Embracer Group
Embracer Group - Solid beat vs. consensus Adj. EBIT in Q4 (ABG Sundal Collier)
2020-05-20 07:14
Adj. EBIT +12.2% vs. ABGSCe and +8.3% vs. cons…
…but new AAA-titles pushed into next FY
EV/Adj. EBIT of ~20x (ABGSCe) for 2020/2021e
Q4’19/20 detailsEmbracer delivered a strong quarter today which offered a beat versus consensus expectations, with Adj. EBIT of SEK 286m, +12.2% vs. ABGSCe and +8.3% vs. consensus, driven by a stronger than expected contribution from the high-margin Games segment, which contributed SEK 904m, exceeding the pre-announced range of SEK 810-850m, corresponding to 67.5% of revenues, +11.3pp vs. ABGSCe. 78% of Games sales were, digital, driven by the increase in demand for digital games following the COVID-19 lockdown. Management claims that the boost in consumer activity has continued, and increased, in the current quarter. Net sales amounted to SEK 1,339m, +3.7% vs. ABGSCe and +3.6% vs. consensus, which we estimate was driven by back catalogue sales from the Metro Exodus release on Steam and Wreckfest, but also new releases such as Hunt: Showdown on PS4, Satisfactory Update 3 on Epic Games Store, and Darksiders Genesis.
AAA-titles pushed into next FY, but Q1 has potential
Management wording in the report suggest that the two AAA-titles previously slated for release in this FY has been pushed into the next FY. Looking at Q1’20/21e, due on 13 August, we see a potentially strong contribution from the Games segment in. Embracer has several new releases within the Games segment, including SnowRunner from the latest acquisition Sabre Interactive – which appears to have been performing well on PS4/XONE, with ~500k copies sold by 10 May according to Gamstat – but also Desperados 3, to be released on 16 June, and SpongeBob SquarePants: Battle for Bikini Bottom, slated for 23 June, amongst others.
Final thoughts
Embracer’s share has been a strong run recently, and is up approximately ~65% since the trough on 16 March, as the company’s trading update confirmed increased player engagement and demand for digital products. There is a conference call/web
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