Equity Research - 09 August 2021 21:00 CET
Embracer Group Reason: Preview of results
Plenty to like despite negative sentiment Company sponsored research
ABGSC Q1e adj. EBIT SEK 1,137m, -9% vs. consensus Not rated Raising adj. EPS by 1-5% ’21/22e-’23/24e on M&A
Raising fair value to SEK 225-350 (225-345) per share Estimate changes (%) 2021e 2022e 2023e Q1’21/22e sales of SEK 3,249m, +57% y-o-y (~19% organic) Sales 7.3% 12.7% 13.9% For Q1’21/22e, we factor in sales of SEK 3,249m (-2.3% vs. FactSet EBIT (rep) -62.5% nm nm consensus), for total y-o-y growth of 57.1%, but organic growth of 19.5% EPS (rep) -49.1% nm nm when adjusting for M&A and FX. We consider this a strong performance Source: ABG Sundal Collier in the 2021 quarter facing the toughest COVID-19-boosted comparables. 09/08/2021 The largest revenue driver in the quarter is Biomutant by our estimate, Share price (SEK) 188.0 where we factor in ~1.4mn copies sold across all platforms. Given the Fair value range (per share) 225-350 economics of the game (internally developed & published on an own IP) this yields net sales of ~SEK 314m with a gross margin of 90.2%. Other IT, Sweden notable drivers include Metro Exodus Enhanced edition on PC and next- EMBRACB.ST/EMBRACB ST gen consoles, and SnowRunner on Steam/Switch. Overall, we estimate that Games will generate 80.9% of sales, driving a strong gross margin MCap (SEKm) 92,344 of 59.8% in the quarter. We estimate adj. EBIT of SEK 1,137m (-9.6% MCap (EURm) 9,064 vs. FactSet consensus), for 59.7% y-o-y growth and a margin of 35.0%. Net debt (EURm) -1,182 Ultimately, we reach adj. EPS of SEK 1.87 in Q1, up 24.5% y-o-y. No. of shares (m) 491 Recent M&A raises adj. EPS by 1-5% ’21/22e-’23/24e Free float (%) 60 Following the recently announced acquisitions (8 in total), we raise our Av. daily volume (k) 4,637 sales estimates by 7-14% for ’21/22e-‘23/24e, where the largest contributor is Crazy Labs, which has been added to the DECA Games Next event Q1 report: 18 Aug segment. After accounting for the dilution of the transactions (upfront + earnouts) ,we raise our adj. EPS estimates by 1-5% for ’21/22e-’23/24e. Performance
300
SOTP fair value range at SEK 225-350 per share 250
We adjust our fair value range to SEK 225-350 per share following our 200 estimate changes. Embracer is currently trading at an f12m EV/adj. EBIT 150 of 15.6x, according to FactSet consensus, which is 18% below the five- 100 year average. This is despite Embracer having its largest new game 50 pipeline ever this fiscal year, with a SEK 2.8-3.3bn development cost 0 18 19 20 21 18 19 20 19 20 21 19 20 21 19 20 21 (recent not M&A included), plenty of M&A headroom even after the latest 18 19 20
Oct Oct Oct Apr Apr Apr Jun Jun Jun Feb Feb Feb Dec Dec Dec Aug Aug Aug Aug acquisitions (~SEK 20bn) and estimated 30% organic growth (ABGSCe) Embracer Group OMX STH PI in a year where most gaming companies are struggling with growth. 1m 3m 12m Analyst(s): [email protected], +46 8 566 286 13 Absolute (%) -15.7 -23.7 26.0 [email protected], +46 8 566 286 37 Source: FactSet
SEKm 2019 2020 2021e 2022e 2023e 2021e 2022e 2023e Sales 5,249 9,024 16,900 19,585 21,737 P/E (x) -38.8 -73.1 -251.1 EBITDA 1,821 3,985 7,496 8,992 10,021 P/E adj (x) 17.9 14.7 12.9 EBITDA margin (%) 34.7 44.2 44.4 45.9 46.1 P/BVPS (x) 2.70 2.71 2.72 EBIT adj 1,032 2,912 5,710 6,672 7,566 EV/EBITDA (x) 10.8 8.6 7.3 EBIT adj margin (%) 19.7 32.3 33.8 34.1 34.8 EV/EBIT adj (x) 14.2 11.6 9.6 Pretax profit 408 296 -1,855 -940 -45 EV/sales (x) 4.79 3.94 3.35 EPS rep 0.91 -0.23 -4.84 -2.57 -0.75 ROE adj (%) 16.1 18.5 21.1 EPS adj 3.11 6.38 10.51 12.82 14.58 Dividend yield (%) 0 0 0 FCF yield (%) -1.2 4.5 5.0 Sales growth (%) -8.8 71.9 87.3 15.9 11.0 Lease adj. FCF yld (%) -1.2 4.5 5.0 EPS growth (%) high -125.1 -2,026.5 46.9 70.9 Net IB debt/EBITDA -1.6 -1.8 -2.1 Source: ABG Sundal Collier, Company data Lease adj. ND/EBITDA -0.8 -1.0 -1.2
Please refer to important disclosures at the end of this report This research product is commissioned and paid for by the company covered in this report. As such, this report is deemed to constitute an acceptable minor non-monetary benefit (i.e. not investment research) as defined in MiFID II. Embracer Group
Company description Risks Embracer Group acquires, develops and publishes PC and Despite Embracer Group’s broad portfolio, there are risks console games for the global gaming market. Its core associated with larger title releases as they have a business model consists of acquiring established gaming relatively large impact on sales right after launch. brands and gradually improving them. Much of Embracer Moreover, disappointing releases or reviews could dent Group’s soul stems from entrepreneur, founder and CEO end-customer enthusiasm and hurt the company's Lars Wingefors, who at the age of 16 founded Nordic finances, especially during the launch period. Delays in Games, which we today associate with Embracer Group. planned and ongoing gaming projects could adversely The game changer came in 2013 when most of today’s affect the group’s profitability. Acquiring established but brand portfolio was acquired from THQ Inc’s insolvency. At temporarily underperforming gaming brands and gradually the start of 2018, the company acquired Koch Media, which improving them increases the potential risk of performing focuses on game development and gives Embracer Group below market expectations. a larger publishing business.
Annual sales and adj. EBIT margin Quarterly sales and adj. EBIT margin
25,000 45.0 7,000 40.0 40.0 6,000 35.0 20,000 35.0 30.0 5,000 30.0 15,000 25.0 25.0 4,000 20.0 20.0 3,000 10,000 15.0 15.0 2,000 10.0 5,000 10.0 1,000 5.0 5.0 0 0.0 0 0.0
2015 2016 2017 2018 2019 2020 Q2'20 Q3'20 Q4'20 Q1'21 2021e 2022e 2023e Q2'21e Q3'21e Q4'21e Q1'22e Sales (LHS) Adj EBIT margin % (RHS) Sales (LHS) Adj EBIT margin % (RHS) Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data EPS estimate changes, 2021e, SEK EPS estimate changes, 2022e, SEK
2 3
1 2 0 1 -1 0 -2 -1 -3
-4 -2
-5 -3
Jul-21 Jul-21 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 ABGSC FactSet Consensus Mean ABGSC FactSet Consensus Mean Source: ABG Sundal Collier, FactSet Source: ABG Sundal Collier, FactSet Lease adj. net debt and ND/EBITDA 12-month forward-looking P/E
0 0.0 1,000.0 (0.0) -5,000 -0.5 (1,000.0) (2,000.0) -10,000 -1.0 (3,000.0)
-15,000 -1.5 (4,000.0) (5,000.0) -20,000 -2.0 (6,000.0) (7,000.0) -25,000 -2.5 (8,000.0) 2014 2015 2016 2017 2018 2019 2020 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20 2021e 2022e 2023e Net IB debt excl. leasing (LHS) Net IB debt/EBITDA lease adj. (RHS) P/E f12m 5y avg Source: ABG Sundal Collier, Company data Source: ABG Sundal Collier, Company data
9 August 2021 ABG Sundal Collier 2 Embracer Group
Estimate changes ABGSC estimate changes 21/22e-23/24e, (SEKm) Estimate changes (SEKm) Old forecast New forecast Change Net sales 2021/22e 2022/23e 2023/24e 2021/22e 2022/23e 2023/24e 2021/22e 2022/23e 2023/24e Games THQ Nordic 2,331 2,576 2,828 2,342 2,588 2,842 0.5% 0.5% 0.5% Games Deep Silver 3,666 4,146 4,611 3,839 4,410 4,904 4.7% 6.4% 6.4% Games Coffee Stain 1,002 1,152 1,325 1,018 1,171 1,346 1.6% 1.6% 1.6% Games Saber Interactive 1,761 1,937 2,131 1,697 1,945 2,140 -3.6% 0.4% 0.4% Games DECA Games 643 720 807 1,404 2,360 2,832 118.3% 227.7% 251.1% Games Gearbox 1,594 1,777 1,982 1,569 1,749 1,951 -1.6% -1.6% -1.6% Games Easybrain 1,905 2,134 2,390 1,991 2,230 2,498 4.5% 4.5% 4.5% Games Total 12,902 14,442 16,073 13,860 16,454 18,512 7.4% 13.9% 15.2% % of total 82.0% 83.2% 84.2% 82.0% 84.0% 85.2% 0.1 pp 0.9 pp 0.9 pp Partner Publishing/Film 2,840 2,925 3,013 3,040 3,131 3,225 7.0% 7.0% 7.0% Group 15,742 17,368 19,086 16,900 19,585 21,737 7.4% 12.8% 13.9%
