G5 Entertainment: Increased pace in game development pipeline
Research Update
2024-08-12
08:07
Analyst Q&A
Closed
Hjalmar Ahlberg answered 6 questions.
Redeye updates on G5 following its Q2-result which was somewhat weaker than expected. The company continues to work on its game pipeline and with several games in soft launch, we continue to see potential for stronger growth ahead, although we push back our growth forecasts slightly.
Hjalmar Ahlberg
Tomas Otterbeck
G5 reported revenue of SEK288m and EBIT of SEK22m while we expected SEK294m and SEK27m respectively. While the reported EBIT was below our forecast, this was partly due to FX revaluations which impacted negatively by SEK3.4m and adjusted for this EBIT was around SEK25m.
G5 continues to evolve its new development funnel where focus is now on increasing the pace of iterations for new and existing games. Currently, the company has 3 games in the pre-production phase and 4 games in various soft launch stages, supporting our expectations of improved growth from new game launches in the coming years.
While we continue to see potential for improved growth for G5 as it builds its game development portfolio, we have pushed growth forward somewhat. We have lowered our topline forecast with 2-3% for 2024-26E while 2024-26E EBITDA is down by 3-4%. On the back the lowered estimates our base case is also adjusted to SEK300 (SEK315) which implies a valuation of around 8x 2025E EBITDA, while the five-year average NTM EV/EBITDA is c7x.
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 1,400.1 | 1,319.9 | 1,173.0 | 1,211.0 | 1,271.5 |
| Revenue Growth | 6.4% | -5.7% | -11.1% | 3.2% | 5.0% |
| EBITDA | 318.3 | 278.9 | 263.0 | 270.4 | 302.7 |
| EBIT | 167.0 | 111.4 | 119.2 | 123.3 | 143.4 |
| EBIT Margin | 11.9% | 8.4% | 10.2% | 10.2% | 11.3% |
| Net Income | 66.9 | 127.6 | 113.6 | 107.8 | 125.5 |
| EV/Sales | 1.1 | 0.8 | 0.5 | 0.4 | 0.3 |
| EV/EBITDA | 4.9 | 3.6 | 2.3 | 2.0 | 1.5 |
| EV/EBIT | 9.4 | 9.1 | 5.1 | 4.3 | 3.1 |
Disclosures and disclaimers