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

Einstufung von GBC AG zu Media and Games Invest SE

Unternehmen: Media and Games Invest SE
ISIN: MT0000580101

Anlass der Studie: Research Note
Empfehlung: BUY
Kursziel: 8.50 EUR
Letzte Ratingänderung:
Analyst: Marcel Goldmann, Cosmin Filker

Continuation of dynamic sales growth in H1 2021; Significant increase in profitability due to economies of scale and M&A effects; GBC estimates and target price also raised following increase in company guidance

Business development in HY1 2021

Media and Games Invest SE (MGI) was able to continue its dynamic growth course in the first six months of the current fiscal year. Compared to the same period of the previous year, consolidated revenues jumped by 92.6% to EUR 109.00 million (H1 2020: EUR 56.60 million).

This was mainly due to strong organic growth effects in the Gaming and Media segments as well as positive revenue synergies within the MGI Group. In addition, M&A activities (especially the KingsIsle transaction) also contributed to the positive Group revenue development.

Parallel to this, the consolidated operating result (EBITDA) also increased significantly by 129.3% to EUR 26.60 million (previous year: EUR 11.60 million) compared with the same period of the previous year. Adjusted for special effects (e.g. M&A costs), the adjusted EBITDA for the first half of 2021 amounted to EUR 28.70 million, which also rose sharply by around 125.0% year-on-year (previous year: EUR 12.70 million).

MGI also made significant gains at the net level in the first six months of the current fiscal year as a result of their significant improvement in profitability, leading to a jump in earnings to EUR 5.60 million in H1 2021 (H1 2020: EUR 0.50 million).

Business development in Q2 2021

Their dynamic growth course is particularly evident in the quarterly view. Following their strong opening quarter, MGI also posted another record quarter in the second quarter of the current fiscal year with a 90.0% increase in consolidated revenues to EUR 57.10 million (Q2 2020: EUR 30.0 million). The strong growth resulted primarily from revenue synergies and organic growth within the Gaming and Media segment. It should be noted here that organic growth of 36.0% was significantly above the company's planning and was also significantly increased despite a particularly strong prioryear quarter due to the Corona pandemic.

Group EBITDA adjusted for special effects (e.g. M&A costs) grew even more strongly than revenues in the second quarter due to the strong performance of the acquired gaming company KingsIsle in combination with economies of scale and thus increased by around 128.0% to EUR 15.30 million (Q2 2020: EUR 6.70 million). The economies of scale came to bear here primarily in the media segment due to the revenue growth achieved and the synergies realized and led to an adjusted EBITDA margin of 16.0% (Q2 2020: 11.0%).

Guidance raised against the backdrop of accelerated inorganic growth

In addition, MGI announced on July 13, 2021 that an agreement was successfully concluded with the current Smaato shareholder Shanghai Qiugu Investment Partnership for the acquisition of 99.9% of the shares in Smaato's holding company 'Shanghai Yi Qiu Business Management Co. Ltd. As part of the transaction, MGI will acquire all but one share of Smaato and will receive a call option to acquire the remaining share, exercisable no earlier than March 31, 2022. According to company sources, the Smaato transaction is expected to close on September 1, 2021.

With locations in San Francisco and Hamburg, Smaato operates a leading digital programmatic advertising platform with a clear focus on mobile devices. This advertising specialist offers its programmatic services to publishers on a software-as-a-service (programmatic SaaS) basis. With expected revenues of EUR 39.0 million in 2021, representing organic growth of approximately 20.0% compared to 2020, and expected adjusted EBITDA of EUR 13.0 million in 2021 (corresponding to a 33.0% EBITDA margin), Smaato is showing a very positive development, according to the company. Through its platform, Smaato reaches over 1.30 billion unique users worldwide every month. This would significantly increase the reach of MGI's Verve Group media segment to a total of 2.70 billion users worldwide.

Against the backdrop of the signed Smaato acquisition, MGI's management recently decided to increase the company's previous guidance. MGI now expects consolidated revenues for the current fiscal year 2021 to be in the range of EUR 234.0 million to EUR 254.0 million (previously: EUR 220.0 million to EUR 240.0 million) and adjusted EBITDA to be in the range of EUR 65.0 million to EUR 70.0 million (previously: EUR 60.0 million to EUR 65.0 million).

