Gentoo Media: On track to achieve FY guidance - ABG
- Q3 trading update and reiterated FY guidance...
- ...driving small downgrades; we highlight great resilience...
- ...compared to affiliate peers; 12% org. sales CAGR '24e-'26e
Gentoo delivering best-in-class growth and margins
After two affiliate peers, Betco and CTM, announced large profit warnings for Q3, Gentoo Media gave a trading update for Q3 with top-line growth of 35% (ABGSCe organic growth of 4%) and a margin of 46-48%. Looking at the mid-point margin, Gentoo was 'only' 7% below our adj. EBITDA estimate, and it reiterated its full-year sales guidance plus an expected adj. EBITDA margin guidance of 45-50%. We note that the adj. EBITDA has likely been hurt by costs related to the spin-off of GiG Software, which has previously not been adjusted for. As such, considering the apparent shaky market dynamics following its peers' profit warnings, we are encouraged by the comparatively strong Q3 numbers, and implied Q4 expectations, when we estimate sales will rise 22% q-o-q. We expect organic growth to accelerate in Q4 to 14% with a margin of 49% for 46% adj. EBITDA growth.
Small cuts as we look for 12% org. sales CAGR '24e-'26e
We make small estimate downgrades after the slightly lower-than-expected Q3 sales. After '24e, we forecast a 12% '25e-'26e organic sales CAGR, and an adj. EBITA CAGR of 19%.
Trading at ~4.5x '25e EV/EBITDA, just below peers
Gentoo is trading at 4.5x '25e EV/EBITDA on our updated estimates, which is just below our affiliate peer group median of 5.1x. However, we estimate a 22% '24e-25e sales CAGR for Gentoo, which can be compared to our peer group's median of 8%. In addition, we again highlight Gentoo's apparent resilience compared to its peers, where several have seen significant hits to their earnings outlooks, e.g., seen in Betco and CTM's recent big profit warnings, where Gentoo reiterated its FY'24 sales guidance with significantly better growth. Gentoo will report its full Q3 on November 13.
Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/gentoo-media/Equity-research/2024/10/gentoo-media---on-track-to-achieve-fy-guidance-/