COGS -6,141 -6,555 -7,193 -6,704 -7,420 -8,195 9.2% 13.2% 13.9% Gross profit 9,601 10,813 11,893 10,196 12,165 13,543 6.2% 12.5% 13.9%
Capitalized costs & other income 2,981 3,284 3,566 3,290 3,877 4,303 10.3% 18.1% 20.7% Operating costs -5,418 -5,905 -6,394 -5,991 -7,051 -7,825 10.6% 19.4% 22.4%
EBITDA 7,165 8,193 9,066 7,496 8,992 10,021 4.6% 9.8% 10.5%
Depreciation & amortization -8,295 -8,598 -8,441 -9,327 -9,912 -10,046 12.4% 15.3% 19.0% Operational -1,614 -1,981 -2,085 -1,786 -2,320 -2,455 10.7% 17.1% 17.7% Non-operational -6,681 -6,617 -6,356 -7,541 -7,592 -7,591 12.9% 14.7% 19.4%
Adj. EBIT 5,551 6,212 6,981 5,710 6,672 7,566 2.9% 7.4% 8.4%
EBIT -1,130 -405 625 -1,831 -920 -25 - - -
Net financials -24 -20 -20 -24 -20 -20 0.0% 0.0% 0.0% Taxes -436 -149 -151 -522 -329 -326 19.9% 121.0% 115.5%
Adj. Net profit 4,983 5,924 6,692 5,055 6,205 7,102 1.4% 4.7% 6.1%
Net profit -1,590 -574 454 -2,378 -1,269 -371 - - -
EPS Adj. (SEK) 10.20 12.12 13.69 10.29 12.58 14.34 0.9% 3.8% 4.7% EPS Basic (SEK) -3.25 -1.17 0.93 -4.84 -2.57 -0.75 - - - Net sales grow th y-o-y 2021/22e 2022/23e 2022/23e 2021/22e 2022/23e 2022/23e 2021/22e 2022/23e 2022/23e Games THQ Nordic 30.3% 10.5% 9.8% 30.9% 10.5% 9.8% 0.6 pp 0.0 pp 0.0 pp Games Deep Silver 76.1% 13.1% 11.2% 84.5% 14.9% 11.2% 8.3 pp 1.8 pp 0.0 pp Games Coffee Stain -15.3% 15.0% 15.0% -13.9% 15.0% 15.0% 1.4 pp 0.0 pp 0.0 pp Games Saber Interactive 48.5% 10.0% 10.0% 43.1% 14.6% 10.0% -5.4 pp 4.6 pp 0.0 pp Games DECA Games 192.3% 12.0% 12.0% 538.0% 68.1% 20.0% 345.7 pp 56.1 pp 8.0 pp Games Gearbox 15.3% 11.5% 11.5% 13.4% 11.5% 11.5% -1.8 pp 0.0 pp 0.0 pp Games Easybrain 1.8% 12.0% 12.0% 6.4% 12.0% 12.0% 4.6 pp 0.0 pp 0.0 pp Games Total 100.1% 11.9% 11.3% 114.9% 18.7% 12.5% 14.9 pp 6.8 pp 1.2 pp Partner Publishing/Film 10.3% 3.0% 3.0% 18.0% 3.0% 3.0% 7.8 pp 0.0 pp 0.0 pp Group 74.4% 10.3% 9.9% 87.3% 15.9% 11.0% 12.8 pp 5.6 pp 1.1 pp Organic 33.9% 9.3% 11.0% 33.9% 9.3% 11.0% 0.0 pp 0.0 pp 0.0 pp
Margins 2021/22e 2022/23e 2022/23e 2021/22e 2022/23e 2022/23e 2021/22e 2022/23e 2022/23e Gross margin 61.0% 62.3% 62.3% 60.3% 62.1% 62.3% -0.7 pp -0.1 pp 0.0 pp EBITDA margin 45.5% 47.2% 47.5% 44.4% 45.9% 46.1% -1.2 pp -1.3 pp -1.4 pp Adj. EBIT margin 35.3% 35.8% 36.6% 33.8% 34.1% 34.8% -1.5 pp -1.7 pp -1.8 pp EBIT margin -7.2% -2.3% 3.3% -10.8% -4.7% -0.1% -3.7 pp -2.4 pp -3.4 pp Adj. Net margin 31.7% 34.1% 35.1% 29.9% 31.7% 32.7% -1.7 pp -2.4 pp -2.4 pp Net margin -10.1% -3.3% 2.4% -14.1% -6.5% -1.7% -4.0 pp -3.2 pp -4.1 pp Source: ABG Sundal Collier, company data
ABGSC vs. FactSet consensus (SEKm) Actual ABGSC Cons ABG vs. Cons ABGSC Cons ABG vs. Cons ABGSC Cons ABG vs. Cons Q1'20/21 Q1'21/22e Q1'21/22e % 21/22e 21/22e % 22/23e 22/23e % Net Sales 1,339 3,249 3,324 -2.3% 16,900 16,815 0.5% 19,585 18,064 8.4% EBITDA 495 1,466 1,522 -3.7% 7,496 7,159 4.7% 8,992 8,206 9.6% Margin 37.0% 45.1% 45.8% 44.4% 42.6% 45.9% 45.4% Adj. EBIT 286 1,137 1,257 -9.6% 5,710 5,711 0.0% 6,672 6,351 5.1% Margin 21.4% 35.0% 37.8% 33.8% 34.0% 34.1% 35.2% Adj. EPS (SEK) 0.98 1.87 2.13 -12.1% 10.29 10.39 -0.9% 12.58 11.49 9.5% Source: ABG Sundal Collier, FactSet, company data
9 August 2021 ABG Sundal Collier 3 Embracer Group
Pipeline estimates The key to understanding financial estimates for Embracer lies in evaluating the company’s video game pipeline. This is true for its video game development and publishing segments and for its Partner Publishing division, which in turn is based on its partners’ – Square Enix and Capcom, to name two – video game pipelines. Estimated release dates for select titles Pipeline estimates - ABGSC
Apr-Jun '20 Jul-Sep '20 Oct-Dec '20 Jan-Mar '21 Apr-Jun '21 Jul-Sep '21 Oct-Dec '21 Jan-Mar '22 Apr '22-Mar '24 Games Segment Q1'20/21 Q2'20/21 Q3'20/21 Q4'20/21 Q1'21/22e Q2'21/22e Q3'21/22e Q4'21/22e 22/23e - 23/24e Dead Island 2 Deep Silver X Saints Row V Deep Silver X Iron Harvest Deep Silver X MotoGP20 Deep Silver X Saints Row : The Third Remastered (Epic) Deep Silver X Outw ard - The Soroboreans (DLC) Deep Silver X Wasteland 3 Deep Silver X Windbound Deep Silver X Pathfinder: Kingmaker (Console) Deep Silver X Chorus Deep Silver X Ride 4 Deep Silver X MXGP 2020 Deep Silver X Shenmue III (Steam) Deep Silver X Metro Exodus Enhanced edition (PC) Deep Silver X Metro Exodus Enhanced edition (Next gen consoles) Deep Silver X Saints Row : The Third Remastered (Steam release) Deep Silver X Maneater (Sw itch) Deep Silver X After the Fall Deep Silver X Monster Energy Super Cross 4 Deep Silver X Evil West World (Flying Wild Hog) Deep Silver X X Hot Wheels Unleashed Deep Silver X Crysis 2 (Remastered) Deep Silver X X Crysis 3 (Remastered) Deep Silver X X SpongeBob SquarePants: Battle for Bikini Bottom (Mobile) THQ Nordic X SpongeBob SquarePants: Battle for Bikini Bottom THQ Nordic X Desperados 3 THQ Nordic X Destroy All Humans! THQ Nordic X Remnant: From the Ashes - Sw amps of Corsus (DLC) THQ Nordic X Remnant: From the Ashes - Subject 2923 (DLC) THQ Nordic X Kingdoms of Amalur: Re-Reckoning THQ Nordic X Aquanox Deep Descent THQ Nordic X Chronos: Before the Ashes THQ Nordic X Lets Sing 2021 THQ Nordic X Titan Quest: Legendary Edition THQ Nordic X Kingdoms of Amalur: Re-Reckoning (Nintendo Sw itch) THQ Nordic X Little Nightmares II (published by Bandai) THQ Nordic X Titan Quest 2 (Unconfirmed) THQ Nordic X Monster Jam: Steel Titans 2 THQ Nordic X Biomutant THQ Nordic X Wreckfest (PS5) THQ Nordic X Destroy All Humans! (Sw itch) THQ Nordic X Satisfactory (Steam release) Coffee Stain X Satisfactory (Update 4) Coffee Stain X Huntdow n Coffee Stain X Deep Rock Galactic (Full release) Coffee Stain X Valheim (Early Access) Coffee Stain X Valheim content drop (ABGSCe) Coffee Stain X Midnight Ghost Hunt Coffee Stain X X Songs of Conquest Coffee Stain X X World War Z (Game of the Year Edition) Saber Interactive X Snow Runner Saber Interactive X WWE Battlegrounds Saber Interactive X Redout: Space Assault Saber Interactive X The Evil Dead Saber Interactive X Star Wars Knights of the Old Republic 3 (ABGSC Projection) Saber Interactive X Star Wars Pinball VR Saber Interactive X Snow Runner (Steam release) Saber Interactive X Snow Runner (Sw itch) Saber Interactive X Homew orld 3 Gearbox Softw are X
Sales Segment Q1'20/21 Q2'20/21 Q3'20/21 Q4'20/21 Q1'21/22e Q2'21/22e Q3'21/22e Q4'21/22e 22/23e - 23/24e Steam publisher w eekend Deep Silver X Steam publisher w eekend THQ Nordic X Steam Autumn & Winter sale Games segments X Xbox Publisher sale (THQ Nordic & Handy Games) THQ Nordic X
Partner Publishing Segment Q1'20/21 Q2'20/21 Q3'20/21 Q4'20/21 Q1'21/22e Q2'21/22e Q3'21/22e Q4'21/22e 22/23e - 23/24e Final Fantasy VII Remake Partner Publishing X Marvel's Avengers (PS4 & Xbox One) Partner Publishing X Marvel's Avengers (PS5 & Xbox Series X) Partner Publishing X Resident Evil 3 Remake Partner Publishing X F1 2020 Partner Publishing X Persona 5 Strikers Partner Publishing X Resident Evil Village Partner Publishing X Call of Duty WW2: Vanguard (ABGSCe) Partner Publishing X Dying Light 2 Partner Publishing X Source: ABG Sundal Collier, company data
9 August 2021 ABG Sundal Collier 4 Embracer Group
Steam developments We estimate that ~40% of Embracer’s Games revenues stem from the sale of products for PC, where a majority (we think ~75%) is generated through the digital distribution platform Steam. As such, measuring the progression of Steam, and Embracer’s market share on Steam can reveal useful data regarding Embracer’s performance.
