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

Einstufung von GBC AG zu Media and Games Invest plc

Unternehmen: Media and Games Invest plc ISIN: MT0000580101

Anlass der Studie: Research Note Empfehlung: BUY Kursziel: 5.15 EUR Letzte Ratingänderung: Analyst: Marcel Goldmann, Cosmin Filker

KingsIsle M&A provides leap in revenue and earnings and significantly strengthens US business; Internationalisation of acquired games IPS and expansion of these online games to further end devices opens up significant revenue potential; Increase in forecasts and price target On 18/01/2021, Media and Games Invest plc (MGI) announced the signing of an agreement for the full acquisition of US game developer KingsIsle (KingsIsle) Entertainment Inc. KingsIsle, based in Austin, Texas (USA), is a leading game developer and publisher. KingsIsle's wholly owned MMO games Wizard101 and Pirate101 (including mobile IP rights) will be transferred to MGI's gaming portfolio. Both online games have loyal communities and therefore very sustainable revenues and have generated the majority of revenues in the US market to date. The FY2021 revenue guidance for the acquired KingsIsle includes expected revenue of $32.0 million and expected Adjusted EBITDA of $21.0 million with an expected EBITDA margin of 68.0%. MGI has agreed with the KingsIsle owners on a fixed purchase price of USD 126.0 million and a performance-based purchase price component (earn out) of up to USD 84.0 million. To finance the M&A, Oaktree Capital, which has a high level of expertise in the media and gaming sector, has agreed to a capital increase of EUR 25.0 million, as a result of which this company will hold a stake of approx. 9.0% in the MGI Group in the future. In our view, MGI has not only gained a new shareholder, but also a strategic partner who should provide significant support for the group's further growth course on the 'financing side'. According to the company, taking into account the earn-out component, the EV/EBITDA multiple from the acquisition will be in the range of 5.8x - 7.3x, depending on the growth of KingsIsle in 2021. This valuation is based on higher revenues, which also generate higher EBITDA, and includes additional EBITDA that may result from a higher revenue base if an earn-out becomes due. In light of the potential multiples to be incurred or paid, we rate the purchase price as favourable. For us, the KingsIsle acquisition represents a very good strategic step to once again significantly increase the growth rate in the group's gaming division and at the same time to leverage significant synergy potentials within the MGI group (e.g. utilisation of the large player base in North America & EU or access to particularly efficient in-house marketing). In addition, this will also significantly strengthen the market position of the gaming segment in the USA. Through the acquisition, the company acquires Wizard101 and Pirate101, two strong online games that have so far generated revenues primarily in the USA. We are convinced that MGI will succeed in growing significantly, especially through the increased internationalisation of the acquired KingsIsle games portfolio. In this context, the strong market position in Europe with a large player base (cross-selling) should pay off for the company in particular, opening up considerable additional business potential. Furthermore, KingsIsle should also be able to benefit from the cooperation with the media companies of the MGI Group with regard to targeted and efficient advertising. Furthermore, an expansion of the games portfolio to other end devices such as consoles or even smartphones offers additional growth opportunities, especially in Asia. In view of the very significant KingsIsle acquisition and the expected positive effects (including synergy effects), we have adjusted our previous revenue and earnings forecast for the 2021 and 2022 financial years upwards. In addition, the increased expansion of the mobile gaming business (e.g. recently announced licensing of the Tripe-A games 'Golf Champions' and 'Heroes of Twilight') and the promotion of the Asian gaming business through cooperation with local publishers (e.g. in the case of Trove, recently launched in closed beta in South Korea) also contributed to the positive forecast adjustment. For the current financial year, we now expect revenues of EUR 173.55 million (previously: EUR 145.62 million) and an EBITDA of EUR 47.42 million (previously: EUR 28.88 million). For the following year 2022, we expect revenues of EUR 199.88 million (previously: EUR 163.05 million) and an EBITDA of EUR 55.92 million (previously: EUR 33.90 million). Within the framework of our DCF valuation model, we have determined a new target price of EUR5.15 (previously: EUR3.20). In addition to the significantly raised forecasts, a reduction of the WACC to 7.11% (previously: 7.70%) has a target price-increasing effect. This reduction is related to the general lowering of the risk-free interest rate in our valuation models sine 01/01/2021 to the new lower limit of 0.25% (previously: 1.00%). An even stronger price target increase is countered by the dilution effect due to the completed capital increase to finance the M&A transaction. In view of the current share price level, we continue to assign a Buy rating and see significant upside potential. Overall, we see the MGI Group in a good starting position to continue the successful dynamic growth course within the growth sectors of online gaming and digital marketing/digital media. The KingsIsle acquisition should provide additional growth impetus within the gaming segment and also have a clearly positive effect on the earnings situation due to the expected high synergy effects. In addition, the Group's own media division provides a significant competitive advantage and should additionally favour the expansion of the market position in the gaming segment.

Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/22036.pdf

Kontakt für Rückfragen Jörg Grunwald Vorstand GBC AG Halderstrasse 27 86150 Augsburg 0821 / 241133 0 research@gbc-ag.de ++++++++++++++++ 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 +++++++++++++++ Date (Time) completion: 01/02/2021 (09:09 am) Date (Time) first distribution: 01/02/2021 (10:00 am)

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Quelle: dpa-Afx