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 (Anno)
Recommendation: BUY
Target price: 4.50 EUR
Last rating change:
Analyst: Marcel Goldmann, Cosmin Filker

Financial year 2023 with solid operating performance finalised; Return to
organic growth is expected for the 2024 financial year; Expansion of the
digital advertising platform business should enable significantly
profitable growth in future; Target price: EUR 4.50 (previously: EUR 4.50);
Rating: BUY
 
According to its published business figures, the MGI Group achieved a solid
sales performance in the past financial year 2023 despite a difficult
environment and market situation, generating sales of EUR 321.98 million (PY:
EUR 324.44 million). On a comparable basis, organic sales even increased by
5.0% compared to the previous year. A particularly high organic sales
growth rate of 16.0% was achieved in the final quarter, which is
traditionally the strongest quarter in terms of sales. The main
contributors to this growth were the 18.9% increase in the software
customer base to 2,276 customers at the end of the financial year (end of
2022: 1,915) and the 19.1% increase in the volume of digital advertising
delivered to 206 billion (advertising ads at the end of FY 2022: 173.0
billion). The renewed improvement in MGI's market position in the mobile
sector is also reflected in the market-leading positions on iOS and Android
with a US market share of 12.0% on both platforms according to the industry
experts at Pixalate. This means that the previously adjusted company
guidance (sales of EUR 303.0 million) and our sales estimate (GBCe: EUR 303.21
million) were exceeded.
 
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). Accordingly, 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, which was slightly above the previous
year's level (PY: EUR 93.20 million). The adjusted EBITDA margin (Adj. EBITDA
margin) also increased to 29.6% (PY: 28.7%). This increase in profitability
reflected the first positive effects of the cost-cutting programme
initiated last year, which should enable annual cost savings of around EUR
10.0 million once successfully implemented. Accordingly, the adjusted
earnings guidance (adjusted EBITDA: EUR 93.0 million) and our earnings
estimate (adjusted EBITDA: EUR 93.07 million) were exceeded.
 
In view of a strong fourth quarter (organic growth Q4 2023: 16.0%) and an
even stronger performance in the first quarter (organic growth Q1 2024:
21.0%), MGI's management is positive about the current financial year 2024
and expects double-digit growth and an improvement in the earnings
situation. Based on the recent concretisation of the guidance with the
publication of the Q1 business figures, MGI now expects sales revenues in a
range of EUR 350.0 million to EUR 370.0 million and an adjusted EBITDA (Adj.
EBITDA) of between EUR 100.0 million and EUR 110.0 million.
 
As part of the publication of our research study on the preliminary annual
results for 2023, we adjusted our previous sales and earnings forecasts
upwards due to the positive outlook, the increased (organic) growth
momentum and the expected recovery of the advertising market. In view of
their strong Q1 performance, their sustained high growth momentum and the
confirmation of the positive outlook, we are confirming our previous sales
and earnings estimates for the current financial year and subsequent years.
Accordingly, we continue to expect sales of EUR 352.18 million and EBITDA of
EUR 100.08 million for the current financial year 2024. For the subsequent
financial years 2025 and 2026, we expect sales (EBITDA) of EUR 389.51 million
(EUR 113.35 million) and EUR 437.03 million (EUR 130.67 million) respectively.
 
MGI recently announced its intention to change the company name to Verve.
The media business is already operating under this name. The name change
marks the successful completion of MGI's transformation into a leading
digital media company. At the same time, plans were announced to expand the
Board by one person and to appoint two new Board members with proven media
expertise. Greg Coleman (USA) was President and Board Member at the
Huffington Post, BuzzFeed and Criteo, among others, and Peter Huijboom
(Netherlands) was CEO Global Media and CEO Global Clients at the
advertising agency Dentsu. Both announcements reflect the clear focus on
the further expansion of the advertising business, but are still subject to
the approval of the Annual General Meeting.
 
Overall, the MGI Group should be able to significantly increase the pace of
growth compared to the previous year thanks to its good market positioning
(especially in the US market) and the expected recovery of the advertising
market. Its innovative customer solutions (AI targeting solutions, etc.) in
particular should make a significant contribution to boosting its customer
base and ad tech platform revenue in the future.
 
Based on our unchanged forecasts for the current financial year 2024 and
the following years, we have maintained our previous price target of EUR 4.50
(previously: EUR 4.50). In view of the current share price level, we
therefore continue to assign a 'BUY' rating and see significant upside
potential in the MGI share. The results of our peer group analysis (see p.
20) also support our assessment of the attractiveness and upside potential
of MGI shares.
 

You can download the research here:
http://www.more-ir.de/d/29777.pdf

Contact for questions
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: 16/05/2024 (8:20 am)
Date (time) of first distribution: 16/05/2024 (11:00 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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