" memberships amid uncertainty around the Miles & More model change (sales of Subscriptions segment decreased by 9% yoy to CHF 7m) and (2) a strong comparable base, especially in the Services segment. Here H1'24 contained unusually high low-margin, non-recurring event-related sales (eNuW: CHF 2m), as well as positive one-offs from the resolution of the legal dispute with "MAG of Life" to the tune of CHF 0.5m. Consequently, the segment sales of Services decreased to CHF 1.7m, down 58% yoy. However, if both positive one-offs are excluded, the underlying sales of the services segment actually increased by 9% yoy, showing the solid development happening at ASW. Consequently, H1 reported EBITDA declined as well and arrived at CHF 0.4m (-54% yoy, 4.9% margin). Mind you, H1 also includes a certain degree of CEO salary overlap and associated costs (e.g. headhunters) to the tune of CHF 0.2m (eNuW), which we regard as one-offs. On the other hand, this implies a solid performance in underlying EBITDA, which increased from CHF 0.4m in H1'24 to CHF 0.6m in H1'25, despite the drop in underlying sales.
New CEO Zain Richardson focuses on OPEX reduction, leveraging group synergies and expanding B2B partnerships: After a handful of months in office, Richardson has already identified OPEX reductions of "several hundred thousands" on a FY basis, which compares well to current EBITDA levels of c. CHF 1m (FY'25e), that are not seen to endanger future growth prospects. Moreover, a key focus is to increase group synergies and ultimately cross-selling opportunities as the different business units (e.g. ASW Bespoke, ASW Collection, World's Finest Clubs) used to work rather independently than as a team, which implies that cross-selling across the group was technically possible, but not enforced enough. Also in light of the business model transformation (rising member base with growing monetization options), Richardson recently introduced a new membership option "Advantage" (€ 890 p.a.), filling an important price point gap between "Premium" (€ 79 p.a) and "Prestige" (€ 5,590 p.a.). Moreover, Richardson has already signed a new airline partner to diversify the partner network and reduce the dependency on "Miles and More", but more importantly signed a new global financial services partner (which will offer ASW products/memberships to their customer base) and is projected to launch already this year.
All in all, the results appear worse than what's happening in the underlying business and the new CEO seems to tackle the right levers to foster a sustainable turnaround in growth and profitability. Against this backdrop and with the recent share price decline in mind, the stock currently offers a great potential. Reiterate BUY with new PT of CHF 2.50 (old: CHF 2.80), based on DCF.
ISIN: CH0404880129
