G5 Entertainment: Weaker sales, strong cash flow - ABG

Sales -6%, adj. EBIT -11% vs. FactSet consensus in Q3
We expect consensus to lower EBIT estimates by 2-4% on '25e-'26e
Highlights positive momentum m-o-m in October, share trades at 4x EBIT '24e


Q3 details

Sales SEK 270m (-6% vs ABGSCe 286m and -6% vs cons 287m), adj. EBIT SEK 23m (-11% vs ABGSCe 26m and -11% vs cons 26m), net profit SEK 24m (-3% vs ABGSCe 25m and 2% vs cons 24m), organic growth -14% y-o-y. Negative growth trend continues, but EBIT margin increased y-o-y (8% vs. 7% Q3'23) supported by a higher gross margin (69% vs. 68% Q3'23) driven by high growth in G5 Store (27% y-o-y, organically) and free cash flow was also strong at SEK 57m leading to a YTD free cash flow of SEK 158m, compared to SEK 78m YTD EBIT. Encouragingly, management highlighted that it has seen a significant m-o-m increase of sales in October, for the first time since 2020. It also said that it is progressing with its goal of releasing one new game globally this year.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/g5-entertainment/Equity-research/2024/11/g5-entertainment---weaker-sales-strong-cash-flow/