Steam concurrent players In terms of daily concurrent player peaks on Steam, we find that new records were set in Q2’20 with ~24.5m players due to the initial COVID-19 lockdown. We are now seeing a slowdown such as in the summer months of 2020; however, the 2021 troughs are still ~20% higher than in 2020, pointing to the long-term increase in the player base on Steam.
Steam concurrent players 30,000,000
24,535,923 24,399,247 25,000,000
14,296,723 20,000,000
15,000,000
10,000,000 8,171,592 6,927,263 4,493,658
5,000,000
0
Steam - Concurrent players Twitch - Concurrent viewers
Source: ABG Sundal Collier, SteamDB, company data
Embracer’s market share on Steam In the graph below, we highlight Embracer’s share of revenues generated on Steam.
Embracer’s market share on Steam
14.0 1800.0%
12 1600.0% 12.0 11.4 1400.0%
10.0 1200.0%
1000.0% 8.0 6.9 800.0%
6.0 600.0% 4.6 4.1 4.2 4.0 400.0% 3.2 3.4 3.2 3.4 3 2.9 2.5 2.5 2.2 200.0% 2.1 2.0 2.1 1.9 1.9 1.6 1.7 1.8 1.8 2.0 1.5 1.4 1.4 1.4 1.3 1.4 1.5 0.9 0.0% 0.7 0.6 0.5 0.7 0.6 0.5 0.7
0.0 -200.0%
Marketplace share Average Growth
Source: ABG Sundal Collier, TIN Analytics, company data
9 August 2021 ABG Sundal Collier 5 Embracer Group
Quarterly overview Quarterly overview, Q1’16-Q4’20/21e (SEKm) Quarterly overview (SEKm) Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q5'18 Q1'19/20 Q2'19/20 Q3'19/20 Q4'19/20 Q1'20/21 Q2'20/21 Q3'20/21 Q4'20/21 Q1'21/22e Q2'21/22e Q3'21/22e Q4'21/22e Games - THQ Nordic 82 86 85 255 135 146 124 352 143 185 330 333 307 488 567 380 355 636 401 573 732 Games - Deep Silver 0 0 0 0 257 338 252 187 794 373 442 467 515 613 507 497 465 521 464 927 1,927 Games - Coffee Stain 0 0 0 0 0 0 0 14 98 83 45 36 82 173 130 99 781 224 276 257 261 Games - Saber Interactive 0 0 0 0 0 0 0 0 0 0 0 0 0 349 259 307 271 308 352 531 506 Games - DECA Games 0 0 0 0 0 0 0 0 0 0 0 0 0 0 33 73 104 175 162 533 533 Games - Gearbox 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 311 301 446 511 Games - Easybrain 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 453 476 526 536 Partner Publishing/Film 0 0 0 0 242 354 897 828 596 501 444 673 436 447 888 813 429 621 451 1,121 847 Net Sales 82 86 85 255 633 837 1,273 1,381 1,631 1,142 1,260 1,509 1,339 2,069 2,383 2,168 2,404 3,249 2,883 4,914 5,853
Capitalized w ork 13 14 19 33 58 93 102 106 116 131 177 221 224 248 273 373 398 481 491 673 801 Other operating income 1 2 -3 3 34 29 64 90 116 45 67 72 122 65 106 59 100 162 144 246 293 Total operating income 96 102 101 291 725 960 1,439 1,576 1,862 1,318 1,503 1,801 1,685 2,381 2,762 2,600 2,902 3,892 3,518 5,833 6,947
COGS -25 -24 -30 -69 -320 -466 -895 -838 -741 -528 -635 -747 -666 -760 -1,034 -861 -963 -1,305 -1,157 -2,082 -2,160 Gross profit 57 61 55 186 313 371 377 542 889 614 625 762 673 1,309 1,349 1,307 1,441 1,944 1,726 2,833 3,693
Opex -29 -38 -37 -65 -179 -287 -329 -412 -503 -401 -450 -536 -524 -656 -759 -860 -766 -1,122 -1,124 -1,695 -2,049 Of w hich Other external expenses -11 -15 -16 -33 -75 -120 -158 -224 -291 -178 -192 -231 -183 -292 -360 -409 -304 -487 -461 -786 -966 Personnel expenses -18 -21 -22 -33 -104 -167 -171 -188 -211 -223 -258 -305 -344 -379 -399 -488 -576 -650 -663 -909 -1,083 Other operating expenses -1 -2 1 1 0 0 0 0 0 0 0 0 3 15 -1 38 113 15 0 0 0
EBITDA 42 40 35 156 226 207 215 326 619 389 418 518 495 965 969 879 1,172 1,466 1,236 2,056 2,738
D&A -10 -9 -10 -47 -118 -154 -124 -175 -446 -308 -342 -427 -399 -746 -796 -1,125 -1,227 -2,214 -2,169 -2,328 -2,615 Operational -6 -6 -7 -43 -101 -140 -116 -132 -223 -186 -178 -216 -209 -253 -275 -276 -269 -329 -284 -443 -730 Non-operational -3 -3 -4 -4 -18 -14 -8 -42 -224 -123 -164 -211 -189 -493 -521 -849 -958 -1885 -1885 -1885 -1885
Adj. EBIT 36 34 28 113 125 67 99 194 396 204 241 302 286 712 653 603 903 1,137 952 1,613 2,008
EBIT 32 31 25 109 107 53 91 152 172 81 76 91 97 219 174 -246 -55 -748 -933 -272 123
Non-recurring items 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net financials 0 0 -1 -5 -9 -4 -3 -4 -9 2 3 -15 73 -36 90 9 140 -6 -6 -6 -6
PTP 32 30 24 104 98 49 88 148 163 83 80 76 170 184 264 -237 85 -754 -939 -278 117
Taxes -8 -7 -4 -24 -17 -15 -23 -34 -60 -31 -15 -43 -37 -93 -36 -138 -126 -189 -235 -70 -29 Tax rate 25.0% 22.3% 18.4% 22.7% 17.2% 30.8% 25.7% 23.1% 36.6% 36.7% 19.0% 56.0% 21.9% 50.7% 13.6% -58.2% 148.5% -25.0% -25.0% -25.0% 25.0%
Net profit 24 24 20 81 81 34 65 114 103 53 65 34 132 90 228 -374 -41 -943 -1,174 -348 88 Adj. Net profit 27 26 22 84 96 45 72 153 291 160 206 218 306 560 725 449 887 915 684 1,510 1,946
EPS Basic (SEK) 0.33 0.33 0.27 1.02 1.03 0.43 0.74 1.32 1.10 0.51 0.23 0.12 0.42 0.24 0.59 -0.89 -0.10 -1.93 -2.39 -0.71 0.18 Adj. EPS (SEK) 0.37 0.37 0.31 1.06 1.21 0.56 0.81 1.78 3.09 1.55 0.73 0.78 0.98 1.50 1.88 1.07 2.08 1.87 1.39 3.07 3.96 Grow th Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q5'18 Q1'19/20 Q2'19/20 Q3'19/20 Q4'19/20 Q1'20/21 Q2'20/21 Q3'20/21 Q4'20/21 Q1'21/22e Q2'21/22e Q3'21/22e Q4'21/22e Sales y-o-y 89.9% 62.2% 8.8% 99.3% 672.7% 878.8% 1403.1% 440.6% 157.6% 36.4% -1.0% 9.3% -17.9% 81.1% 89.2% 43.7% 79.5% 57.1% 21.0% 126.7% 143.5% Organic growth 50.6% 66.0% 26.6% 61.5% 19.5% -17.0% 75.6% 92.6% EBITDA y-o-y 81.8% 71.2% 36.4% 157.4% 438.7% 421.1% 521.3% 108.6% 174.0% 88.2% 94.7% 58.8% -19.9% 147.8% 131.8% 69.6% 136.7% 51.8% 27.6% 133.9% 133.6% Adj. EBIT y-o-y 102.8% 93.9% 45.0% 110.6% 251.0% 96.2% 251.2% 71.6% 216.9% 204.5% 143.9% 55.7% -27.8% 249.2% 171.4% 99.8% 215.7% 59.7% 45.9% 167.3% 122.4% EBIT y-o-y 125.9% 114.9% 53.1% 115.6% 233.4% 73.3% 269.5% 39.0% 60.3% 52.2% -16.0% -40.1% -43.8% 170.5% 127.4% -370.2% -156.5% -441.6% -637.7% 10.9% -325.5% Net profit y-o-y 122.0% 121.6% 53.5% 112.0% 240.3% 44.9% 232.1% 41.3% 26.9% 53.7% -0.8% -70.5% 28.2% 72.4% 253.3% -1214.3% -131.1% -1142.1% -615.0% -7.1% -313.7% Adj.Net profit y-o-y 98.5% 98.0% 45.4% 106.9% 259.3% 72.5% 220.4% 83.1% 204.2% 252.4% 187.5% 42.3% 5.1% 250.1% 251.4% 105.9% 190.2% 63.5% -5.6% 236.4% 