Sales of SEK 1,630m, +5.2% vs. ABGSCe

Operational EBIT of SEK 395.9m, +54.6% vs. ABGSCe

Acquisition of German studio Piranha Bytes

Q5’18/Q1’19 reported vs. ABGSCe
THQ reported its Q5’18/Q1’19 today which showed strong sales fuelled by the release of Metro Exodus in February, which appears to have sold more than we expected. Reported net sales was SEK 1,630m, which corresponds to a y-o-y growth rate of 157.6%, driven by acquisitions. This was approximately 5.2% above our estimated net sales of SEK 1,550m. Operational EBIT was SEK 395.9m, which was 54.6% above our estimate of SEK 256m, driven by increased amortization of IP rights and acquisition related goodwill. We had previously estimated that Metro Exodus would sell approximately ~1m copies, and sales of SEK 595m for Deep Silver. However, Deep Silver reported sales of SEK 794m, approximately 33.4% above our estimate, and it thus seems that Metro Exodus has sold closer to ~1.4m copies. According to management, Metro Exodus has sold in line with expectations, and recouped all investment in development and marketing.

THQ acquires Piranha Bytes
In conjunction with the report, THQ announced that it will acquire all the assets that belongs to the group of companies called Piranha Bytes. The acquisition includes the development studio and all IP rights. Piranha is a German game developer which have previously created video game series like Gothic, Risen and ELEX which seem to have gathered favourable reviews according to Metacritic. THQ and Koch Media both have a long-standing relationship with Piranha since 2002, as both have acted as the studio’s publisher for its three major titles. THQ does not disclose the purchase price.

THQ trading at ‘19e EV/EBIT of 29.8x on ABGSCe
At the current share price, THQ is trading at a ‘19e EV/EBIT of 29.8x based on ABGSC estimates. This is approximately 59% above the three-year average NTM EV/EBIT of 18.7x. Based on FactSet consensus estimates, THQ is trading at a ‘19e EV/EBIT of 23.1x, whic
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