Original-Research: Media and Games Invest SE - from GBC AG

Classification of GBC AG to Media and Games Invest SE

Company Name: Media and Games Invest SE

ISIN: SE0018538068

Reason for the research: Research study (Note)

Recommendation: BUY

Target price: 4.50 EUR

Last rating change:

Analyst: Marcel Goldmann, Cosmin Filker

FY 2023 closed with solid sales performance; strong new customer business

ensured significant organic growth; return to dynamic growth path expected;

price target raised to EUR 4.50; buy rating confirmed


Sales and earnings development 2023


On 29 February 2029, Media and Games Invest SE (MGI) published its

preliminary business figures for the past financial year 2023. According to

these figures, the technology company achieved solid revenue growth

compared to the previous year (PY: EUR 324.44 million) with its fully

integrated advertising software platform (ad tech platform), generating

revenue of EUR 321.98 million. The majority of revenue was generated by the

traditionally largest advertising segment 'Supply Side Platform' (revenue

share of SSP: 93.6%) with revenue totalling EUR 301.39 million (PY: EUR 298.88



On a comparable basis, the company reports a moderate increase in

consolidated sales of 5.0%, which achieved a particularly high growth rate

of 16.0% in the final quarter, traditionally the strongest quarter in terms

of sales. The sales growth achieved was mainly due to an increase in the

software customer base and the volume of advertising placed. The number of

customers on MGI's digital ad tech platform increased dynamically by 18.9%

year-on-year to 2,276 at the end of the fourth quarter (number of customers

at the end of Q4 2022: 1,915). At the same time, the volume of digital

advertising delivered increased significantly by 19.1% to 206 billion at

the end of the fourth quarter (advertising ads at the end of Q4 2022: 173



Thanks to the significant expansion of the software customer base and the

substantial increase in advertising volume, the company was able to hold

its own and even gain market share despite a previously difficult market

situation (low CPMs, subdued advertising budgets, etc.). The company's

further improved market position in the mobile sector is also reflected in

the market-leading positions on iOS and Android with a market share of

12.0% and 12.0% respectively, according to the industry experts at

Pixalate. Accordingly, we believe that MGI has outperformed the advertising

industry as a whole and the overall advertising market.


In terms of earnings, MGI achieved growth at all earnings levels, primarily

due to the revaluation of the AxesInMotion earn-out payment liability

(positive one-off effect of EUR 62.76 million). EBITDA increased dynamically

by 51.6% to EUR 128.46 million (PY: EUR 84.75 million) compared to the previous

year. Adjusted for special effects (e.g. M&A and restructuring costs or

revaluations of balance sheet items), adjusted EBITDA (Adj. EBITDA)

totalled EUR 95.20 million, a slight increase compared to the previous year

(PY: EUR 93.20 million).


The adjusted EBITDA margin (Adj. EBITDA margin) increased to 29.6% (PY:

28.7%). This increase in profitability reflects the first positive effects

of the savings programme launched last year, which is expected to generate

annual cost savings of around EUR 10.0 million once successfully implemented.

We believe that the majority of the planned savings effects should already

materialise in the current 2024 financial year.


In terms of net performance, a consolidated result (after minority

interests) of EUR 46.73 million was achieved, which was significantly above

the previous year's level (PY: EUR -20.32 million). This significant increase

in net income was mainly due to the positive one-off effect from the

revaluation of an M&A-related payment obligation described above. In

addition, a relatively low tax expense ratio also favoured their positive

earnings development.


The company guidance adjusted by MGI management in the third quarter of

2023 (sales of EUR 303 million and adjusted EBITDA of EUR 93.0 million) was

therefore exceeded. Our sales estimate (sales: EUR 303.21 million) and

adjusted EBITDA forecast (adjusted EBITDA: EUR 93.07 million) were also



Forecasts and evaluation


With the publication of the preliminary figures, MGI's management has also

provided a rough outlook for the current financial year, although this

guidance will be further specified as the year progresses. In view of a

strong fourth quarter (organic growth Q4 2023: 16.0%) and an even more

dynamic start to the year (organic growth Jan. 2024: 18.0%), MGI expects

double-digit percentage growth in consolidated sales for the current

financial year 2024. At the same time, an improvement in earnings is also



In light of the positive company outlook, the increased (organic) growth

momentum and the expected recovery of the advertising market, we have

adjusted our previous sales and earnings estimates upwards. Accordingly, we

now expect revenue of EUR 352.18 million (PY: EUR 324.74 million) and EBITDA of

EUR 100.08 million (PY: EUR 95.56 million) for the current financial year. For

the following financial year 2025, we are forecasting sales of EUR 389.51

million (PY: EUR 357.66 million) and EBITDA of EUR 113.35 million (PY: EUR 108.49

million). With regard to the 2026 financial year, which we have included in

our detailed forecast period for the first time, we anticipate a further

increase in sales and EBITDA to EUR 437.03 million and EUR 130.67 million



Overall, we therefore assume that MGI will succeed in returning to a

dynamic growth trajectory with its leading ad tech platform. The company's

strong positioning in the in-app and CTV segment in particular should prove

to be one of the main growth drivers. In terms of earnings, the

cost-cutting programme launched by the company last year should take full

effect from the current financial year onwards and thus provide an

additional boost to future earnings.


As part of our DCF valuation model, we have raised our price target to EUR

4.50 (previously: EUR 4.05) per share due to our increased sales and earnings

estimates. An even higher price target increase was counteracted by higher

capital costs (risk-free interest rate currently 2.50%, instead of 2.00%

previously). In view of the current share price level, we therefore

continue to give the stock a 'BUY' rating and see significant upside




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Date (time) of completion: 04/03/2024 (8:20 am)

Date (time) of first distribution: 04/03/2024 (10:00 am)

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The result of this research does not constitute investment advice

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