119.3% EPS y-o-y 84.9% 84.6% 27.3% 72.4% 210.3% 29.9% 172.6% 29.9% 6.7% 19.9% -68.9% -90.9% -61.4% -52.3% 157.3% -846.5% -122.8% -894.0% -504.1% -20.7% -285.7% Adj. EPS y-o-y 65.4% 65.0% 20.6% 68.3% 227.6% 54.7% 163.0% 68.3% 155.7% 174.8% -9.7% -56.3% -68.3% -3.1% 155.9% 38.0% 112.0% 24.5% -25.9% 186.9% 90.6% Margins Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q5'18 Q1'19/20 Q2'19/20 Q3'19/20 Q4'19/20 Q1'20/21 Q2'20/21 Q3'20/21 Q4'20/21 Q1'21/22e Q2'21/22e Q3'21/22e Q4'21/22e Gross margin 70.1% 71.6% 64.9% 72.9% 49.5% 44.4% 29.7% 39.3% 54.5% 53.8% 49.6% 50.5% 50.3% 63.3% 56.6% 60.3% 59.9% 59.8% 59.9% 57.6% 63.1% EBITDA margin 51.2% 46.4% 40.8% 61.2% 35.7% 24.7% 16.9% 23.6% 37.9% 34.1% 33.2% 34.4% 37.0% 46.7% 40.7% 40.5% 48.8% 45.1% 42.9% 41.8% 46.8% Adj. EBIT margin 43.5% 39.9% 33.2% 44.3% 19.8% 8.0% 7.7% 14.0% 24.3% 17.8% 19.1% 20.0% 21.4% 34.4% 27.4% 27.8% 37.6% 35.0% 33.0% 32.8% 34.3% EBIT margin 39.3% 35.9% 29.0% 42.8% 17.0% 6.4% 7.1% 11.0% 10.6% 7.1% 6.1% 6.0% 7.2% 10.6% 7.3% -11.3% -2.3% -23.0% -32.4% -5.5% 2.1% Net margin 29.2% 27.6% 23.1% 31.6% 12.8% 4.1% 5.1% 8.3% 6.3% 4.6% 5.1% 2.2% 9.9% 4.4% 9.6% -17.3% -1.7% -29.0% -40.7% -7.1% 1.5% Adj. Net margin 32.5% 30.7% 26.4% 32.8% 15.1% 5.4% 5.6% 11.1% 17.8% 14.0% 16.4% 14.5% 22.8% 27.1% 30.4% 20.7% 36.9% 28.2% 23.7% 30.7% 33.2% Source: ABG Sundal Collier, company data
9 August 2021 ABG Sundal Collier 6 Embracer Group
Annual overview Annual overview, 2013-2022/23e (SEKm) Annual overview (SEKm) 2013 2014 2015 2016 2017 2018 2019/20 2020/21 2021/22e 2022/23e 2023/24e Games - THQ Nordic 102 178 213 302 508 899 1,155 1,789 2,342 2,588 2,842 Games - Deep Silver 0 0 0 0 0 1,828 1,796 2,081 3,839 4,410 4,904 Games - Coffee Stain 0 0 0 0 0 112 246 1,183 1,018 1,171 1,346 Games - Saber Interactive 0 0 0 0 0 0 0 1,186 1,697 1,945 2,140 Games - DECA Games 0 0 0 0 0 0 0 210 1,404 2,360 2,832 Games - Gearbox 0 0 0 0 0 0 0 0 1,569 1,749 1,951 Games - Easybrain 0 0 0 0 0 0 0 0 1,991 2,230 2,498 Partner Publishing/Film 0 0 0 0 0 2,916 2,054 2,576 3,040 3,131 3,225 Net Sales 102 178 213 302 508 5,754 5,249 9,024 16,900 19,585 21,737
Capitalized w ork 0 0 8 36 80 475 753 1,292 2,446 2,899 3,217 Other operating income 2 4 5 9 3 333 306 329 845 979 1,087 Total operating income 104 182 226 347 590 6,562 6,308 10,645 20,190 23,463 26,041
COGS -32 -58 -70 -119 -148 -3,261 -2,576 -3,618 -6,704 -7,420 -8,195 Gross profit 71 121 143 183 360 2,493 2,673 5,406 10,196 12,165 13,543
Opex -24 -29 -51 -96 -169 -1,709 -1,911 -3,041 -5,991 -7,051 -7,825 Of w hich Other external expenses -13 -15 -29 -43 -75 -868 -784 -1,365 -2,701 -3,134 -3,478 Personnel expenses -10 -14 -22 -52 -94 -841 -1,130 -1,842 -3,305 -3,917 -4,347 Other operating expenses -1 0 0 0 0 0 3 165 15 0 0
EBITDA 49 95 105 132 273 1,592 1,821 3,985 7,496 8,992 10,021
D&A 0 0 -39 -37 -76 -1,017 -1,476 -3,893 -9,327 -9,912 -10,046 Operational 0 -26 -24 -62 -712 -789 -1,073 -1,786 -2,320 -2,455 Non-operational 0 -12 -13 -14 -305 -687 -2,820 -7,541 -7,592 -7,591
Adj. EBIT 49 95 79 108 211 881 1,032 2,912 5,710 6,672 7,566
EBIT 49 95 67 95 197 575 345 92 -1,831 -920 -25
Non-recurring items 0 0 0 0 0 0 0 0 0 0 0
Net financials -2 -1 -1 -2 -6 -29 63 203 -24 -20 -20
PTP 47 94 66 93 191 546 408 296 -1,855 -940 -45
Taxes 0 -15 -14 -21 -43 -149 -126 -393 -522 -329 -326 Tax rate 0.3% 15.9% 21.6% 22.5% 22.5% 27.2% 30.7% 132.9% -28.1% -35.0% -726.6%
Net profit 47 79 52 72 148 398 283 -97 -2,378 -1,269 -371 Adj. Net profit 47 79 62 83 159 657 890 2,621 5,055 6,205 7,102
EPS Basic (SEK) 0.78 1.32 0.86 1.18 2.00 4.23 0.91 -0.23 -4.84 -2.57 -0.75 Adj. EPS (SEK) 0.78 1.32 1.03 1.35 2.15 6.99 2.85 6.14 10.29 12.58 14.34 Grow th 2013 2014 2015 2016 2017 2018 2019/20 2020/21 2021/22e 2022/23e 2023/24e Sales y-o-y 74.0% 19.6% 41.8% 68.1% 1033.7% -8.8% 71.9% 87.3% 15.9% 11.0% Organic growth 50.3% 33.9% 9.3% 11.0% EBITDA y-o-y 95.3% 10.4% 26.0% 106.0% 484.1% 14.4% 118.8% 88.1% 20.0% 11.4% Adj. EBIT y-o-y 95.3% -17.2% 37.2% 94.9% 317.7% 17.2% 182.1% 96.1% 16.9% 13.4% EBIT y-o-y 95.3% -30.1% 43.1% 106.5% 192.5% -40.0% -73.2% -2084.2% -49.8% -97.3% Net profit y-o-y 68.4% -34.7% 39.6% 104.5% 169.3% -28.9% -134.4% 2346.2% -46.6% -70.8% EPS y-o-y 68.4% -34.7% 37.0% 69.1% 111.8% -78.6% -125.1% 2026.5% -46.9% -70.9% Adj. EPS y-o-y 68.4% -22.3% 31.6% 59.3% 225.0% -59.2% 115.2% 67.7% 22.2% 14.0% Margins 2013 2014 2015 2016 2017 2018 2019/20 2020/21 2021/22e 2022/23e 2023/24e Gross margin 69.0% 67.7% 67.1% 60.6% 70.9% 43.3% 50.9% 59.9% 60.3% 62.1% 62.3% EBITDA margin 47.7% 53.5% 49.4% 43.8% 53.7% 27.7% 34.7% 44.2% 44.4% 45.9% 46.1% Adj. EBIT margin 47.7% 53.5% 37.0% 35.8% 41.5% 15.3% 19.7% 32.3% 33.8% 34.1% 34.8% EBIT margin 47.7% 53.5% 31.3% 31.6% 38.8% 10.0% 6.6% 1.0% -10.8% -4.7% -0.1% Net margin 46.0% 44.5% 24.3% 23.9% 29.1% 6.9% 5.4% -1.1% -14.1% -6.5% -1.7% Adj. Net margin 46.0% 44.5% 28.9% 27.3% 31.3% 11.4% 17.0% 29.0% 29.9% 31.7% 32.7% Other metrics 2013 2014 2015 2016 2017 2018 2019/20 2020/21 2021/22e 2022/23e 2023/24e EV/Sales 2.5x 3.8x 1.4x 6.6x 9.2x 4.7x 3.9x 3.3x EV/EBITDA 5.6x 7.1x 5.2x 19.1x 20.8x 10.7x 8.4x 7.1x EV/Adj. EBIT 6.9x 9.2x 9.4x 33.7x 28.5x 14.0x 11.3x 9.4x EV/EBIT 7.8x 9.8x 14.4x 101.0x 898.6x -43.6x -82.3x -2,857.1x Adj. P/E 7.4x 8.9x 9.6x 40.3x 36.7x 18.2x 14.8x 12.9x P/E 8.4x 9.6x 15.8x 126.8x -988.4x -38.6x -72.4x -247.7x ND/EBITDA -0.2x -1.0x -1.9x -1.3x -0.6x -3.3x -1.6x -1.8x -2.1x ROE adj. 79.5% 36.8% 21.6% 17.5% 12.7% 13.9% 15.7% 18.1% 20.7% ROIC adj. 67.7% 49.8% 40.5% 30.9% 16.2% 20.0% 23.0% 26.1% 38.0% ROCE adj. 74.1% 34.5% 19.8% 15.1% 11.9% 14.5% 14.9% 17.3% 19.8% FCF yield -9.8% -9.5% -1.9% 0.0% 1.8% 3.3% 4.5% 5.1% Source: ABG Sundal Collier, company data
9 August 2021 ABG Sundal Collier 7 Embracer Group
Valuation We look at Embracer in terms of 1) three sum-of-the-parts valuations based on our ’21/22e EBITDA estimates and EV/EBITDA multiples based on relevant peers, 2) a peer group comparison and 3) the historical 12-month forward multiples.
