Maximum Entertainment reported revenue of EUR19.9m (growth of 22%) and EBITDA of EUR1.8m (margin of 9%), which was close to our forecasts of EUR18.7m and EUR1.9m respectively. The company continued to see progress on profitability and balance between cash generation and investments. Still, net debt increased vs Q4 2023, and more progress is needed to improve the company’s financial strength.

Following the change of reporting currency to EUR and accounting standard to IFRS, the company has improved transparency with more granularity on costs while it also impacts reported EBIT positively as goodwill is no longer amortized. The company has also provided a sales split where it discloses revenue from own IPs, licensed publishing, and sub-publishing. With this, we believe it will become easier to understand the development of profitability, which varies between quarters depending on the sales mix.

We have made limited changes to our estimates while we lower our base case as we adjust for somewhat lower growth and an increased share count following earnout settlements. Maximum Entertainment is currently valued low at an EV/EBITDA of 3-4x 2024-25E while our base case of SEK15 (SEK20) indicates significant upside and implies an EV/EBITDA of 8-10x 2024-25E. However, we also highlight that the company’s financial flexibility remains limited, which is reflected in our bear case that includes dilution from an equity capital injection and implies a fair value of SEK3 (SEK5).