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

Einstufung von GBC AG zu Media and Games Invest SE

Unternehmen: Media and Games Invest SE

ISIN: MT0000580101

Anlass der Studie: Research Note

Empfehlung: BUY

Kursziel: 8.50 EUR

Letzte Ratingänderung:

Analyst: Marcel Goldmann, Cosmin Filker

Continuation of dynamic sales growth in H1 2021; Significant increase in

profitability due to economies of scale and M&A effects; GBC estimates and

target price also raised following increase in company guidance

Business development in HY1 2021

Media and Games Invest SE (MGI) was able to continue its dynamic growth

course in the first six months of the current fiscal year. Compared to the

same period of the previous year, consolidated revenues jumped by 92.6% to

EUR 109.00 million (H1 2020: EUR 56.60 million).

This was mainly due to strong organic growth effects in the Gaming and

Media segments as well as positive revenue synergies within the MGI Group.

In addition, M&A activities (especially the KingsIsle transaction) also

contributed to the positive Group revenue development.

Parallel to this, the consolidated operating result (EBITDA) also increased

significantly by 129.3% to EUR 26.60 million (previous year: EUR 11.60

million) compared with the same period of the previous year. Adjusted for

special effects (e.g. M&A costs), the adjusted EBITDA for the first half of

2021 amounted to EUR 28.70 million, which also rose sharply by around

125.0% year-on-year (previous year: EUR 12.70 million).

MGI also made significant gains at the net level in the first six months of

the current fiscal year as a result of their significant improvement in

profitability, leading to a jump in earnings to EUR 5.60 million in H1 2021

(H1 2020: EUR 0.50 million).

Business development in Q2 2021

Their dynamic growth course is particularly evident in the quarterly view.

Following their strong opening quarter, MGI also posted another record

quarter in the second quarter of the current fiscal year with a 90.0%

increase in consolidated revenues to EUR 57.10 million (Q2 2020: EUR 30.0

million). The strong growth resulted primarily from revenue synergies and

organic growth within the Gaming and Media segment. It should be noted here

that organic growth of 36.0% was significantly above the company's planning

and was also significantly increased despite a particularly strong prior-

year quarter due to the Corona pandemic.

Group EBITDA adjusted for special effects (e.g. M&A costs) grew even more

strongly than revenues in the second quarter due to the strong performance

of the acquired gaming company KingsIsle in combination with economies of

scale and thus increased by around 128.0% to EUR 15.30 million (Q2 2020:

EUR 6.70 million). The economies of scale came to bear here primarily in

the media segment due to the revenue growth achieved and the synergies

realized and led to an adjusted EBITDA margin of 16.0% (Q2 2020: 11.0%).

Guidance raised against the backdrop of accelerated inorganic growth

In addition, MGI announced on July 13, 2021 that an agreement was

successfully concluded with the current Smaato shareholder Shanghai Qiugu

Investment Partnership for the acquisition of 99.9% of the shares in

Smaato's holding company 'Shanghai Yi Qiu Business Management Co. Ltd. As

part of the transaction, MGI will acquire all but one share of Smaato and

will receive a call option to acquire the remaining share, exercisable no

earlier than March 31, 2022. According to company sources, the Smaato

transaction is expected to close on September 1, 2021.

With locations in San Francisco and Hamburg, Smaato operates a leading

digital programmatic advertising platform with a clear focus on mobile

devices. This advertising specialist offers its programmatic services to

publishers on a software-as-a-service (programmatic SaaS) basis. With

expected revenues of EUR 39.0 million in 2021, representing organic growth

of approximately 20.0% compared to 2020, and expected adjusted EBITDA of

EUR 13.0 million in 2021 (corresponding to a 33.0% EBITDA margin), Smaato

is showing a very positive development, according to the company. Through

its platform, Smaato reaches over 1.30 billion unique users worldwide every

month. This would significantly increase the reach of MGI's Verve Group

media segment to a total of 2.70 billion users worldwide.

Against the backdrop of the signed Smaato acquisition, MGI's management

recently decided to increase the company's previous guidance. MGI now

expects consolidated revenues for the current fiscal year 2021 to be in the

range of EUR 234.0 million to EUR 254.0 million (previously: EUR 220.0

million to EUR 240.0 million) and adjusted EBITDA to be in the range of EUR

65.0 million to EUR 70.0 million (previously: EUR 60.0 million to EUR 65.0


Overall, it should be noted that the revenue and earnings performance of

the MGI Group was very satisfactory in the first half of 2021. In

particular, the Media segment was able to make significant gains in terms

of profitability. In addition, the performance also showed how highly

scalable the Group's platform-based busi-ness model is and what positive

synergy effects are possible through the combination of the two

complementary business segments (Games & Media).

