Partner Publishing drives sales beat of 46% vs ABGSCe

Consensus EBIT estimates probably up 5-10% for 2018e

Acquires Coffee Stain and Bugbear Entertainment

The supposed calmer Q3 caught us by surprise
Sales came in at SEK 1,273m (46% vs ABGSCe, 22% vs FactSet cons), driven by strong performance for the Partner Publishing (PP) business. PP delivered sales of SEK 897m (537m) vs ABGSCe of SEK 580m. That was also a q-o-q improvement of SEK 543m. The other explanation to the sales beat was better performance from Deep Silver, with sales of SEK 252m (326m) vs ABGSCe of SEK 160m. The performance was probably driven by a strong end to the quarter and higher sales of old titles than we anticipated. All in all, the highs for PP and lows for Deep Silver are both higher than we believed.

Consensus EBIT estimates probably up 5-10% for 2018e
Looking forward to Q4, we expect the main driver of sales to be THQ Nordics game development, and today’s report had no effect on our view for Q4 on the segment. Although still early, we think that consensus EBIT estimates will come up around 5-10% for the current reporting year.

Continues to consolidate
In addition to the report, two new acquisitions were announced; Coffee Stain and Bugbear Entertainment. The former will add around SEK 200m-250m with EBT of SEK 100m-150m to the next reporting year, and the purchase price amounted to SEK 317m. What Bugbear will contribute is not known, but it is probably smaller than Coffee Stain. It is a Finnish developer with 18 employees that develops racing games and is known for Wreckfest, a game which THQ Nordic published with great success.

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