EG7: Strong Q3 and positive outlook
Research Update
2022-11-29
07:43
Redeye updates on EG7 post its Q3-results which came in stronger than expected while it also saw a solid start to Q4 as well as a positive outlook for the rest of the year. We increase our estimates on the back of the strong performance and slightly lift our valuation range where the increased estimates are counter-acted by increased assumptions for the risk-free rate.
Hjalmar Ahlberg
Tomas Otterbeck
Strong Q3-results
EG7 reported stronger-than-expected Q3-results with both stronger growth and better profitability driven by solid performance in the Game segment. The strong performance in Games resulted in a group EBITDA-margin of 25% which was much stronger than our estimate of 19%.
Positive outlook for Q4 2022
The company also saw a solid start to Q4 with revenue of SEK148m in October. With positive seasonality coupled with upside potential from the viral success of Big Blue Bubbles game My Singing Monsters the outlook for the rest of the quarter is strong as well. This is reflected in the company's increased guidance where the new revenue guidance is increased from SEK1.6bn-1.7bn to SEK1.8bn.
Increased estimates and valuation range
On the back of increased estimates following the strong report coupled with the cash injection from the divestment of Innova we increase our valuation range on EG7. Our new base case stands at SEK41 (SEK39) where the increased estimates are also counter-acted by higher assumptions for the risk-free rate.
| SEKm | 2020 | 2021 | 2022e | 2023e | 2024e |
| Revenues | 569.5 | 1,670.7 | 1,816.9 | 1,865.0 | 2,004.9 |
| Revenue Growth | 904% | 193% | 8.8% | 2.6% | 7.5% |
| EBITDA | 12.3 | 380.5 | 444.7 | 418.7 | 444.3 |
| EBIT | -3.7 | 290.3 | 346.8 | 306.8 | 324.0 |
| EBIT Margin | -0.6% | 17.4% | 19.1% | 16.4% | 16.2% |
| Net Income | -98.1 | 97.1 | -127.1 | 102.6 | 115.5 |
| EV/EBIT | -2,392 | 10.2 | 5.6 | 5.9 | 5.0 |
| EV/EBITDA | 712 | 7.8 | 4.4 | 4.3 | 3.7 |
| P/E | -99.6 | 16.0 | 9.7 | 9.7 | 9.2 |
Solid Q3-results
EG7 reported revenue of SEK445m for Q3 2022 which was 11% above our forecast of SEK400m. The stronger-than-expected topline was driven by the Game segment which beat our revenue forecast with 18% while Service revenue was in line with expectations. EBITDA came in at SEK113m representing a margin of 25% which was much stronger than our EBITDA forecast of SEK75m and margin of 19%. The strong margin was also mainly driven by the Game segment with a continued strong performance from Big Blue Bubble which had an EBITDA-margin of 63% in the quarter.
Strong cash flow
Disclosures and disclaimers