Bublar Group
Bublar Group - Consolidating the XR space (ABG Sundal Collier)
2020-06-29 06:52
M&A driven growth story within XR software
Forecast ’22e sales of SEK 330m, 7.0% EBITDA margin
SOTP fair value range of SEK 2.8-7.9 per share
Riding on the back of strong structural trends in XRThe Bublar Group is a conglomerate currently consisting of four companies, which is leveraging its proprietary technology within extended reality (XR), augmented reality (AR), motion capture and visual effects (VFX), with the ambition of becoming the global leader within the space. The group implements an M&A-driven growth strategy, recently adding ~SEK 200m in sales by acquiring the award winning VFX studio Goodbye Kansas Studios. Bublar’s underlying markets are exhibiting rapid growth, following increased adoption of its key technologies and expansion of applicable areas, where for example the XR market is expected to grow at a CAGR of ~65% between 2019 and 2025, according to Mordor Intelligence.
Set to reap the rewards of continued software investments
We anticipate that Bublar Group will experience accelerated growth in our forecast period. Key drivers are: the commercialization and appropriate packaging of its platforms via Vobling and Sayduck, the imminent release of Otherworld Heroes and Hello Kitty AR: Kawaii World from Virtual Brains, and Goodbye Kansas Studios opting to enter more extensive framework agreements with its key customers and leveraging its proprietary software through a licensing model. As such, we estimate that revenue will increase from SEK 144m in ’20e to SEK 330m in ’22e, with an EBITDA margin of 7.0% in ‘22e. We point out that Goodbye Kansas Studios was included in the group from 1 May 2020.
EV/sales 2.2x-0.9x for ’20e-’22e, SOTP SEK 2.8-7.9 per share
We utilise a sum-of-the-parts valuation in order to determine a fair value range for Bublar Group, given that the company’s segments differ quite a bit. By discounting our ‘21 sales estimates with a WACC of 12.0%, and applying a range of relevant peer multiples, we find a fair value range of SEK 2.8-7.9 per
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