Gentoo Media: Solid cash generation
Research Update
2024-11-14
07:07
Redeye updates on Gentoo Media following Q3-results where we have made limited changes to estimates and the company looks set to deliver continued solid performance in Q4. Following the split up of the group, the cash generation is now very strong and creates potential for improved shareholder remuneration in the coming years.
Hjalmar Ahlberg
Anton Hoof
Gentoo Q3-results was in line with preliminary results announced on 25 October and close to our forecast prior to the announcement. Underlying performance was even slightly better than expected, considering that the company was impacted by a lower-than-normal sportswin margin in August and September. The company reiterated its guidance for 2024E (revenue of EUR125m-135m with EBITDA-margin of 45-50%), implying a positive outlook for Q4 2024E.
Gentoo reported strong cash flow in Q3 with proforma free cash flow of around EUR18.4m. Capex level after the split-up looks to be lower than we had anticipated. As such, we have lowered our capex assumptions and we expect the company to have zero net debt by 2026E, suggesting potential for M&A or shareholder remuneration.
While we make limited changes to our estimates on the back of the Q3-report, we have slightly increased our valuation owing to the lowered capex assumptions. Our new base case is SEK51 (SEK49) and implies c9x EV/EBITDA 2025E, while the share currently trades at c5x EV/EBITDA 2025E.
| EURm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 61.8 | 89.1 | 124.7 | 149.2 | 171.6 |
| Revenue Growth | 37.3% | 44.1% | 40.0% | 19.6% | 15.0% |
| EBITDA | 29.5 | 40.3 | 59.8 | 72.1 | 85.5 |
| EBIT | 21.7 | 27.8 | 41.4 | 54.3 | 66.7 |
| EBIT Margin | 35.1% | 31.2% | 33.2% | 36.4% | 38.9% |
| Net Income | 19.1 | 12.5 | 26.6 | 37.8 | 50.2 |
| EV/Sales | 6.3 | 4.5 | 2.9 | 2.4 | 1.7 |
| EV/EBITDA | 13.1 | 9.8 | 6.1 | 4.9 | 3.4 |
| EV/EBIT | 17.8 | 14.3 | 8.9 | 6.5 | 4.4 |
Gentoo reported revenue of EUR30.4m and EBITDA of EUR14.6m which was in line with the preliminary results announced on 25 October. The outcome was also close to our forecast ahead of the preliminary results announcement where we expected topline of EUR31.4m and EBITDA of EUR15.1m. The company stated that player-friendly sports results impacted revenue negatively by around EUR1.5m, suggesting that the outcome would have been above expectations with a normalized sports win margin. FTD intake was stable YoY, with growth in publishing while paid saw a decline. Gentoo further highlighted that value of deposits was up 36% YoY, as it continues to focus on high-value FTD markets.
Disclosures and disclaimers