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

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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
million).

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
market.

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
potential.

Die vollständige Analyse können Sie hier downloaden:
http://www.more-ir.de/d/22848.pdf

Kontakt für Rückfragen
GBC AG
Halderstrasse 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG und Art. 20 MAR. Beim oben analysierten Unternehmen ist folgender möglicher Interessenkonflikt gegeben: (5a,5b,7,11); Einen Katalog möglicher Interessenkonflikte finden Sie unter:
http://www.gbc-ag.de/de/Offenlegung
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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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Quelle: dpa-AFX