Sozap: Undramatic quarter
Research Update
2024-05-16
06:00
Redeye updates its estimates following Sozap’s Q1 report. The Q1 came in roughly in line in with our expectations in terms of sales while profitability was lower than expected due to higher UA investments.
Anton Hoof
Overall, we believe the report was roughly in line with our expectations, with somewhat lower sales and higher UA investments. Questopia continues to be the primary growth driver, while Armed Heist is holding up compared to last year. Although a growth of 42% is solid, sales must increase further for the company to reach profitability. To achieve this, we believe the launch of Fishing Tour must be successful.
After the quarter, Sozap announced a rights issue of SEK11.4m (secured to ~45%). The proceeds from the rights issue will be used to complete and launch the Fishing Tour and to reach positive operating cash flow. Although the rights issue aligns with our estimates (SEK10m), the subscription price of SEK0.75 per share represents a larger discount than we had initially anticipated. The rights issue is expected to be completed in Q2, and we will adjust our valuation based on the final outcome.
Following the Q1 figures, we made limited revisions to our sales estimates, taking down 2024e sales by 9% while leaving 2025e-2026e unchanged. In terms of cost, we have increased D&A as the company has started to amortize more of its game in the quarter. We leave our valuation unchanged. Our base case stands at SEK3.5, and the fair value range is SEK0.5-8.
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Net Sales | 16.6 | 15.0 | 19.9 | 29.5 | 35.4 |
| Sales Growth | -5.2% | -9.8% | 32.9% | 48.4% | 20.0% |
| EBITDA | -2.7 | -3.0 | -0.56 | 10.0 | 13.8 |
| EBIT | -14.3 | -9.0 | -11.0 | -1.0 | 2.5 |
| EBIT Margin | -86.0% | -60.0% | -55.6% | -3.5% | 7.0% |
| Net Income | -14.3 | -8.9 | -10.0 | -0.82 | 6.0 |
| EV/Sales | 3.5 | 2.7 | 0.2 | 0.3 | 0.1 |
| EV/EBITDA | -21.7 | -13.2 | -6.3 | 0.8 | 0.3 |
Q1 was in line with Q4 in terms of net sales, which amounted to SEK4.7m, an increase of 42% y/y and 41% in constant currency. This is 6% lower than our expectations of SEK5.0m. The deviation is attributed to lower ARPDAU (average revenue per daily active user), while DAU (Daily Active Users) came in line with expectations. The growth in the quarter primarily stems from Questopia, while revenues from Armed Heist were in line with Q1 last year.
Disclosures and disclaimers