GiG: Outlook remains strong, split of business could create valuation upside
Research Update
2023-02-24
07:37
Redeye updates on GiG following its Q4-results which came in slightly above expectations. The outlook also remains strong with continued potential for topline growth and margin improvement going forward and we make limited changes to our estimates. However, the main news was the initiated strategic review with purpose of splitting its Media and Platform business in two independent listed companies which has potential to increase the value of the group in our view.
Hjalmar Ahlberg
Anton Hoof
GiG's Q4-results came in slightly above our expectations driven by strong performance in the Media segment which saw both stronger growth and profitability than expected. However, Platform came in slightly lower than our forecast and we have assumed a slightly slower ramp-up of margin improvement during 2023-24E.
In connection with the Q4-results, GiG also announced that it is initiating a strategic review with purpose of splitting its Media and Platform business in two independent listed companies. The company sees potential for the business to grow faster as separate businesses and in our view a separation could potentially also create valuation upside.
Overall, we have made limited changes to our estimates, although the slightly slower ramp-up of profitability in the Platform segment results in EBITDA being trimmed with 4% for 2023-24E. Our valuation range remains unchanged with a base case of SEK45 which implies an EV/EBITDA multiple of 11x 2023E while the share currently trades at c7x EV/EBITDA 2023E.
| EURm | 2021 | 2022 | 2023e | 2024e | 2025e |
| Revenues | 66.8 | 90.1 | 119.8 | 142.3 | 167.2 |
| Revenue Growth | 28.0% | 34.9% | 33.0% | 18.8% | 17.5% |
| EBITDA | 20.7 | 32.5 | 52.3 | 67.4 | 80.8 |
| EBITDA Margin | 31.0% | 36.1% | 43.6% | 47.4% | 48.3% |
| EBIT | 7.0 | 11.9 | 25.5 | 40.6 | 54.0 |
| EBIT Margin | 10.4% | 13.2% | 21.2% | 28.5% | 32.3% |
| Net Income | 0.35 | 5.8 | 16.1 | 30.9 | 41.6 |
| EV/EBIT | 25.0 | 32.5 | 15.0 | 8.7 | 6.0 |
| EV/EBITDA | 8.4 | 11.9 | 7.3 | 5.2 | 4.0 |
GiG reported revenue of EUR26.0m in Q4 2022 which was above our forecast of EUR25.4m. The beat was mainly driven by the Media segment which saw revenue of EUR17.8m compared to our forecast of EUR17.0m. Platform reported slightly lower revenue than we estimated coming in at EUR8.2m compared to our estimate of EUR8.5m.
On EBITDA, the company reported EUR10.8m which was 6% above our forecast also driven by the Media Services segment reporting an EBITDA of EUR8.9m (we estimated EUR8.1m). The strong profitability in the Media Segment (EBITDA-margin of 50% compared to our forecast of 48%) was achieved despite an increased marketing spend driving a strong FTD intake of 115.9k creating potential for continued growth in 2023.
Disclosures and disclaimers