GBC AG: Media and Games Invest plc | Rating: BUY

Original-Research: Media and Games Invest plc - von GBC AG

Einstufung von GBC AG zu Media and Games Invest plc

Unternehmen: Media and Games Invest plc ISIN: MT0000580101

Anlass der Studie: Research Comment
Empfehlung: BUY
Kursziel: 3.20 EUR
Letzte Ratingänderung:
Analyst: Marcel Goldmann, Cosmin Filker

9 Months 2020: MGI continues on a clear growth course, expansion of mobile gaming activities opens up additional high revenue potential; company guidance raised again; increase of forecasts and target price

On 30 November 2020, Media and Games Invest plc (MGI) announced its Q3 business figures and 9-month business figures respectively. On the basis of these published figures, the company was again able to increase revenues in the third quarter by 29.0% year on year to EUR 35.00 million (Q3 2019: EUR 27.2 million), thus continuing on its growth path. At the adjusted EBITDA level, the company achieved an EBITDA increase of 61.0% to EUR 6.40 million (Q3 2019: EUR 4.00 million), thus increasing its earnings power disproportionately.

In the third quarter, the company recorded revenues of EUR 18.00 million in its core business area of gaming, which were slightly below the extraordinarily strong second quarter (Q2 2020: EUR 18.80 million) due to seasonal effects and lower corona restriction effects. The very positive business development in the gaming segment during the year was characterised by significant organic growth overall (16.0% organic growth in the first nine months of 2020). In terms of segment earnings, adjusted EBITDA in the third quarter amounted to EUR 5.00 million (Q2 2020: EUR 5.50 million).

The second business segment, Media, recorded a significant 49.0% jump in revenues to EUR 17.00 million in the third quarter compared to the previous quarter (Q2 2020: EUR 11.20 million). This development was mainly driven by increased mobile gaming advertising campaigns with Zynga and other gaming companies. Compared to the previous quarter (Q2 2020: EUR 1.20 million), adjusted EBITDA increased significantly by 13.0% to EUR 1.40 million due to a higher advertising business volume.

On a strategic level, MGI took an important step towards further expanding the particularly high-growth mobile gaming business by acquiring the mobile gaming company freenet Digital GmbH at the end of the third quarter. As a result, mobile gaming revenues are expected to increase significantly from the current fourth quarter onwards. According to its own statements, the company sees significant potential for organic growth in this area, e.g. by expanding the existing games portfolio to mobile devices as well or by introducing new licensed mobile games. The targeted dynamic growth in the mobile games segment is also to be supported substantially by the company's own advertising division, which also has extensive know-how in the marketing of mobile games, through efficient user acquisition.

In the first nine months of the current financial year, MGI generated sales revenues of EUR 91.50 million, which represents an increase of 64.0% compared to the same period of the previous year. This increase was driven by strong organic and inorganic growth. At earnings level, adjusted EBITDA of EUR 19.00 million was achieved, representing an increase of 54.0% over the same period of the previous year. Net income (after minorities) after the first nine months amounted to EUR 0.70 million, almost on a par with the previous year (Q1-Q3 2019: EUR 0.90 million).

In view of the very dynamic business development in the third quarter and the positive expectations for the fourth quarter, the MGI management has again raised the issued corporate guidance for the current financial year. The company now expects consolidated sales revenues in a range of EUR 125 million to EUR 135 million and EBITDA of between EUR 23 million and EUR 26 million. The company is optimistic about the current fourth quarter due to what is traditionally the strongest quarter in terms of revenue and the many planned gaming activities as well as game releases and updates.

In view of the raised corporate guidance, we have also adjusted our previous revenue and earnings forecasts upwards. For the current financial year, we now expect revenues of EUR 133.25 million (previously: EUR 118.16 million) and EBITDA of EUR 25.02 (previously: EUR 21.74 million). For the following year 2021, we expect revenues of EUR 145.62 million (previously: EUR 139.28 million) and an EBITDA of EUR 28.88 million (previously: EUR 26.98 million). In the following financial year 2022, revenue should increase again to EUR 163.05 million (previously: EUR 162.12 million) and EBITDA of EUR 33.90 million (previously: EUR 32.34 million) should be achieved.

Based on our raised estimates and lowered cost of capital, we have used our DCF model to calculate a fair value of EUR 3.20 per share, thereby raising our previous target price (EUR 2.95 per share). The recent significant capital increase has further improved the company's risk profile and led to a reduction in our cost of capital due to a beta reduction. (note: an even stronger increase in our target price was counteracted by the dilution effect of the capital increase). In view of the current share price level, we continue to assign a BUY rating and see significant upside potential.

All in all, we believe that the company is in a very good position to continue its successful growth strategy at a very dynamic pace. The intensified expansion of mobile gaming activities in combination with the Media division's increasing focus on target customers with online-based business models (such as gaming or e-commerce companies) should provide an additional boost to future revenue development. In addition, the company's high level of cash opens up the possibility of further increasing the pace of growth of the company through targeted M&As.

Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/21924.pdf

Kontakt für Rückfragen
Jörg Grunwald
Vorstand
GBC AG
Halderstrasse 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Date (Time) completion: 07/12/2020 (09:19 am) Date (Time) first distribution: 07/12/2020 (10:00 am)

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