CHER B

Cherry

Research update

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Cherry: The Transformation Begins

Cherry reported a strong Q4 report across all segments, the online casino delivered in line with expectations SEK 118.7 million (estimate 118.6 million kronor). Adjusted EBIT for revaluation of additional purchase price came in stronger than expected at SEK 14.9 (estimated 11.5) million led by operational efficiency and stronger than expected result from Yggdrasil.

Yggdrasil has gained significant momentum operationally and financially with the company growing approximately 100 percent QoQ showcasing its quality games performance across some of the most innovative operators in the business. Although, the company’s growth story has only begun, we expect more top-tier games to climb the ranks amongst operators continuously. Moreover, the company has a small games portfolio and still a small portion of the large and fast growing operator market. It reported revenues of SEK 8.2 (expectation 5.5 MSEK) before internal revenues.

Our confidence in Yggdrasil’s growth trajectory has increased due to enhanced durable competitive advantage, which the market still barely perceives at all. Consequently, our SOTP and DCF intrinsic value increases significantly to SEK 200 per share (Previously: SEK 140). Bear and Bull case scenarios are revised to SEK 90 and SEK 320 per share (previously SEK 60 and 200). Furthermore, as previously the scenarios continue to be built upon warranted margin of safety mechanisms for all segments – the online casino itself is able to defend the majority of the current market cap. Moreover, continued intense focus on shareholder-friendly measures will further enhance shareholder value.

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