Forecast and evalutation

In view of their convincing half-year business development, the Group's

extensive growth pipeline and their once again increased guidance, we have

also raised our previous forecasts for the current financial year and

subsequent years.

From a conservative perspective, we now expect consolidated revenues of EUR

234.15 million (previously: EUR 223.15 million) and EBITDA of EUR 61.21

million (previously: EUR 58.71 million), which are both at the lower end of

the adjusted forecast range. For the current fiscal period, we assume that

around 50.0% of consolidated revenues will be generated in both the Gaming

and Media segments. For the latter segment, we also anticipate a positive

revenue contribution from the expected consolidation of Smaato (from

September 2021).

We also expect a continuation of the successful growth strategy for the

following fiscal years and anticipate significant revenue and earnings

growth in both business segments. Thanks to the good market position of the

Gaming segment and the numerous growth projects announced by the division,

MGI should succeed in profiting sustainably from the booming gaming sector.

Thus, their profitable growth in this business segment should be further

expanded significantly in the coming years.

With regard to the Media segment, we also expect dynamic revenue

development in the coming years. Here, the business unit should be able to

benefit in particular from its strong focus on gaming and e-commerce

companies and the increased marketing of digital programmatic advertising

(programmatic SaaS advertising). At this point, it should be emphasized

that, according to media experts, the area of programmatic advertising is

considered one of the fastest growing segments in the digital advertising


As a result of the M&A transactions carried out in the recent past, the

Media division also has a strong market position and critical size, which

should enable MGI to continue to achieve dynamic growth in this division in

the future. In particular, the transformative Smaato transaction should

significantly advance the group's own advertising division (Verve Group) in

terms of revenue volume, profitability and reach. MGI said it expects

Smaato's digital advertising technology platform to further strengthen its

programmatic SaaS offering and EBITDA margin profile.

In addition, the even closer integration of the various media units should

enable further positive synergy effects to be achieved within the Verve

Group, which will additionally boost the profitability and revenue growth

of the media division.

Specifically, we expect consolidated revenues of EUR 289.88 million for the

following fiscal year 2022 (previously: EUR 276.29 million). In the

following year 2023, revenues should then be able to increase further to

EUR 362.41 million (previously: EUR 345.64 million). With regard to the

prospective revenue composition, we expect a balanced revenue mix from the

Games and Media segments in the medium and long term. Both complementary

business segments should also be able to benefit from significant synergy

effects with each other in the future.

Our expected dynamic revenue development is also reflected in our earnings

forecasts. We expect a significant increase in the operating result

(EBITDA) in the coming years. In parallel, we also expect a significant

increase in the EBITDA margin to around 30.0% in the long term due to

expected economies of scale based on the platform approach of the MGI

Group. In this context, it should be possible to generate EBITDA in the

order of EUR 107.63 million in fiscal year 2023.

Overall, we believe that the MGI Group is well positioned in the two

business segments Gaming and Media to continue their previous dynamic

growth course in the growth areas of online/mobile gaming and digital

media/ad-tech at a high growth rate in the future. Thanks to the company's

platform approach in the gaming and media segment and the extensive synergy

potential between the two complementary business areas, MGI should succeed

in further increasing group profitability in the future. In addition, the

company currently has around EUR 230.0 million in cash and cash equivalents

at its disposal in order to provide additional support for the profitable

growth course it has embarked upon through targeted acquisitions, which are

also planned as part of the corporate strategy.

Within the framework of our DCF valuation model, we have determined a new

price target of EUR 8.50 per share on the basis of our increased estimates

for the financial years 2021, 2022 and 2023, thus significantly raising our

previous price target (EUR 8.00) significantly. In view of the current

share price level, we continue to issue a 'buy' rating and see significant

upside potential. The results of our peer group analysis (see page 7 below)

also support our assessment of the share's attractiveness and price


Die vollständige Analyse können Sie hier downloaden:


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Date (time) of completion: 31/08/2021 (10:18 am)

Date (time) of first distribution: 31/08/2021 (11:00 am)

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