G5 Entertainment
G5 Entertainment - Focus on decline of main revenue contributor (ABG Sundal Collier)
2019-01-20 11:00
Declining gross rankings for G5 games on iOS
Lower estimates for ’19e, EBIT cut by 19.9%
Postponed release of G5-developed new games
Lower gross rankings on iOSWe expect Q4e sales of SEK 357m, corresponding to a q-o-q growth rate of 4.4%. Y-o-y growth remains flat, however. We have cut our estimates due to the continued declining gross rankings on iOS for the majority of G5’s games. This is the third quarter in a row with declining gross rankings for Hidden City, which solidifies our previously stated view that the game’s sales have peaked. We have adjusted our Q4e EBIT estimate to SEK 25m, corresponding to an EBIT margin of 7.0%, which represents a y-o-y margin increase of 2.5pp.
’19e estimates cut, to reflect new outlook
The declining gross rankings on iOS, coupled with the postponed release of several internally developed games, have caused us to revise our estimates for ’19e. We have cut our sales estimate for ’19e by 10.7%, and our EBIT estimate by 19.9%. As such, we anticipate that ’19e sales will remain flat y-o-y at SEK 1,472m, and that EBIT will come in at SEK 140m, corresponding to a margin of 9.5%. We expect that UA for ’19e will be slightly lower than ’18e, at 24.5% of sales, as the peak of ‘Hidden City’ is recognised by G5.
China ends licensing freeze
China is once again granting new gaming licenses, bringing an end to the licensing freeze that has halted game approvals since March ’18. Chinese media regulators have granted gaming licenses to 84 new games in the beginning of Q1’19. The freeze was implemented in an attempt to combat health concerns associated with gaming addiction among the country’s youth. The licensing freeze may have adversely affected the sales of G5’s games that were released in ’18.
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