BLOCKESCENCE PLC Original-Research: Media and Games Invest plc (von GBC AG): Buy

Directive transparence : information réglementée

23/07/2020 12:01

Original-Research: Media and Games Invest plc - von GBC AG

Einstufung von GBC AG zu Media and Games Invest plc

Unternehmen: Media and Games Invest plc ISIN: MT0000580101

Anlass der Studie: Research Report (Anno) Empfehlung: Buy
Kursziel: 2.85 EUR
Kursziel auf Sicht von: 31.12.2021
Letzte Ratingänderung: -
Analyst: Dario Maugeri, Cosmin Filker

Dynamic growth and strong cash generation in FY2019

Positive impact of COVID-19 on Video Games Sales

Management successful in Optimizing the Value Chain of Games and Digital Media

Media and Games Invest plc (formerly Blockescence plc) completed a very successful financial year in FY 2019 and got off to an excellent start in Q1/2020. Net sales rose by 157.2% to 83.89m in FY2019 while EBITDA increased by 79.8% to 15.54m in FY2019. Although acquisition costs were incurred in the media segment, the successful integration of Trion Worlds and WildTangent led to a substantial EBITDA-increase compared to FY 2018.

The management has implemented a very successful corporate strategy over the last years. Since the acquisition of adspree through gamigo AG in 2016, Mr Westermann (CEO) and Mr. Echt (CFO) have pursued a successful buy and integrating strategy, optimizing the value chain between the two segments. Key improvements are expected in user acquisition and advertising income. This is in contrast to the higher risk development of new games which, however, MGI continues to partly pursue. According to the management statement, as not many competitors are pursuing this strategy, particularly in the gaming sector, MGI may strike lucrative deals. Furthermore, new technologies were implemented in 2019 (i.e. cloud database) with remarkable cost-savings.

Since March 2020, the COVID-19 pandemic has impacted MGI activities. Although on the media side a balance has been visible between customers pausing their budgets and others increasing their spending, the effect for video games was a very positive one. As the population of many parts of Europe and North America had to stay at home, gamigo experienced a strong increase both in new registrations and in player activities. In March 2020 alone, monthly active users increased by 20% compared to January and February 2020. Net sales in Q1/2020, therefore, doubled to EUR 26.55m (PY: EUR 13.33m) while EBITDA grew by 40.3% to EUR 5.31m (PY: EUR 3.79m).

MGI's balance sheet has the typical structure of a technology company. Due to completed acquisitions by the end of the FY 2019, intangible assets reached

EUR 233.21m (74.6% of total assets), including EUR 147.34m in goodwill and EUR 72.67m in other intangible assets. In order to finance this growth, various bonds were issued both at the MGI and gamigo level. At the end of December 2019 bonds on balance amounted to EUR 63.99m for the whole group. In 2020, the company completed the acquisitions of two further media companies strengthening its digital marketing offer. We have noted that the interest coverage rate decreased to 3.3 in Q1/20 compared to 4.5 at the end of 2019. However, MGI has a strong cash generation as shown by the operative cash flows in Q1/20 to EUR 5.87m (EUR 2.48m).

The uncertainty surrounding the COVID 19 pandemic and its impact on the world economy remains difficult to predict. Although we remain prudent, also due to the volatility of the video-game business, based on the positive impact in Q1/20 and expected improvement in earning quality due to synergies and initiated cost-cutting measures, we remain positive as to the development of MGI. Hence, we have estimated a significant revenue growth rate of around 30% which should be followed by an increase in profitability. The acquisitions of Verve Group and Platform 161 in the first half of 2020 have already laid a solid foundation for inorganic growth. We have maintained our BUY rating and accounting 92.12m shares (18.2m more due to gamigo minority acquisition and 3.9m more due to AppLift purchase), we came out with the target price of EUR 2.85 per share (prior: EUR 2.10).  

Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/21247.pdf

Kontakt für Rückfragen
Jörg Grunwald
Halderstraße 27
86150 Augsburg
0821 / 241133 0
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Date (time) of completion: 22.07.2020 (11:20 am) Date (time) of first distribution: 23.07.2020 (12:00 am)

-------------------übermittelt durch die EQS Group AG.-------------------

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