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Stillfront Group

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Stillfront Group: Below on MAU estimate but with increasing monetization rates

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Yesterday Stillfront Group released their user statistics for Q2’18. The Monthly Average Users (MAU) came in below our projections, but the company states that they see increasing monetization figures. During the quarter Coldwood’s title Unravel Two was launched, the game is not included in the user statistics. We will likely trim our projections for Q2 to a minor degree, but will not make any changes to our valuation. We look forward to an exciting H2 with a lot of releases for the Group.

The Monthly Average Users (MAU) came in at 4.24 million an increase of 26% Y/Y (Pro-forma), but still 14% below our projections. We likely had overestimated the rise in MAU from the new Empire titles. The company states that the monetization figures continue to improve, meaning that the users are spending at an increasing rate. The DAU/MAU ratio came in at 24%, which was an increase from the strong figures we saw during Q1. The rising stickiness ratio (DAU/MAU) supports the company’s statement regarding improving monetization.

It should also be noted that Unravel Two is not included in the user statistics numbers. Coldwood, or really Electronic Arts, had a surprise launch of Unravel Two in conjunction with the E3 conference. The release trailer has been seen over 0.5 million times on YouTube, and the game has received great reception both from the player community and critics. EA is the publisher and owner of the IP, but Coldwood (Stillfront Group) gets a type of royalty on the sales. We do not have the exact figures, but we estimate that the first release created an income of SEK 10-14m during the first twelve months for Coldwood. After seeing the game receptions, that actually trumps the first installment; we find it likely that Unravel Two will generate higher income for the Group then the first game.

The MAU came in 14% below our projections. However, we believe the increasing monetization and the launch of Unravel Two will make of for a smaller user count. We will likely trim our forecasts for Q2 to a minor degree and present our updated projection prior the Q2 report release. We look forward to an exciting H2 with a lot of releases for the Group. Our Base-case valuation currently amounts to 288 SEK per share which implies a 19x multiple of our 2018 EBIT estimate. 

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