Media and Games Invest: Rebound in sight
Research Update
2024-03-01
07:25
Redeye updates its view on Media and Games Invest (MGI) following its Q4 2023 report, showing stronger sales and profitability than expected. The strong year-end continued into the new year, and the company had an organic growth of 18% in January, setting up for a solid 2024.
Anton Hoof
MGI delivered a strong Q4, and net sales increased 16% organically y/y while coming in 23% above our estimates. In terms of profitability, Adj EBITDA came in at EUR31.7m (31.5), with a margin of 32% (34). This was 20% above our estimates of EUR26.5m. Adj EBIT (excl PPA) was also stronger than our estimates and came in at EUR26.8m (28.1), yielding a margin of 27% (30). With the strong Q4 numbers, we can conclude that MGI exceeded its revised FY23 guidance in both revenues and Adj EBITDA.
The company started to observe indications of a long-awaited recovery in the ad market in the quarter, and 2024 has started strong. Although CPM levels have been muted throughout 2023, the company has continued to invest in new products, gained market share, and increased the number of Software Clients, all of which are expected to yield fruit in 2024. With the rebound in sight, we think the company is set for a strong 2024.
On the back of the Q4 2023 report and the solid outlook for 2024, we have raised our sales estimates by 7% 2024e and 9-10% 2025e-2026e. Although the company had an organic growth of 18% in January 2024, we take a somewhat conservative view and estimate a y/y growth of 10% for 2024. Our new valuation range is SEK12-SEK42 (10-38), with a base case of SEK30 (27). Our base case of SEK30 corresponds to 7x EV/Adj EBIT in 2025e.
| EURm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Net Sales | 324.4 | 322.0 | 354.9 | 409.1 | 431.5 |
| Sales Growth | 28.7% | -0.8% | 10.2% | 15.3% | 5.5% |
| EBITDA | 84.8 | 128.4 | 99.9 | 125.7 | 127.6 |
| EBITDA Margin | 26.1% | 39.9% | 28.1% | 30.7% | 29.6% |
| EBIT | 26.6 | 99.0 | 69.0 | 92.2 | 93.3 |
| EBIT Margin | 8.2% | 30.7% | 19.4% | 22.5% | 21.6% |
| Net Income | -20.4 | 46.1 | 13.7 | 42.4 | 50.2 |
| EV/Sales | 1.6 | 1.3 | 1.2 | 0.9 | 0.8 |
| EV/EBITDA | 6.3 | 3.3 | 4.2 | 3.0 | 2.6 |
| EV/EBIT | 20.1 | 4.3 | 6.1 | 4.2 | 3.5 |
Media and Games Invest (MGI) delivered a strong year-end, growing 16% organically (adjusted for fx and divestments) while continuing to take market share. The company states that the growth is primarily driven by new software clients (which were up 19% y/y), new product releases, and a somewhat better underlying ad market.
Disclosures and disclaimers