Sum-of-the-parts valuation We have identified potential valuation multiples for Embracer’s segments based on the valuation of relevant peers, which are included in the peer table on the next page. For example, when valuing Embracer’s THQ Nordic, Saber Interactive, Coffee Stain and Gearbox segments, we look at peers such as Paradox Interactive, Frontier Developments and Codemasters. The Deep Silver segment is trickier, as it has historically relied on licensed IPs and its earnings have been volatile; thus we think the valuation should be slightly lower. For DECA Games and Easybrain, we look at mobile game developer peers such as Stillfront and Zynga for valuation guidance. The Partner Publishing segment is considerably different from the rest of the group, as its core business is the physical distribution of video games, thus we look at peers such as Digital Bros, Focus Home Interactive and Thunderful Group. Below we highlight our EBITDA estimates and growth assumptions for ’21/22e, on which we base our SOTP valuation range. SOTP estimates overview (SEKm) SOTP (SEKm) EBITDA 21/22e Margin estimates EBITDA y-o-y grow th
THQ Nordic 1,335 57% 31% Deep Silver 1,996 52% 84% Coffee Stain 662 65% -14% Saber Interactive 1,018 60% 43% DECA Games 604 43% n.a. Gearbox 847 54% 13% Easybrain 717 36% 6% Partner Publishing 365 12% 18% Number of shares (m) 491.2 Source: ABG Sundal Collier, company data
Our three SOTP valuations produce a fair value range of SEK 225-350 (225-345) per share based on the following assumptions and our next FY EBITDA estimates.
SOTP valuation overview, (SEKm) SOTP (SEKm) Multiple Valuation Value per share Multiple Valuation Value per share Multiple Valuation Value per share
THQ Nordic 16x EV/EBITDA 21,359 43 23x EV/EBITDA 30,704 63 26x EV/EBITDA 34,708 71 Deep Silver 16x EV/EBITDA 31,742 65 23x EV/EBITDA 45,916 93 25x EV/EBITDA 48,910 100 Coffee Stain 16x EV/EBITDA 10,587 22 24x EV/EBITDA 15,881 32 25x EV/EBITDA 16,212 33 Saber Interactive 14x EV/EBITDA 14,255 29 24x EV/EBITDA 24,437 50 24x EV/EBITDA 24,437 50 DECA Games 10x EV/EBITDA 6,035 12 14x EV/EBITDA 8,449 17 16x EV/EBITDA 9,897 20 Gearbox 15x EV/EBITDA 12,285 25 24x EV/EBITDA 19,911 41 26x EV/EBITDA 22,029 45 Easybrain 10x EV/EBITDA 7,168 15 14x EV/EBITDA 10,035 20 16x EV/EBITDA 11,755 24 Partner Publishing 8x EV/EBITDA 2,918 6 9x EV/EBITDA 3,283 7 10x EV/EBITDA 3,794 8 Enterprise value 106,349 217 Enterprise value 158,615 323 Enterprise value 171,742 350 Net debt (21/22e) -11,990 -24 Net debt (21/22e) -11,990 -24 Net debt (21/22e) -11,990 -24 Market cap 118,339 241 Market cap 170,605 347 Market cap 183,732 374 WACC 7.0% WACC 7.0% WACC 7.0% Discounted MCAP 110,597 225 Discounted MCAP 159,444 325 Discounted MCAP 171,712 350 Source: ABG Sundal Collier, company data
9 August 2021 ABG Sundal Collier 8 Embracer Group
Relative valuation To obtain a comprehensive overview of the valuation and operational performance of companies in the video games industry, we compare Embracer across three peer groups of video game developers and publishers: large, mid-sized and mobile. The mobile peer group is included to highlight the valuation and operative performance differences among video game segments.
Valuation and operative performance across peer groups Large developers & publishers Mcap Share price P/E (x)* EV/EBIT (x)* EV/EBITDA (x) EBIT-margin (%)* EBITDA-margin (%) EV/Sales (x) ROIC (%)* CAGR '20-'23e Company (SEKm) Ccy SP 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e Sales EBIT
Activision Blizzard 623,310 SEK 802.2 25.7 21.8 20.8 17.9 14.6 13.1 17.4 14.3 13.1 43.0 44.0 45.5 44.2 45.1 45.7 7.7 6.4 6.0 14.1 14.8 13.8 6.8 11.4 Electronic Arts 344,248 SEK 1,202.9 22.8 21.0 17.9 16.7 15.0 12.6 15.3 13.9 11.8 31.9 32.4 33.9 34.8 34.8 36.2 5.3 4.8 4.3 19.0 20.4 23.5 11.0 11.8 Take-Tw o 176,712 SEK 1,527.9 34.6 28.4 21.3 25.3 19.8 13.8 22.7 18.4 13.1 21.0 22.5 24.5 23.3 24.3 25.7 5.3 4.5 3.4 17.0 17.2 19.7 13.0 10.2 Ubisoft 71,674 SEK 582.0 23.7 20.5 18.0 15.8 13.8 11.8 6.5 5.7 4.9 19.5 20.1 21.3 47.5 49.0 51.2 3.1 2.8 2.5 8.3 9.0 Bandai Namco 129,421 SEK 589.2 25.5 21.0 18.4 15.3 12.9 10.8 11.8 10.3 8.2 12.7 14.0 15.2 16.5 17.5 19.8 1.9 1.8 1.6 12.1 13.6 13.7 6.1 17.3 Nintendo 610,539 SEK 5,125.3 18.0 18.6 19.8 12.3 12.3 12.3 11.7 11.2 10.9 36.1 36.5 36.2 37.9 39.9 40.8 4.5 4.5 4.5 22.8 20.1 17.5 -3.5 -3.9 NCsoft 128,893 SEK 6,254.7 24.5 16.8 11.5 16.9 10.7 6.8 15.7 10.2 6.3 33.8 39.1 12.1 36.3 41.2 12.8 5.7 4.2 1.0 18.7 22.2 20.0 18.5 23.3 NEXON 162,530 SEK 182.9 19.4 15.8 15.4 13.3 9.6 8.6 12.6 9.3 8.4 40.3 44.2 44.5 42.5 45.6 45.8 5.4 4.3 3.8 13.8 14.7 13.4 9.6 15.5 Peer average 280,916 24.3 20.5 17.9 16.7 13.6 11.2 14.2 11.7 9.6 29.8 31.6 29.1 35.4 37.2 34.8 4.9 4.2 3.4 16.8 17.6 17.4 8.7 11.8 Peer median 169,621 24.1 20.7 18.2 16.3 13.4 12.1 14.0 10.8 9.7 32.8 34.5 29.2 37.1 40.5 38.5 5.3 4.4 3.6 17.0 17.2 17.5 9.0 11.6 Embracer Group (ABGSCe) 491 SEK 187 18.2 14.8 12.9 14.0 11.3 9.4 10.7 8.4 7.1 33.8 34.1 34.8 44.4 45.9 46.1 4.7 3.9 3.3 15.7 18.1 20.7 34.0 37.5 vs peer average -25% -28% -28% -16% -17% -16% -25% -28% -26% 13% 8% 19% 25% 23% 33% -3% -7% -3% -6% 3% 19% 290% 217% vs peer median -25% -29% -29% -14% -15% -22% -24% -22% -27% 3% -1% 19% 19% 13% 20% -11% -11% -9% -7% 5% 19% 280% 223% Mid-sized developers & publishers Mcap Share price P/E (x)* EV/EBIT (x)* EV/EBITDA (x) EBIT-margin (%)* EBITDA-margin (%) EV/Sales (x) ROIC (%)* CAGR '20-'23e Company (SEKm) Ccy SP 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e Sales EBIT
Konami 67,913 SEK 509.8 23.3 19.8 17.7 15.1 11.8 10.1 11.5 9.5 8.3 20.5 23.4 25.0 26.8 29.0 30.6 3.1 2.8 2.5 10.2 11.3 11.2 5.9 31.2 CD Projekt 38,964 SEK 386.8 29.4 25.9 31.7 22.0 20.9 24.4 18.9 17.2 18.8 53.7 54.5 50.5 62.5 66.1 65.3 11.8 11.4 12.3 24.9 26.3 21.1 -16.7 -18.8 Paradox Interactive 18,860 SEK 178.6 34.8 27.1 24.5 26.1 19.9 17.8 16.3 12.1 10.8 36.8 36.7 36.8 59.1 60.6 60.3 9.6 7.3 6.5 13.0 14.6 Frontier Developments 12,280 SEK 315.8 41.5 32.8 30.4 33.9 26.1 22.6 19.7 15.4 13.0 22.8 22.6 22.7 39.3 38.5 39.4 7.7 5.9 5.1 18.4 17.8 30.2 30.8 Focus Home Interactive 4,159 SEK 665.0 24.9 17.4 15.7 15.0 11.1 9.5 10.4 7.9 9.6 14.9 16.0 17.9 21.5 22.6 17.8 2.2 1.8 1.7 17.5 8.3 15.9 Team17 Group 10,256 SEK 79.2 35.3 32.2 29.7 27.3 23.9 21.2 24.5 21.5 19.1 33.4 33.5 33.3 37.1 37.3 37.0 9.1 8.0 7.1 19.6 17.9 17.1 8.8 8.8 Remedy Entertainment 6,322 SEK 483.6 50.8 52.6 31.3 35.8 36.9 33.4 32.2 33.5 30.3 36.4 35.9 34.7 48.8 12.0 11.2 18.3 23.2 11 Bit Studios 2,835 SEK 1,199.7 92.3 80.0 74.1 9.1 50.8 46.8 7.9 26.0 18.3 54.8 41.0 28.9 63.5 20.8 13.5 5.0 8.2 7.0 42.5 37.5 44.0 Digital Bros 3,509 SEK 246.0 18.4 17.9 13.0 12.0 6.6 6.2 17.2 17.8 34.0 34.3 2.2 2.1 2.7 15.2 Sumo Group 7,551 SEK 45.3 43.5 37.1 33.6 36.2 29.5 24.0 27.2 22.6 19.9 17.1 17.2 18.1 22.8 22.5 21.9 6.2 5.1 4.4 10.5 11.8 12.0 27.8 34.2 Koei Tecmo 61,061 SEK 