Cherry: The Beginning of a New Era

Research Update

2015-08-27

16:10

Cherry reported a Q2 which delivered above expectation of 107 million kronor (estimate 98 million kronor). EBIT resulted in a loss of -5.2 million kronor (estimate: loss of -4.5 million). The negative EBIT was burdened by other expenses primarily. The online casino, achieved excellent performance both by growth of SEK 65.5 million kronor (expected 60.6) and improved profitability. Likewise did Yggdrasil continue to perform well on a business level with the fundamental components to improve revenues significantly going forward, indicating the potential intrinsic value of this segment. It reported revenues of SEK 1.6 (expectation 3.0 MSEK). The restaurant casino continued to act as a strong cash-flow generator which reported 39.6 MSEK (estimated 34.8 MSEK). Changes in primarily the durable competitive standing as an entity, the short and long term underlying growth rate, and profitability causes us to change the intrinsic value. Consequently, the new intrinsic DCF and SOTP value is now increased substantially to SEK 120 per share (Previously: SEK 50). Our bear and bull case are changed to SEK 60 and 200 per share (Previously SEK 30 and 60 per share). The company continues to position itself for strong growth as a relatively small player in the Nordic pond along with solid prerequisites to achieve profitable growth throughout Europe in a highly competitive environment. The company trades at a significant margin of safety relative to our intrinsic value with several catalysts to close the gap.

PS

Philip Skogby

Disclosures and disclaimers

Premium Plan required to unlock

Unlock companies to access

more high quality research.