Basic-Fit Free cash flow at lower growth

Today we publish a company note on Basic-Fit. Basic-Fit sacrificed part of its growth to do a limited SBB of EUR 40.0m (2.6% Mcap) while it has to repay a EUR 303.75m bond in June FY26. It missed its 2023 CMD targets of capex/club and yield/member and lowered its guidance for 2 consecutive years. Nevertheless, Basic-Fit will remain the fastest growing fitness chain in Europe even after its lower growth outlook. We continue to believe in the business model but it will take time to rebuilt investor trust. We believe the stock trades cheap at 6.4x EV/EBITDA (excl. fin leases). We see no immediate trigger for the stock apart from showing membership growth and a higher than expected yield/member for multiple quarters to confirm the trend. The first positive signals are there, the management guided during the analyst call an inflow of 200k members in Jan-Feb FY25, which is above 1Q24 (250k) as 1Q24 was skewed upwards due to 104 club openings (including RSG acquisition) vs 68 YTD (09/04, BFIT commercial websites). Still we want to see multiple good quarters to assess the impact from the changes in membership structure, the 24/7 clubs and more clarity on the bond refinancing. The uncertainty makes use move to the sidelines and reduce our rating from Accumulate to Hold at a EUR 20.0 target price.