367.6 29.4 28.0 24.2 21.8 20.4 14.8 27.4 21.8 19.7 41.7 43.8 46.1 46.3 52.9 48.0 7.1 5.9 5.2 16.2 15.5 16.5 13.1 18.6 Square Enix 50,941 SEK 426.6 20.5 18.5 16.7 10.6 9.6 8.5 9.2 8.3 7.7 15.0 15.4 15.8 17.3 17.7 17.3 1.6 1.5 1.3 12.8 12.9 12.9 5.5 9.6 TinyBuild 6,034 SEK 29.9 56.1 52.3 42.7 58.5 40.4 32.1 42.4 37.5 30.8 28.6 37.3 39.9 39.4 40.3 41.6 16.7 15.1 12.8 Capcom 52,080 SEK 243.9 24.7 22.1 21.0 20.0 17.3 16.2 18.1 15.7 14.0 38.5 39.8 40.6 42.5 43.9 47.0 7.7 6.9 6.6 20.5 19.6 17.4 7.5 11.7 Peer average 24,483 37.5 29.5 26.6 29.7 25.3 17.5 22.6 19.6 15.0 28.5 29.0 33.7 37.5 37.8 41.4 8.4 7.0 5.9 15.7 15.8 18.9 12.4 18.4 Peer median 11,268 32.1 27.1 27.1 24.1 20.6 17.0 19.3 16.4 13.5 27.3 26.8 36.4 38.2 36.0 41.6 7.7 6.4 5.2 16.2 16.5 16.8 8.8 15.9 Embracer Group (ABGSCe) 491 SEK 187 18.2 14.8 12.9 14.0 11.3 9.4 10.7 8.4 7.1 33.8 34.1 34.8 44.4 45.9 46.1 4.7 3.9 3.3 15.7 18.1 20.7 34.0 37.5 vs peer average -52% -50% -51% -53% -55% -46% -53% -57% -53% 18% 17% 3% 18% 21% 11% -44% -45% -44% 0% 15% 10% 174% 104% vs peer median -43% -45% -52% -42% -45% -45% -45% -49% -47% 24% 27% -4% 16% 28% 11% -39% -40% -37% -3% 10% 23% 287% 135% Mobile developers & publishers Mcap Share price P/E (x)* EV/EBIT (x)* EV/EBITDA (x) EBIT-margin (%)* EBITDA-margin (%) EV/Sales (x) ROIC (%)* CAGR '20-'23e Company (SEKm) Ccy SP 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e 2021e 2022e 2023e Sales EBIT
Com2us 11,538 SEK 959.4 11.6 9.3 8.6 6.0 3.8 3.0 5.6 3.6 2.8 25.0 27.5 28.0 26.4 29.1 29.5 1.5 1.0 0.8 13.4 18.7 27.9 Stillfront 30,327 SEK 84.3 21.4 17.3 15.2 18.2 14.7 12.3 14.3 11.3 9.4 28.9 30.0 30.9 36.7 39.2 40.6 5.3 4.4 3.8 26.1 25.8 Zynga 94,608 SEK 86.9 26.1 22.2 20.6 18.1 13.8 11.8 15.9 12.6 10.6 20.3 22.6 23.1 23.0 24.7 25.7 3.7 3.1 2.7 10.7 12.4 12.1 14.9 13.1 G5 Entertainment 4,717 SEK 545.5 20.0 16.0 12.7 16.4 12.3 8.7 10.7 8.1 6.1 18.5 20.8 23.6 28.5 31.6 33.5 3.0 2.6 2.1 11.3 32.5 Rovio Entertainment 5,263 SEK 71.2 19.8 18.2 16.8 12.1 10.8 9.1 9.5 8.7 7.8 12.6 12.7 13.6 16.1 15.8 16.0 1.5 1.4 1.2 3.3 -3.0 Ten Square Games 7,257 SEK 998.6 15.8 11.5 9.7 11.7 9.5 7.3 12.2 10.1 7.2 34.2 34.7 33.8 32.6 32.8 34.1 4.0 3.3 2.5 21.5 22.2 Peer average 25,618 19.1 15.7 13.9 13.7 10.8 8.7 11.4 9.1 7.3 23.2 24.7 25.5 27.2 28.9 29.9 3.2 2.6 2.2 10.7 12.4 12.7 16.0 19.8 Peer median 9,397 19.9 16.6 14.0 14.3 11.5 8.9 11.4 9.4 7.5 22.6 25.1 25.8 27.5 30.3 31.5 3.3 2.8 2.3 10.7 12.4 12.7 16.8 24.0 Embracer Group (ABGSCe) 491 SEK 187 18.2 14.8 12.9 14.0 11.3 9.4 10.7 8.4 7.1 33.8 34.1 34.8 44.4 45.9 46.1 4.7 3.9 3.3 15.7 18.1 20.7 34.0 37.5 vs peer average -5% -6% -7% 2% 5% 8% -6% -7% -3% 45% 38% 37% 63% 59% 54% 49% 47% 49% 47% 46% 63% 113% 90% vs peer median -9% -11% -7% -2% -2% 5% -7% -10% -5% 49% 36% 35% 61% 51% 46% 41% 36% 45% 47% 46% 63% 103% 56% *Adjusted P/E, EV/EBIT, EBIT-margin and ROIC for Embracer Group to ease comparison to IFRS peers Source: ABG Sundal Collier (for Embracer), FactSet, company da
Mid-sized peers, EV/sales vs. EBIT margin, ’21e Large peers, EV/sales vs. EBIT margin, ’21e 16x 10x
11 Bit 9x 14x Activision Blizzard 8x 12x Remedy 7x NEXON e 10x e NCsoft 2 1 6x Take-Two Electronic Arts 2 2 ' '
s s e Paradox e l 8x l 5x a a
S Team17
Capcom S / Frontier / V V 4x E 6x Sumo Group E Nintendo Koei Tecmo 3x Ubisoft Embracer 4x Square Enix 2x Konami Embracer 2x Bandai Namco Focus Home 1x Digital Bros 0x 0x 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% EBIT margin '22e adj. EBIT margin '21e
Source: ABG Sundal Collier (for Embracer), FactSet Source: ABG Sundal Collier (for Embracer), FactSet
9 August 2021 ABG Sundal Collier 9 Embracer Group
Forward multiples Based on FactSet consensus, Embracer is currently trading at a f12m EV/adj. EBIT of approximately 15.6x, which is approximately 18.0% below the five-year historical average of 18.7x. Looking at the f12m adjusted P/E, we find that Embracer is trading at around 18.1x, which is 29.8% below the five-year historical average of 25.9x.
F12m EV/adj. EBIT F12m adj. P/E 100.0% 90.0% 50x 35x 80.0% 60.0% 30x 15.6 60.0% 40x 18.1 40.0% 25x 30.0% 30x 20.0% 20x 0.0% 0.0% 15x 20x -20.0% -30.0% -40.0% 10x 10x -60.0% -60.0% 5x -80.0% 0x -90.0% 0x -100.0%
Premium/Discount F12m EV/adj.EBIT Avg. EV/adj.EBIT Premium/Discount F12m P/E Avg. P/E
Source: ABG Sundal Collier, FactSet, company data Source: ABG Sundal Collier, FactSet, company data
9 August 2021 ABG Sundal Collier 10 Embracer Group
ESG profile
Sustainability framework rollout initiated… Key issues* ABGSC weight In conjunction with Embracer’s 2018/2019 annual report, the company Environment 25% announced that it had launched a sustainability framework to promote Financing environmental impact what it termed “Smarter business”. The framework seeks to create further Packaging material and waste long-term value for the company’s shareholders through four pillars: Climate change Business Sense, Solid Work, Great People and Greener Planet. Social 50% Embracer, like the gaming industry as a whole, is growing rapidly, adding Human capital revenues and employees at a rapid rate, which increases Embracer’s Health and safety responsibility and accountability. Labour management Governance 25% …with Karin Edner assuming responsibility Corporate behaviour The framework is structured in such a way that the Swedish parent Business ethics company is responsible for the smarter business framework at group Corporate governance level, and will produce a yearly sustainability report that highlights the Previous ESG incidents group’s progress. However, it is up to each subsidiary to appoint a None sustainability ambassador to lead and coordinate the work through Exposure to ESG Trends suitable activities and initiatives at subsidiary level. In brief, the Business Building energy efficiency, Recycling, Plastic waste, Sense pillar seeks to increase transparency, combat corruption and Renewable materials enhance consumer data protection. The Solid Work pillar promotes responsible gaming content and marketing, working against gaming addiction and to increasing the accessibility of Embracer’s games. The third pillar, Great People, will promote diversity, different perspectives and skillsets, while nurturing creative independence and work-life balance. Lastly, the Greener Planet pillar will seek to minimize the environmental footprint from Embracer’s operations and further investment in partnerships that focus on preventing and mitigating the company’s climate impact.
Social and governance data ESG Data 2017 Women in workforce % 13 22 No data available Women in management % 25 0 Women in board % 60 20 CEO salary, SEKm p.a. 1.1 1 Employee turnover % Employee absence %
Person responsible for sustainability: Karin Edner Senior management: No ESG quantified targets Today Target By No targets available
*based on the MSCI framework but not using all the parameters.
