G5 Entertainment: Initiates new buybacks - ABG

Authorised to repurchase 5% of shares…
… while the share trades at 13% FCF yield on 2023e
Investments in Sherlock looks promising

Authorised to acquire additional 5% of shares outstanding
G5 announced that it will exercise its right to repurchase shares, which was authorised by the AGM on 15 June. The purpose of this is to give the board more possibilities to create shareholder value, but also to use own shares as payment for potential future acquisition or use them in incentive programs to mitigate share dilution. The AGM has authorised the board to acquire up to ten percent of the shares outstanding, meaning that it could acquire an additional 395.000 shares until the next AGM, which correspond to 5% of the current share count.

Share trading at 13% FCF yield on 2023e
We find it encouraging that the company will continue with buybacks when it is sitting with SEK 190m in cash on the balance sheet while trading at 13% FCF yield on 2023e. This initiative also sends a message that the situation in Ukraine and Russia is stable enough for G5 to pursue more aggressive shareholder friendly investments.

Investment in Sherlock is bearing fruit
On another note, the initial takeaways from the significant UA investment in Sherlock looks promising. By looking at performance trackers on mobile platforms, we estimate a significant uptick in downloads for the game from the end of April/early May, which has started to manifest itself in a sales uptick in June. It is still too early to draw any conclusions, but we estimate Sherlock to grow sales by 15-20% q-o-q in Q2’22e. By Q4’22e, we estimate that Sherlock will do SEK 100m in quarterly sales.
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