Original-Research: Media and Games Invest plc - von GBC AG
Einstufung von GBC AG zu Media and Games Invest plc
Unternehmen: Media and Games Invest plc
Anlass der Studie: Research Note
Kursziel: 7.35 EUR
Analyst: Marcel Goldmann, Cosmin Filker
Jump in revenue and earnings in the first quarter of 2021; the largest growth pipeline in the company's history ensures further dynamic growth; the expected recovery of the advertising market offers additional growth potential for the Group's own digital advertising division, increase in forecasts and price target
Turnover and earnings development in the first quarter of 2021
After Media and Games Invest plc (MGI) published its preliminary business figures for 2020 at the end of February 2021, the company has now also recently announced its business figures for the first quarter of 2021. According to these figures, the MGI Group has continued its dynamic growth course with a quarterly revenue increase of 96.0% year-on-year to EUR 51.90 million (Q1 2020: EUR 26.50 million) and at the same time was able to record another record quarter.
The significant increase in turnover was based on both organic growth (38.0%) and inorganic growth (58.0%). The latter was driven by the two most recent acquisitions of KingsIsle and LKQD. It is worth mentioning that KingsIsle was the largest M&A transaction in the company's history. Accordingly, this single acquisition contributed significantly to the increase in Group turnover in the first quarter of 2021 with approx. EUR 8.80 million (share of Group turnover: approx. 17.0%).
The significant increase in Group revenue was driven in particular by the Gaming segment, traditionally the largest business area. In this segment, the company achieved a jump in revenue of 97.1% to EUR 27.40 million in the first quarter of 2021 (Q1 2020: EUR 13.90 million). In addition to the KingsIsle acquisition, the main reasons for this positive development were several large content updates in combination with increased user acquisition.
In addition, the media division also made a strong contribution to the increase in Group revenue with dynamic revenue growth of 94.4% to EUR 24.50 million (Q1 2020: EUR 12.60 million). This pleasing development was primarily due to customer relationships with gaming companies and the media company LKQD (provider of an advertising video platform), which was acquired in the first quarter.
Through the acquisition of this video platform provider, the advertising division (Verve Group), which focuses very strongly on digital advertising, was additionally strengthened and thus has an even broader range of advertising formats and advertising services at its disposal and can therefore serve any customer wishes or market trends even more comprehensively. In addition, the MGI Group expects that the advertising division will also benefit from a significant recovery of the media market after the foreseeable end of the pandemic.
MGI also announced that it currently has the largest organic growth pipeline in the company's history. This includes several projects and products in both the games and media sectors. Specifically, this includes the launch of the games Heroes of Twilight and Skydome as well as the market entry of the advertising division (Verve) in Japan, the third largest advertising market in the world.
In the course of the published quarterly figures, the company also announced that it expects strong growth for both the gaming and media divisions in the current financial year compared to the previous year. This outlook is thus also in line with the medium-term targets announced by the company, which envisage an average revenue growth rate of 25.0% to 30.0% (CAGR) and an adjusted EBITDA margin of 25.0% to 30.0% as well as an adjusted EBIT margin of 15.0% to 20.0%.
Parallel to the rapid development of turnover, a dynamic development of earnings was also achieved. In the first quarter of 2021, EBITDA increased by around 128.0% to EUR 12.10 million (Q1 2020: EUR 5.30 million) compared to the same period of the previous year. EBITDA adjusted for one-off effects (e.g. special and restructuring costs from M&A transactions) also increased significantly by around 129.0% to EUR 13.50 million (Q1 2020: EUR 5.90 million) compared to the same quarter of the previous year. The adjusted EBITDA margin amounted to 26.0% and was thus also significantly expanded compared to the same quarter of the previous year (Q1 2020: 22.0%).
Forecasts and evaluation
MGI's first-quarter 2021 results were well above our expectations. In view of the very good performance at the start of the year and the largest growth pipeline in the company's history announced by the company and the expected strong recovery of the advertising market, we have raised our previous estimates significantly.
For the current financial year 2021, we now expect revenues of EUR 202.30 million (previously: EUR 173.55 million) and an EBITDA of EUR 52.81 million (previously: EUR 47.42 million). For the following financial year 2022, we also calculate with significantly higher revenues and expect a further increase in revenues to EUR 255.10 million (previously: EUR 199.88 million) and an EBITDA of EUR 69.90 million (previously:
EUR 55.92 million). For the following year 2023, which we have included in the concrete estimation period for the first time, we expect revenues of EUR 319.39 million and an EBITDA of EUR 92.94 million.
Our forecast increases for the 2022 and 2023 financial periods are also based on two other factors. Firstly, the increase in estimates for the 2021 financial year results in a higher starting point for the subsequent years. In addition, our previous estimates were always below the corporate outlook and thus had a significantly more conservative character. In view of the fact that our previous forecasts were regularly significantly exceeded, we are now moving much closer to the corporate guidance (see above medium-term planning of the MGI Group).
Within the framework of our DCF valuation model, we have determined a new price target of EUR 7.35 per share based on our raised estimates for the 2021 and 2022 financial years and the first-time inclusion of the 2023 financial year in our detailed estimation period, thus significantly raising our previous price target (previously: EUR 5.15 per share). In view of the current share price level, we continue to assign a Buy rating and see significant upside potential.
Overall, we continue to see the company in a good strategic position to continue its dynamic growth course in both high-growth business segments (gaming, digital advertising). In particular, the group's own advertising division should be able to benefit not only from the growth in digital advertising, but also from the growth potential resulting from the expected recovery of the advertising market in the 'post-Corona phase'. In addition, the MGI Group's high cash reserves (end of March 2021: EUR 51.70 million) put it in a position to further increase the pace of growth through targeted acquisitions and thereby additionally strengthen the Group's profitability.
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Date (time) of completion: 03/05/2021 (16:44 pm)
Date (time) of first distribution: 04/05/2021 (10:00 am)
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