9 August 2021 ABG Sundal Collier 11 Embracer Group
Income Statement (SEKm) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021e Q3 2021e Q4 2021e Q1 2022e Sales 2,069 2,383 2,168 2,404 3,249 2,883 4,914 5,853 COGS -760 -1,034 -861 -963 -1,305 -1,157 -2,082 -2,160 Gross profit 1,309 1,349 1,307 1,441 1,944 1,726 2,833 3,693 Other operating items -344 -380 -428 -269 -479 -490 -777 -955 EBITDA 965 969 879 1,172 1,466 1,236 2,056 2,738 Depreciation and amortisation -746 -796 -1,125 -1,227 -2,214 -2,169 -2,328 -2,615 EBITA 219 174 -246 -55 -748 -933 -272 123 EO items -493 -521 -849 -958 -1,885 -1,885 -1,885 -1,885 Impairment and PPA amortisation 0 0 0 0 0 0 0 0 EBIT 219 174 -246 -55 -748 -933 -272 123 Net financial items -36 90 9 140 -6 -6 -6 -6 Pretax profit 184 264 -237 85 -754 -939 -278 117 Tax -93 -36 -138 -126 -189 -235 -70 -29 Net profit 91 228 -374 -41 -943 -1,174 -348 88 Minority interest 0 0 0 0 0 0 0 0 Net profit discontinued 0 0 0 0 0 0 0 0 Net profit to shareholders 91 228 -374 -41 -943 -1,174 -348 88 EPS 0.29 0.73 -1.20 -0.13 -3.02 -3.76 -1.12 0.28 EPS Adj 0.29 0.73 -1.20 -0.13 -3.02 -3.76 -1.12 0.28 Total extraordinary items after tax -493 -521 -849 -958 -1,885 -1,885 -1,885 -1,885 Tax rate (%) 50.7 13.6 58.2 148.5 25.0 25.0 25.0 25.0 Gross margin (%) 63.3 56.6 60.3 59.9 59.8 59.9 57.6 63.1 EBITDA margin (%) 46.7 40.7 40.5 48.8 45.1 42.9 41.8 46.8 EBITA margin (%) 10.6 7.3 -11.3 -2.3 -23.0 -32.4 -5.5 2.1 EBIT margin (%) 10.6 7.3 -11.3 -2.3 -23.0 -32.4 -5.5 2.1 Pretax margin (%) 8.9 11.1 -10.9 3.5 -23.2 -32.6 -5.7 2.0 Net margin (%) 4.4 9.6 -17.3 -1.7 -29.0 -40.7 -7.1 1.5 Growth rates Y/Y Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021e Q3 2021e Q4 2021e Q1 2022e Sales growth (%) 81.1 89.2 43.7 79.5 57.1 21.0 126.7 143.5 EBITDA growth (%) 147.8 131.8 69.6 136.7 51.8 27.6 133.9 133.6 EBIT growth (%) 170.5 127.4 -chg -chg -chg -chg -chg +chg Net profit growth (%) 72.4 253.3 -chg -chg -chg -chg +chg +chg EPS growth (%) 72.4 253.3 -chg -chg -chg -chg +chg +chg Adj earnings numbers Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021e Q3 2021e Q4 2021e Q1 2022e EBITDA Adj 1,458 1,490 1,728 2,130 3,351 3,121 3,941 4,623 EBITDA Adj margin (%) 70.5 62.5 79.7 88.6 103.1 108.3 80.2 79.0 EBITA Adj 712 694 603 903 1,137 952 1,613 2,008 EBITA Adj margin (%) 34.4 29.1 27.8 37.6 35.0 33.0 32.8 34.3 EBIT Adj 712 694 603 903 1,137 952 1,613 2,008 EBIT Adj margin (%) 34.4 29.1 27.8 37.6 35.0 33.0 32.8 34.3 Pretax profit Adj 676 784 612 1,043 1,131 946 1,607 2,002 Net profit Adj 583 749 475 917 942 711 1,537 1,973 Net profit to shareholders Adj 583 749 475 917 942 711 1,537 1,973 Net Adj margin (%) 28.2 31.4 21.9 38.1 29.0 24.7 31.3 33.7 Source: ABG Sundal Collier, Company data
9 August 2021 ABG Sundal Collier 12 Embracer Group
Income Statement (SEKm) 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e Sales 178 213 302 508 5,754 5,249 9,024 16,900 19,585 21,737 COGS -58 -70 -119 -148 -3,261 -2,576 -3,618 -6,704 -7,420 -8,195 Gross profit 121 143 183 360 2,493 2,673 5,406 10,196 12,165 13,543 Other operating items -25 -38 -51 -87 -901 -852 -1,420 -2,700 -3,173 -3,521 EBITDA 95 105 132 273 1,592 1,821 3,985 7,496 8,992 10,021 Depreciation and amortisation 0 -39 -37 -76 -1,017 -1,476 -3,893 -9,327 -9,912 -10,046 Of which leasing depreciation 0 0 0 0 0 0 0 0 0 0 EBITA 95 67 95 197 575 345 92 -1,831 -920 -25 EO items 0 -12 -13 -14 -305 -687 -2,820 -7,541 -7,592 -7,591 Impairment and PPA amortisation 0 0 0 0 0 0 0 0 0 0 EBIT 95 67 95 197 575 345 92 -1,831 -920 -25 Net financial items -1 -1 -2 -6 -29 63 203 -24 -20 -20 Pretax profit 94 66 93 191 546 408 296 -1,855 -940 -45 Tax -15 -14 -21 -43 -149 -126 -393 -522 -329 -326 Net profit 79 52 72 148 398 283 -97 -2,378 -1,269 -371 Minority interest 0 0 0 0 0 0 0 0 0 0 Net profit discontinued 0 0 0 0 0 0 0 0 0 0 Net profit to shareholders 79 52 72 148 398 283 -97 -2,378 -1,269 -371 EPS 0 0 0 0 0 0.91 -0.23 -4.84 -2.57 -0.75 EPS Adj 0 0 0 0 0 3.11 6.38 10.51 12.82 14.58 Total extraordinary items after tax 0 -12 -13 -14 -305 -687 -2,820 -7,541 -7,592 -7,591 Leasing payments 0 0 0 0 0 0 0 0 0 0 Tax rate (%) 15.9 21.6 22.5 22.5 27.2 30.7 132.9 28.1 35.0 726.6 Gross margin (%) 67.7 67.1 60.6 70.9 43.3 50.9 59.9 60.3 62.1 62.3 EBITDA margin (%) 53.5 49.4 43.8 53.7 27.7 34.7 44.2 44.4 45.9 46.1 EBITA margin (%) 53.5 31.3 31.6 38.8 10.0 6.6 1.0 -10.8 -4.7 -0.1 EBIT margin (%) 53.5 31.3 31.6 38.8 10.0 6.6 1.0 -10.8 -4.7 -0.1 Pretax margin (%) 52.9 31.0 30.9 37.5 9.5 7.8 3.3 -11.0 -4.8 -0.2 Net margin (%) 44.5 24.3 23.9 29.1 6.9 5.4 -1.1 -14.1 -6.5 -1.7 Growth rates Y/Y 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e Sales growth (%) na 19.6 41.8 68.1 1,033.7 -8.8 71.9 87.3 15.9 11.0 EBITDA growth (%) na 10.4 26.0 106.0 484.1 14.4 118.8 88.1 20.0 11.4 EBIT growth (%) na -30.1 43.1 106.5 192.5 -40.0 -73.2 -2,084.2 49.8 97.3 Net profit growth (%) na -34.7 39.6 104.5 169.3 -28.9 -134.4 -2,346.2 46.6 70.8 EPS growth (%) na na na na na high -125.1 -2,026.5 46.9 70.9 Profitability 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e ROE (%) na 66.8 32.2 20.1 10.6 4.0 -0.5 -7.4 -3.7 -1.1 ROE Adj (%) na 82.7 38.0 22.0 18.8 13.8 14.5 16.1 18.5 21.1 ROCE (%) na 80.1 39.8 24.5 13.3 5.4 2.2 -5.4 -2.5 -0.1 ROCE Adj(%) na 94.9 45.2 26.2 20.2 13.6 15.9 16.9 18.6 21.0 ROIC (%) na 87.0 51.8 37.6 16.8 4.4 -0.3 -12.0 -6.2 -1.3 ROIC Adj (%) na 103.1 58.8 40.2 25.8 13.0 -8.2 37.4 44.6 396.6 Adj earnings numbers 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e EBITDA Adj 95 117 145 287 1,898 2,509 6,805 15,037 16,584 17,612 EBITDA Adj margin (%) 53.5 55.1 48.1 56.5 33.0 47.8 75.4 89.0 84.7 81.0 EBITDA lease Adj 95 117 145 287 1,898 2,509 6,805 15,037 16,584 17,612 EBITDA lease Adj margin (%) 53.5 55.1 48.1 56.5 33.0 47.8 75.4 89.0 84.7 81.0 EBITA Adj 95 79 108 211 881 1,032 2,912 5,710 6,672 7,566 EBITA Adj margin (%) 53.5 37.0 35.8 41.5 15.3 19.7 32.3 33.8 34.1 34.8 EBIT Adj 95 79 108 211 881 1,032 2,912 5,710 6,672 7,566 EBIT Adj margin (%) 53.5 37.0 35.8 41.5 15.3 19.7 32.3 33.8 34.1 34.8 Pretax profit Adj 94 78 106 205 851 1,096 3,115 5,686 6,652 7,546 Net profit Adj 79 64 85 162 703 970 2,723 5,163 6,323 7,220 Net profit to shareholders Adj 79 64 85 162 703 970 2,723 5,163 6,323 7,220 Net Adj margin (%) 44.5 30.1 28.2 31.9 12.2 18.5 30.2 30.6 32.3 33.2 Source: ABG Sundal Collier, Company data
9 August 2021 ABG Sundal Collier 13 Embracer Group
