G5 Entertainment: Decelerating growth in Q2e - ABG

We expect a bit weaker organic growth in Q2
We cut FCF by 6%, 4% and 6% for '23e, '24e and '25e
Share trading at 10x P/E and 9% FCF yield on 2023e


-9% organic growth in Q2e vs. -7% in Q1

Despite a sequential improvement in the overall market according to Sensor Tower (we estimate -5% market growth in Q2 vs. -8% in Q1), we expect G5's organic growth to slow a bit in Q2 (-9% in Q2 vs. -7% in Q1), for SEK 335m in sales. The reason is a continued decline in old games while growth in Sherlock is maturing. Looking at app data, we expect Sherlock to decline 1% q-o-q, and other games to decline 4%. While the trend is negative, we think it is encouraging to see that both Hidden City and the Jewels family continue to be relatively stable. Furthermore, we forecast SEK 35m in EBIT for a margin of 10.5% compared to 11.5% in Q1 — a lower margin owing to flat opex but 3% lower sales q-o-q. We forecast that the user acquisition cost will remain at the low end of guidance, at 18% of sales, similar to Q1.

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