Embracer Group
Embracer Group - Seasonally strong quarter ahead (ABG Sundal Collier)
2020-01-19 20:06
Solid Q3’19/20e expected; however, we adjust…
…estimates due to FF VII, Shenmue III & Biomutant
EV/operational EBIT 17.3x-11.8x for ’19e-‘21e
Q3’19/20e: sales of SEK 1,535m, Op. EBIT SEK 363mFor Q3’19/20e, we estimate a top line of SEK 1,535m for total y-o-y growth of 11.2%. On a segment level, we estimate revenues of SEK 550m from Deep Silver, driven by strong back catalogue sales from Metro Exodus and Kingdom Come: Deliverance as well as the new release of Shenmue III. For THQ Nordic, we estimate sales of SEK 325m, driven mainly by the release of Darksiders Genesis on Steam and Google Stadia in combination with strong back catalogue sales from Wreckfest. For Coffee Stain, we forecast sales of SEK 60m, mainly driven by Satisfactory, which has claimed a spot on the Epic Game Store top sellers list for several weeks. In terms of Partner Publishing, we forecast sales of SEK 600m, driven by the seasonally strong Sep-Dec period, along with stronger than expected sales for F1’19. As such, the total contribution from the Games segments amounts to SEK 935m, or 61% of total revenues. This should provide strong margins for the quarter, and we forecast a gross margin of 50.1%, contributing to our operational EBIT estimate of SEK 363m, for a margin of 23.6%.
Estimate revisions due to FF VII, Shenmue III & Biomutant
We lower our revenue estimate for Deep Silver from SEK 625m to SEK 550m in Q3’19/20e, mainly due to Shenmue III performing below our expectations. Furthermore, as no official release date has been announced for Biomutant, we have pencilled in a release in the next financial year instead of Q4’19/20e. Lastly, due to a delay of Square Enixs’ Final Fantasy VII remake, we now pencil in a release in Q1’20/21e instead of Q4’19/20e. See page 3 for more details.
EV/Op. EBIT 17.3x-11.8x for 2019/2020e-2021/2022e
Based on our updated estimates, Embracer is trading at an EV/operational EBIT of 17.3x-11.8x for 2019/2020e-2021/2022e. This is a discount of 23.1% compared to the 3-year
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