G5 Entertainment: Getting more for the (buyback) money - ABG

Q3 due 8 Nov, we expect weaker growth
A bit more cautious on growth and profitability
Share trading at 8x P/E and 7x EV/FCF on '23e


Q3e: Softer growth, lagging the mobile games market

We expect G5 has lagged the mobile market slightly during Q3, mainly because of a weaker performance for Sherlock. After a strong 2022, Sherlock stabilised in Q1 but then declined a bit sequentially in Q2 and Q3. This should be expected for a game now two years old, but also means that G5 is lacking growth drivers currently. Fortunately, Hidden City and the rest of the portfolio seem to be stable, which means sales should hold up relatively well. G5 still expects one or two new global launches in Q4, which could be incremental growth drivers. We forecast SEK 322m in sales in Q3, a 3% decline q-o-q (-5% organic, +2% FX), vs. +2% market growth (Sensor Tower est.). Part of the sequential decline is due to seasonality, but also weaker sales for Sherlock. We forecast most cost items to remain stable q-o-q, including user acquisition at 19% of sales, for an EBIT of SEK 35m (11% EBIT margin).

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/g5-entertainment/Equity-research/2023/10/g5-entertainment---getting-more-for-the-buyback-money/