Original-Research: Media and Games Invest SE (von GBC AG): BUY
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Original-Research: Media and Games Invest SE - from GBC AG
Classification of GBC AG to Media and Games Invest SE
Company Name: Media and Games Invest SE
ISIN: SE0018538068
Reason for the research: Research study (Note)
Recommendation: BUY
Target price: 4.50 EUR
Last rating change:
Analyst: Marcel Goldmann, Cosmin Filker
FY 2023 closed with solid sales performance; strong new customer business
ensured significant organic growth; return to dynamic growth path expected;
price target raised to EUR 4.50; buy rating confirmed
Sales and earnings development 2023
On 29 February 2029, Media and Games Invest SE (MGI) published its
preliminary business figures for the past financial year 2023. According to
these figures, the technology company achieved solid revenue growth
compared to the previous year (PY: EUR 324.44 million) with its fully
integrated advertising software platform (ad tech platform), generating
revenue of EUR 321.98 million. The majority of revenue was generated by the
traditionally largest advertising segment 'Supply Side Platform' (revenue
share of SSP: 93.6%) with revenue totalling EUR 301.39 million (PY: EUR 298.88
million).
On a comparable basis, the company reports a moderate increase in
consolidated sales of 5.0%, which achieved a particularly high growth rate
of 16.0% in the final quarter, traditionally the strongest quarter in terms
of sales. The sales growth achieved was mainly due to an increase in the
software customer base and the volume of advertising placed. The number of
customers on MGI's digital ad tech platform increased dynamically by 18.9%
year-on-year to 2,276 at the end of the fourth quarter (number of customers
at the end of Q4 2022: 1,915). At the same time, the volume of digital
advertising delivered increased significantly by 19.1% to 206 billion at
the end of the fourth quarter (advertising ads at the end of Q4 2022: 173
billion).
Thanks to the significant expansion of the software customer base and the
substantial increase in advertising volume, the company was able to hold
its own and even gain market share despite a previously difficult market
situation (low CPMs, subdued advertising budgets, etc.). The company's
further improved market position in the mobile sector is also reflected in
the market-leading positions on iOS and Android with a market share of
12.0% and 12.0% respectively, according to the industry experts at
Pixalate. Accordingly, we believe that MGI has outperformed the advertising
industry as a whole and the overall advertising market.
In terms of earnings, MGI achieved growth at all earnings levels, primarily
due to the revaluation of the AxesInMotion earn-out payment liability
(positive one-off effect of EUR 62.76 million). EBITDA increased dynamically
by 51.6% to EUR 128.46 million (PY: EUR 84.75 million) compared to the previous
year. Adjusted for special effects (e.g. M&A and restructuring costs or
revaluations of balance sheet items), adjusted EBITDA (Adj. EBITDA)
totalled EUR 95.20 million, a slight increase compared to the previous year
(PY: EUR 93.20 million).
The adjusted EBITDA margin (Adj. EBITDA margin) increased to 29.6% (PY:
28.7%). This increase in profitability reflects the first positive effects
of the savings programme launched last year, which is expected to generate
annual cost savings of around EUR 10.0 million once successfully implemented.
We believe that the majority of the planned savings effects should already
materialise in the current 2024 financial year.
In terms of net performance, a consolidated result (after minority
interests) of EUR 46.73 million was achieved, which was significantly above
the previous year's level (PY: EUR -20.32 million). This significant increase
in net income was mainly due to the positive one-off effect from the
revaluation of an M&A-related payment obligation described above. In
addition, a relatively low tax expense ratio also favoured their positive
earnings development.
The company guidance adjusted by MGI management in the third quarter of
2023 (sales of EUR 303 million and adjusted EBITDA of EUR 93.0 million) was
therefore exceeded. Our sales estimate (sales: EUR 303.21 million) and
adjusted EBITDA forecast (adjusted EBITDA: EUR 93.07 million) were also
exceeded.
Forecasts and evaluation
With the publication of the preliminary figures, MGI's management has also
provided a rough outlook for the current financial year, although this
guidance will be further specified as the year progresses. In view of a
strong fourth quarter (organic growth Q4 2023: 16.0%) and an even more
dynamic start to the year (organic growth Jan. 2024: 18.0%), MGI expects
double-digit percentage growth in consolidated sales for the current
financial year 2024. At the same time, an improvement in earnings is also
expected.
In light of the positive company outlook, the increased (organic) growth
momentum and the expected recovery of the advertising market, we have
adjusted our previous sales and earnings estimates upwards. Accordingly, we
now expect revenue of EUR 352.18 million (PY: EUR 324.74 million) and EBITDA of
EUR 100.08 million (PY: EUR 95.56 million) for the current financial year. For
the following financial year 2025, we are forecasting sales of EUR 389.51
million (PY: EUR 357.66 million) and EBITDA of EUR 113.35 million (PY: EUR 108.49
million). With regard to the 2026 financial year, which we have included in
our detailed forecast period for the first time, we anticipate a further
increase in sales and EBITDA to EUR 437.03 million and EUR 130.67 million
respectively.
Overall, we therefore assume that MGI will succeed in returning to a
dynamic growth trajectory with its leading ad tech platform. The company's
strong positioning in the in-app and CTV segment in particular should prove
to be one of the main growth drivers. In terms of earnings, the
cost-cutting programme launched by the company last year should take full
effect from the current financial year onwards and thus provide an
additional boost to future earnings.
As part of our DCF valuation model, we have raised our price target to EUR
4.50 (previously: EUR 4.05) per share due to our increased sales and earnings
estimates. An even higher price target increase was counteracted by higher
capital costs (risk-free interest rate currently 2.50%, instead of 2.00%
previously). In view of the current share price level, we therefore
continue to give the stock a 'BUY' rating and see significant upside
potential.
You can download the research here:
http://www.more-ir.de/d/29049.pdf
Contact for questions
GBC AG
Halderstrasse 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Date (time) of completion: 04/03/2024 (8:20 am)
Date (time) of first distribution: 04/03/2024 (10:00 am)
-------------------transmitted by EQS Group AG.-------------------
The issuer is solely responsible for the content of this research.
The result of this research does not constitute investment advice
or an invitation to conclude certain stock exchange transactions.
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