Increased sequential growth in sight for Q4’19e…

…as Jewels of Rome solidifies revenue contribution

DCF range of SEK 70-207 per share

Q4’19e: sales of SEK 324m alongside EBIT margin of 6.6%
For Q4’19e we forecast sales of SEK 324m, for a q-o-q growth rate of 7.3%, but a negative y-o-y growth rate of -5.0%. In Q3’19 we witnessed the first q-o-q growth since Q2’18, as Jewels of Rome climbed the gross ranking lists and claimed a spot as a top three revenue contributor for G5. Since then, Jewels of Rome has solidified its position, becoming the clear number two revenue contributor as the game has climbed the gross rankings in the U.S. and Japan. Hidden City has remained relatively stable on the gross rankings in both countries during Q4’19, so we estimate increased q-o-q sales growth of 7.3%, compared to 1.4% in Q3’19. Additionally, we believe that G5 will once again pay “normal levels” of royalties for Hidden City – where Q3’19 was an anomaly in our opinion – and we forecast a gross margin of 55.5% as G5’s own games comprise a greater part of revenues. We estimate that G5 will spend 29% of revenues on UA in Q4, which is in line with the historical average for Q4, leading us to forecast an EBIT of SEK 22m and a margin of 6.6%. Q4 results will be reported on 12 February.

Two new games revealed since our last update
G5 released its latest game The Hidden Treasures on 18 Dec. 2019, which is a fundamental remake of one of G5’s older games: Nightmares from the Deep. The game is a new hybrid of the Hidden Object and Match-3 genres, and although it is too early to judge the potential of the game, reviews have been favourable so far. Additionally, G5 revealed on 20 Dec. 2019 that it will be venturing into a new genre through the word puzzle game Wordplay: Exercise your Brain, which is set to be released on 16 Jan. 2020.

EV/EBIT 10.9x-4.3x, FCF yield 2.6%-12.1% for ‘19e-‘21e
Following our estimate changes, our DCF scenarios indicate a fair value range of SEK 70-207 per share. Please re
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