Embracer: Valuation update reflecting Asmodee spin-off
Research Update
2025-02-03
08:03
Redeye updates its estimates and valuation on Embracer to reflect the Asmodee spin-off and the stronger-than-expected preannounced results for Q3 2024/25E.
Hjalmar Ahlberg
Tomas Otterbeck
Embracer's preannounced Q3-results was stronger than expected driven by the PC/Console segment which benefitted from external development projects and upfront revenue from subscription platform deals, but also a strong performance from Embracer’s back catalogue. Tabletop was also slightly above our forecast while Mobile and Entertainment & Service saw strong topline but softer-than-expected adjusted EBIT.
Given that the strong performance in PC/Console was partly driven by external development projects and upfront revenue from subscription platform deals, we have made limited changes to our long-term estimates for the segment. We have also slightly lowered margin assumptions for Mobile and overall, we increse our 2024/25E EBIT by 5% while 2025/26-27E is up around 2% (excluding impact from the Asmodee spin-off).
We have updated our valuation to reflect the Asmodee spin-off where our new fair value range is SEK80-200 per share with a base case of SEK150 which implies an EV/EBIT of c9x 2025/26E. Looking at our SOP-valuation approach, it implies a valuation range of SEK119-197 (average SEK158) for Embracer excluding Asmodee.
| Key Financials | |||||
|---|---|---|---|---|---|
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Total Revenue | 42,862.0 | 48,131.0 | 32,561.9 | 23,620.3 | 25,201.7 |
| Revenue Growth | 118% | 12.3% | -32.3% | -27.5% | 6.7% |
| EBITDA | 9,787.0 | 11,377.0 | 8,378.0 | 7,582.9 | 8,689.1 |
| EBIT | 6,367.0 | 7,063.0 | 4,392.0 | 3,554.5 | 4,375.8 |
| EBIT Margin | 16.9% | 16.7% | 15.1% | 17.6% | 20.3% |
| Net Income | 5,515.0 | 5,193.0 | 1,923.3 | 2,563.3 | 3,236.7 |
| EV/Sales | 2.2 | 1.1 | 1.5 | 2.1 | 1.9 |
| EV/EBITDA | 8.4 | 4.2 | 5.2 | 5.6 | 4.8 |
| EV/EBIT | 12.9 | 6.8 | 9.9 | 12.0 | 9.6 |
Embracer has finalized the date for the spin-off of Asmodee, which will start trading on February 7, while the last day for trading the Embracer share, including the right to receive shares in Asmodee, is February 3. As such, we have updated our valuation to adjust for the spin-off of Asmodee where our new valuation range is SEK80-200 (previously SEK150-348) with a base case of SEK150 (SEK240). We have also updated our SOP-valuation, where we have now adjusted for the expected net debt allocation between Embracer and Asmodee. The SOP-valuation implies an EV of SEK23.7-35.5bn (average SEK29.6bn) for Asmodee, by applying EV/EBIT multiples of 10-15x. Adjusted for net debt and earnouts the implies a market value per share of SEK76-128 (average SEK102) for Asmodee. The SOP-valuation further implies a market value per share of SEK119-197 (average SEK158) for Embracer, excluding Asmodee. The tables below summarize key assumptions for the DCF-based fair value range and the implied valuation based on the SOP approach.
| Embracer: Fair Value Range | |||
| SEK | Bear Case | Base Case | Bull Case |
| Value per share | 80 | 150 | 200 |
| Revenue CAGR 2025-2028 | 2% | 6% | 9% |
| Revenue CAGR 2029-2038 | 2% | 4% | 5% |
| Growth Terminal | 2% | 2% | 2% |
| EBITDA-margin 2024-2038 | 28% | 33% | 36% |
| EBITDA Terminal | 25% | 28% | 30% |
| Source: Redeye Research |
Disclosures and disclaimers