Overall, it should be noted that the revenue and earnings performance of the MGI Group was very satisfactory in the first half of 2021. In particular, the Media segment was able to make significant gains in terms of profitability. In addition, the performance also showed how highly scalable the Group's platform-based busi-ness model is and what positive synergy effects are possible through the combination of the two complementary business segments (Games & Media).

Forecast and evalutation

In view of their convincing half-year business development, the Group's extensive growth pipeline and their once again increased guidance, we have also raised our previous forecasts for the current financial year and subsequent years.

From a conservative perspective, we now expect consolidated revenues of EUR 234.15 million (previously: EUR 223.15 million) and EBITDA of EUR 61.21 million (previously: EUR 58.71 million), which are both at the lower end of the adjusted forecast range. For the current fiscal period, we assume that around 50.0% of consolidated revenues will be generated in both the Gaming and Media segments. For the latter segment, we also anticipate a positive revenue contribution from the expected consolidation of Smaato (from September 2021).

We also expect a continuation of the successful growth strategy for the following fiscal years and anticipate significant revenue and earnings growth in both business segments. Thanks to the good market position of the Gaming segment and the numerous growth projects announced by the division, MGI should succeed in profiting sustainably from the booming gaming sector. Thus, their profitable growth in this business segment should be further expanded significantly in the coming years.

With regard to the Media segment, we also expect dynamic revenue development in the coming years. Here, the business unit should be able to benefit in particular from its strong focus on gaming and e-commerce companies and the increased marketing of digital programmatic advertising (programmatic SaaS advertising). At this point, it should be emphasized that, according to media experts, the area of programmatic advertising is considered one of the fastest growing segments in the digital advertising market.

As a result of the M&A transactions carried out in the recent past, the Media division also has a strong market position and critical size, which should enable MGI to continue to achieve dynamic growth in this division in the future. In particular, the transformative Smaato transaction should significantly advance the group's own advertising division (Verve Group) in terms of revenue volume, profitability and reach. MGI said it expects Smaato's digital advertising technology platform to further strengthen its programmatic SaaS offering and EBITDA margin profile.

In addition, the even closer integration of the various media units should enable further positive synergy effects to be achieved within the Verve Group, which will additionally boost the profitability and revenue growth of the media division.

Specifically, we expect consolidated revenues of EUR 289.88 million for the following fiscal year 2022 (previously: EUR 276.29 million). In the following year 2023, revenues should then be able to increase further to EUR 362.41 million (previously: EUR 345.64 million). With regard to the prospective revenue composition, we expect a balanced revenue mix from the Games and Media segments in the medium and long term. Both complementary business segments should also be able to benefit from significant synergy effects with each other in the future.

Our expected dynamic revenue development is also reflected in our earnings forecasts. We expect a significant increase in the operating result (EBITDA) in the coming years. In parallel, we also expect a significant increase in the EBITDA margin to around 30.0% in the long term due to expected economies of scale based on the platform approach of the MGI Group. In this context, it should be possible to generate EBITDA in the order of EUR 107.63 million in fiscal year 2023.

Overall, we believe that the MGI Group is well positioned in the two business segments Gaming and Media to continue their previous dynamic growth course in the growth areas of online/mobile gaming and digital media/ad-tech at a high growth rate in the future. Thanks to the company's platform approach in the gaming and media segment and the extensive synergy potential between the two complementary business areas, MGI should succeed in further increasing group profitability in the future. In addition, the company currently has around EUR 230.0 million in cash and cash equivalents at its disposal in order to provide additional support for the profitable growth course it has embarked upon through targeted acquisitions, which are also planned as part of the corporate strategy.

Within the framework of our DCF valuation model, we have determined a new price target of EUR 8.50 per share on the basis of our increased estimates for the financial years 2021, 2022 and 2023, thus significantly raising our previous price target (EUR 8.00) significantly. In view of the current share price level, we continue to issue a 'buy' rating and see significant upside potential. The results of our peer group analysis (see page 7 below) also support our assessment of the share's attractiveness and price potential.

Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/22848.pdf

Kontakt für Rückfragen
GBC AG
Halderstrasse 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG und Art. 20 MAR. Beim oben analysierten Unternehmen ist folgender möglicher Interessenkonflikt gegeben: (5a,5b,7,11); Einen Katalog möglicher Interessenkonflikte finden Sie unter: http://www.gbc-ag.de/de/Offenlegung
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Date (time) of completion: 31/08/2021 (10:18 am) Date (time) of first distribution: 31/08/2021 (11:00 am)

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