Amongst the majority of reports that have arrived from competitors is that the European markets shows promising growth as well in the Nordics. For Mr Greens Q3 we expect 208.4 million SEK which is equivalent to 24 percent growth on a YoY comparison (7 percent growth QoQ) primarily led by enhanced traction for the European markets. Marketing costs are assesed to be 45 percent of the revenues led by its growth strategy. COGS is estimated to be around 17 percent and other expenses to be approximately 18 percent. EBIT is expected to be SEK 24.9 million at 11.9 percent – which still can be heavily disrupted by higher COGS due to regulatory taxes, VAT - along with higher than expected other expenses which correlates to the degree of European expansion.
Its important to note as in previous quarters that the company participates in an intense growth phase which can cause significant fluctuations in revenues for newly established markets - progressively the margin should expand but depends on the level of activity by the company to maintain and expand its business. Another interesting matter relates to product development for its design change of its platform that was released recently, its hard to know the outcome in the short-term - Although, we believe that constant innovation is key to sustain an long-term competitive advantage.
On the individual markets the growth varies to a large extent and for the Nordic market where growth is largely non-existent the yield is expected to be significant as the large volumes translates into significant earnings. Nevertheless, we will be looking onto comments regarding its growth trajectory, product development, strategic ideas and competitive dynamics. Its highly important for Mr Green to nurture its product development from smart algorhitms to more efficient payment solutions to maintain high retention in a highly competitive environment.
We still want to see capital allocation features from owners and management including that of buybacks rather than insignificant dividend ratio relative to competitors. This would significantly alter the impression of the company’s value for the general investor and thus setting the course for an revaluation of the company. Furthermore, this is critical step to closing the price-value gap in order for the company to activate itself within the now ongoing consolidation trend to handle the upcoming regulatory impact and competitive dynamics that are emerging within the industry. A fair price of the business is thus important and other catalysts are for example an listing on mid-cap, extension to sportsbetting and with sooner than expected margin expansion. Nevertheless, the current stock price makes Mr Green an ever-increasing attractive acquistion target as an strong organic brand complement to tier-1 operators.
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