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 (Anno)

Recommendation: BUY

Target price: 4.50 EUR

Last rating change:

Analyst: Marcel Goldmann, Cosmin Filker

Financial year 2023 with solid operating performance finalised; Return to

organic growth is expected for the 2024 financial year; Expansion of the

digital advertising platform business should enable significantly

profitable growth in future; Target price: EUR 4.50 (previously: EUR 4.50);

Rating: BUY


According to its published business figures, the MGI Group achieved a solid

sales performance in the past financial year 2023 despite a difficult

environment and market situation, generating sales of EUR 321.98 million (PY:

EUR 324.44 million). On a comparable basis, organic sales even increased by

5.0% compared to the previous year. A particularly high organic sales

growth rate of 16.0% was achieved in the final quarter, which is

traditionally the strongest quarter in terms of sales. The main

contributors to this growth were the 18.9% increase in the software

customer base to 2,276 customers at the end of the financial year (end of

2022: 1,915) and the 19.1% increase in the volume of digital advertising

delivered to 206 billion (advertising ads at the end of FY 2022: 173.0

billion). The renewed improvement in MGI's market position in the mobile

sector is also reflected in the market-leading positions on iOS and Android

with a US market share of 12.0% on both platforms according to the industry

experts at Pixalate. This means that the previously adjusted company

guidance (sales of EUR 303.0 million) and our sales estimate (GBCe: EUR 303.21

million) were exceeded.


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). Accordingly, 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, which was slightly above the previous

year's level (PY: EUR 93.20 million). The adjusted EBITDA margin (Adj. EBITDA

margin) also increased to 29.6% (PY: 28.7%). This increase in profitability

reflected the first positive effects of the cost-cutting programme

initiated last year, which should enable annual cost savings of around EUR

10.0 million once successfully implemented. Accordingly, the adjusted

earnings guidance (adjusted EBITDA: EUR 93.0 million) and our earnings

estimate (adjusted EBITDA: EUR 93.07 million) were exceeded.


In view of a strong fourth quarter (organic growth Q4 2023: 16.0%) and an

even stronger performance in the first quarter (organic growth Q1 2024:

21.0%), MGI's management is positive about the current financial year 2024

and expects double-digit growth and an improvement in the earnings

situation. Based on the recent concretisation of the guidance with the

publication of the Q1 business figures, MGI now expects sales revenues in a

range of EUR 350.0 million to EUR 370.0 million and an adjusted EBITDA (Adj.

EBITDA) of between EUR 100.0 million and EUR 110.0 million.


As part of the publication of our research study on the preliminary annual

results for 2023, we adjusted our previous sales and earnings forecasts

upwards due to the positive outlook, the increased (organic) growth

momentum and the expected recovery of the advertising market. In view of

their strong Q1 performance, their sustained high growth momentum and the

confirmation of the positive outlook, we are confirming our previous sales

and earnings estimates for the current financial year and subsequent years.

Accordingly, we continue to expect sales of EUR 352.18 million and EBITDA of

EUR 100.08 million for the current financial year 2024. For the subsequent

financial years 2025 and 2026, we expect sales (EBITDA) of EUR 389.51 million

(EUR 113.35 million) and EUR 437.03 million (EUR 130.67 million) respectively.


MGI recently announced its intention to change the company name to Verve.

The media business is already operating under this name. The name change

marks the successful completion of MGI's transformation into a leading

digital media company. At the same time, plans were announced to expand the

Board by one person and to appoint two new Board members with proven media

expertise. Greg Coleman (USA) was President and Board Member at the

Huffington Post, BuzzFeed and Criteo, among others, and Peter Huijboom

(Netherlands) was CEO Global Media and CEO Global Clients at the

advertising agency Dentsu. Both announcements reflect the clear focus on

the further expansion of the advertising business, but are still subject to

the approval of the Annual General Meeting.


Overall, the MGI Group should be able to significantly increase the pace of

growth compared to the previous year thanks to its good market positioning

(especially in the US market) and the expected recovery of the advertising

market. Its innovative customer solutions (AI targeting solutions, etc.) in

particular should make a significant contribution to boosting its customer

base and ad tech platform revenue in the future.


Based on our unchanged forecasts for the current financial year 2024 and

the following years, we have maintained our previous price target of EUR 4.50

(previously: EUR 4.50). In view of the current share price level, we

therefore continue to assign a 'BUY' rating and see significant upside

potential in the MGI share. The results of our peer group analysis (see p.

20) also support our assessment of the attractiveness and upside potential

of MGI shares.


You can download the research here:


Contact for questions


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Date (time) of completion: 16/05/2024 (8:20 am)

Date (time) of first distribution: 16/05/2024 (11:00 am)

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The result of this research does not constitute investment advice

or an invitation to conclude certain stock exchange transactions.