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: 9.40 EUR
Letzte Ratingänderung:
Analyst: Marcel Goldmann, Cosmin Filker

AxesInMotion acquisition significantly strengthens ad software platform with high-quality first-party data; Acquired company should significantly boost future company performance due to multiple synergy potentials; Forecasts and price target raised; Buy rating

Acquisition of the AxesInMotion

Media and Games Invest SE (MGI) recently announced an agreement to fully acquire Spanish mobile games developer AxesInMotion S.L. (AxesInMotion). The acquired company was founded in 2014 and is based in Seville, Spain. AxesInMotion is one of the leading free-to-play mobile game developers, with a strong portfolio of high-definition racing games that have already generated over 700 million downloads worldwide.

The company has succeeded in building a portfolio of high-quality racing games over the past few years, with 87.0% of revenues generated through ingame advertising. The developer's flagship titles include 'Car Driving Simulator', 'Mega Ramps' and 'Extreme SUV Driving Simulator'. In addition, the company has two new titles in the pipeline, one of which is already almost fully developed. In terms of geographic revenue distribution, the USA was the most important single market for the company with an estimated revenue share of approximately 33.0% at last count.

With normalised IFRS revenue of EUR 7.90 million and adjusted EBITDA (adj. EBITDA) of EUR 5.00 million (adj. EBITDA margin of 64.0%) in 2021, combined with an organic growth rate of 36.0% over the past three years, AxesInMotion is well positioned for further growth opportunities within the MGI Group, according to the company. Based on management assumptions and taking into account the (expected) medium-term synergies with MGI, AxesInMotion would have contributed an additional EBITDA of EUR 17.0 million on a pro-forma basis (2021) and provided for an increase in adjusted EBITDA (adj. EBITDA) of more than 20.0%, according to the company.

MGI has agreed with the AxesInMotion owners on a fixed purchase price of EUR 55.0 million plus a performance-based purchase price component (earn out) of up to EUR 110.0 million. To finance the acquisition, the MGI Group has carried out a capital increase with a volume of around EUR 30.0 million and also plans to draw on its own liquid funds (cash and cash flow). The transaction is expected to be completed in May 2022.

According to the company, taking into account the earn-out component, the EV/EBITDA multiple from the acquisition - depending on the realised revenue and EBITDA synergies until 2024 - will be in a range of 6.8x to 9.1x. Against the backdrop of the potential multiples to be incurred or paid, we rate the purchase price as favourable.

Forecast adjustment with consideration of the inorganic effect

In parallel to the announced acquisition, MGI has slightly increased its previous corporate guidance for the current financial year 2022, also based on the expected positive effects from the acquisition. The company now expects revenues in a range of EUR 295.0 million to EUR 315.0 million (previously: EUR 290.0 million to EUR 310.0 million) and adjusted EBITDA of EUR 83.0 million to EUR 93.0 million (previously: adjusted EBITDA of EUR 80.0 million to EUR 90.0 million).

For us, the highly synergistic acquisition represents a good strategic move for the MGI Group, as it is a promising addition to the existing games portfolio and at the same time significantly supports the pursued growth strategy (MGI's Vision 2025) through the acquisition of mobile game content. The acquisition of AxesInMotion also reflects the MGI Group's new investment focus following the company's transformation into an ad software platform with first-party data from game content.

The acquisition of AxesInMotion and the expected positive effects (including synergies) associated with it should have a significantly positive impact on the future revenue and earnings situation of the MGI Group. In this context, we assume that significant revenue synergies can be realised in particular through the integration of the company's mobile games into MGI's ad software platform. These should result primarily from more efficient and extensive user acquisition and better monetisation of the in-game advertising space.

In view of the very promising acquisition and the positive effects (including synergy effects) we expect from the Group integration, we have adjusted our previous revenue and earnings forecasts for the current financial year 2022 and also for subsequent years upwards.

For the current financial year, we now expect revenues of EUR 307.22 million (previously: EUR 302.22 million) and EBITDA of EUR 87.52 million (previously: EUR 84.52 million). For the subsequent years 2023 and 2024, we calculate revenue growth to EUR 377.76 million (previously: EUR 364.76 million) and EUR 473.08 million (previously: EUR 455.08 million), respectively. In parallel, we expect EBITDA to increase to EUR 116.94 million (previously: EUR 108.03 million) and EUR 147.03 million (previously: EUR 134.43 million).

Overall, we continue to see the MGI Group well positioned to grow very dynamically and highly profitably in the future as an ad tech company with its own gaming activities (access to 'first party data' and advertising space of gaming assets). The combination and close integration of synergetic media and gaming business activities should continue to significantly boost their profitable growth to date. In addition, the currently available liquid funds (GBCe: approximately EUR 100 million) offer the company the possibility at any time of further strengthening the group through planned M&A transactions and, at the same time, to further increase their earning power and pace of growth.

Within the framework of our DCF valuation model, we have raised our previous price target to EUR 9.40 (previously: EUR 9.20 per share) due to our increased estimates for the current financial year and the following years. The increase in our previous WACC due to a higher risk-free interest rate (to 0.40%, from 0.25% previously) and the dilution effect due to the completed capital increase to finance the M&A transaction have counteracted an even stronger price target increase. In view of the current share price level, we therefore continue to assign a 'Buy' rating and see significant upside potential.

Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/24015.pdf

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Date (time) of completion: 05/05/2022 (9:13 am) Date (time) of first distribution: 05/05/2022 (10:00 am)

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