Cash Flow Statement (SEKm) 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e EBITDA 95 105 132 273 1,592 1,821 3,985 7,496 8,992 10,021 Net financial items -1 -1 -2 -6 -29 63 203 -24 -20 -20 Paid tax -9 -12 -11 -22 -17 -123 -277 -422 -522 -329 Non-cash items 0 0 0 0 0 0 0 0 0 0 Cash flow before change in WC 85 93 119 244 1,546 1,761 3,911 7,049 8,450 9,672 Change in WC -25 17 -20 -65 -190 -30 -12 -100 193 3 Operating cash flow 60 110 99 179 1,356 1,731 3,899 6,949 8,643 9,675 CAPEX tangible fixed assets 0 -0 2 2 140 -42 -70 -169 -196 -217 CAPEX intangible fixed assets 36 69 157 312 1,335 -1,653 -2,139 -3,718 -4,309 -4,782 Acquisitions and disposals 0 0 0 -62 -1,071 -911 -4,591 -4,200 0 0 Free cash flow 96 178 258 430 1,761 -876 -2,900 -1,138 4,139 4,676 Dividend paid 0 0 0 0 0 0 0 0 0 0 Share issues and buybacks -10 -34 202 655 3,488 474 14,725 0 0 0 Lease liability amortisation 0 0 0 0 0 0 0 0 0 0 Other non cash items -76 -131 -346 -704 -3,772 -545 257 -4 0 0 Balance Sheet (SEKm) 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e Goodwill 0 0 0 0 830 1,412 10,804 14,688 9,059 2,510 Other intangible assets 75 104 229 571 2,877 4,459 5,586 6,997 8,413 10,169 Tangible fixed assets 1 2 4 8 156 185 238 333 414 531 Right-of-use asset 0 0 0 0 0 0 0 0 0 0 Total other fixed assets 3 0 0 3 196 251 572 572 572 572 Fixed assets 78 106 232 582 4,059 6,307 17,199 22,589 18,458 13,782 Inventories 8 13 18 30 323 353 243 243 243 243 Receivables 26 31 47 90 1,297 1,468 2,010 2,010 2,010 2,010 Other current assets 0 0 0 0 0 0 0 0 0 0 Cash and liquid assets 18 26 167 627 2,929 2,510 14,300 13,159 17,297 21,973 Total assets 131 175 465 1,329 8,608 10,637 33,752 38,001 38,008 38,008 Shareholders equity 63 92 357 1,114 6,379 7,636 29,982 34,231 34,237 34,237 Minority 0 0 0 0 0 0 0 0 0 0 Total equity 63 92 357 1,114 6,379 7,636 29,982 34,231 34,237 34,237 Long-term debt 10 1 0 0 211 222 246 246 246 246 Pension debt 0 0 0 0 0 0 0 0 0 0 Convertible debt 0 0 0 0 0 0 0 0 0 0 Leasing liability 0 0 0 0 0 0 0 0 0 0 Total other long-term liabilities 0 0 0 0 0 0 0 0 0 0 Short-term debt 0 0 29 110 918 1,491 1,494 1,494 1,494 1,494 Accounts payable 58 82 80 105 1,100 1,288 2,030 2,030 2,030 2,030 Other current liabilities 0 0 0 0 0 0 0 0 0 0 Total liabilities and equity 131 175 465 1,329 8,608 10,637 33,752 38,001 38,008 38,008 Net IB debt -11 -24 -139 -520 -1,996 -1,049 -13,131 -11,990 -16,129 -20,804 Net IB debt excl. pension debt -11 -24 -139 -520 -1,996 -1,049 -13,131 -11,990 -16,129 -20,804 Net IB debt excl. leasing -11 -24 -139 -520 -1,996 -1,049 -13,131 -11,990 -16,129 -20,804 Capital invested 52 68 218 594 4,383 6,588 16,851 22,241 18,109 13,433 Working capital -23 -39 -15 15 521 532 223 223 223 223 EV breakdown 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e Market cap. diluted (m) na na 676 1,953 4,525 22,083 83,948 92,344 92,728 93,111 Net IB debt Adj -8 -24 -139 -517 -1,800 -798 -12,560 -11,418 -15,557 -20,233 Market value of minority 0 0 0 0 0 0 0 0 0 0 Reversal of shares and participations 0 0 0 0 0 0 0 0 0 0 Reversal of conv. debt assumed equity 0 0 0 0 0 0 0 0 0 0 EV na na 538 1,436 2,725 21,286 71,389 80,926 77,171 72,879 Capital efficiency 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e Total assets turnover (%) na 139.0 94.3 56.6 115.8 54.6 40.7 47.1 51.5 57.2 Working capital/sales (%) na -14.5 -8.8 0.1 4.7 10.0 4.2 1.3 1.1 1.0 Financial risk and debt service 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e Net debt/equity -0.17 -0.26 -0.39 -0.47 -0.31 -0.14 -0.44 -0.35 -0.47 -0.61 Net debt/market cap na na -0.23 -0.37 -0.39 -0.05 -0.23 -0.13 -0.17 -0.22 Equity ratio (%) 48.2 52.3 76.7 83.8 74.1 71.8 88.8 90.1 90.1 90.1 Net IB debt adj./equity -0.12 -0.26 -0.39 -0.46 -0.28 -0.10 -0.42 -0.33 -0.45 -0.59 Current ratio 0.91 0.84 2.14 3.48 2.25 1.56 4.70 4.37 5.55 6.87 EBITDA/net interest 98.25 177.17 62.47 44.05 54.54 -28.72 -19.61 312.32 449.60 501.06 Net IB debt/EBITDA -0.11 -0.23 -1.05 -1.91 -1.25 -0.58 -3.29 -1.60 -1.79 -2.08 Net IB debt/EBITDA lease Adj -0.11 -0.21 -0.96 -1.81 -1.05 -0.42 -1.93 -0.80 -0.97 -1.18 Interest cover 73.93 106.55 44.94 31.73 17.76 9.75 2.93 -76.31 -36.60 -0.79 Source: ABG Sundal Collier, Company data
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Valuation and Ratios (SEKm) 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e Shares outstanding adj. 60 60 61 74 94 312 427 491 493 495 Fully diluted shares Adj 60 60 61 74 94 312 427 491 493 495 EPS 0 0 0 0 0 0.91 -0.23 -4.84 -2.57 -0.75 Dividend per share Adj 0 0 0 0 0 0 0 0 0 0 EPS Adj 0 0 0 0 0 3.11 6.38 10.51 12.82 14.58 BVPS 1.05 1.53 5.83 15.07 67.86 24.48 70.22 69.69 69.41 69.13 BVPS Adj -0.19 -0.21 2.09 7.34 28.43 5.66 31.83 25.54 33.99 43.53 Net IB debt / share -0.2 -0.4 -2.3 -7.0 -21.2 -3.4 -30.8 -24.4 -32.7 -42.0 Share price na na 11.07 26.42 48.13 70.78 196.60 188.00 188.00 188.00 Market cap. (m) na na 676 1,953 4,525 22,083 83,948 92,344 92,728 93,111 Valuation 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e P/E na na nm nm nm 78.1 -863.7 -38.8 -73.1 -251.1 EV/sales na na 1.78 2.83 0.47 4.05 7.91 4.79 3.94 3.35 EV/EBITDA na na 4.1 5.3 1.7 11.7 17.9 10.8 8.6 7.3 EV/EBITA na na 5.6 7.3 4.7 61.7 773.4 -44.2 -83.9 -2,930.7 EV/EBIT na na 5.6 7.3 4.7 61.7 773.4 -44.2 -83.9 -2,930.7 Dividend yield (%) na na 0 0 0 0 0 0 0 0 FCF yield (%) na na 0 0 0 -4.0 -3.5 -1.2 4.5 5.0 Lease adj. FCF yield (%) na na 38.2 22.0 38.9 -4.0 -3.5 -1.2 4.5 5.0 P/BVPS na na 1.90 1.75 0.71 2.89 2.80 2.70 2.71 2.72 P/BVPS Adj na na 5.29 3.60 1.69 12.51 6.18 7.36 5.53 4.32 P/E Adj na na nm nm nm 22.8 30.8 17.9 14.7 12.9 EV/EBITDA Adj na na 3.7 5.0 1.4 8.5 10.5 5.4 4.7 4.1 EV/EBITA Adj na na 5.0 6.8 3.1 20.6 24.5 14.2 11.6 9.6 EV/EBIT Adj na na 5.0 6.8 3.1 20.6 24.5 14.2 11.6 9.6 EV/cap. employed na na 1.4 1.2 0.4 2.3 2.3 2.2 2.1 2.0 Investment ratios 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e Capex/sales -20.2 -32.0 -52.7 -61.7 -25.6 32.3 24.5 23.0 23.0 23.0 Capex/depreciation nm -177.1 -428.8 -412.5 -145.1 114.9 56.7 41.7 45.4 49.8 Capex tangibles/tangible fixed assets 0 16.7 -55.7 -19.7 -90.2 23.0 29.3 50.7 47.3 40.9 Capex intangibles/definite intangibles -48.1 -65.6 -68.7 -54.5 -46.4 37.1 38.3 53.1 51.2 47.0 Depreciation on intangibles/definite intangibles 0 36.8 16.2 13.3 35.4 33.1 69.7 133.3 117.8 98.8 Depreciation on tangibles/tangibles 0 0 0 0 0 0 0 0 0 0 Source: ABG Sundal Collier, Company data
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Analyst certification I/We, Jesper Birch-Jensen, Stefan Knutsson, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and securities covered in this report. Analyst valuation methods ABG Sundal Collier analysts may publish valuation ranges for stocks covered under Company Sponsored Research. These valuation ranges rely on various valuation methods. One of the most frequently used methods is the valuation of a company by calculation of that company's discounted cash flow (DCF). Another valuation method is the analysis of a company's return on capital employed relative to its cost of capital. Finally, the analysts may analyse various valuation multiples (e.g. the P/E multiples and the EV/EBITDA multiples) relative to global industry peers. In special cases, particularly for property companies and investment companies, the ratio of price to net asset value is considered. Valuation ranges may be changed when earnings and cash flow forecasts are changed. They may also be changed when the underlying value of a company's assets changes (in the cases of investment companies, property companies or insurance companies) or when factors impacting the required rate of return change. Important Company Specific Disclosure The following disclosures relate to the relationship between ABG Sundal Collier and its affiliates and the companies covered by ABG Sundal Collier referred to in this research report.
Unless disclosed in this section, ABG Sundal Collier has no required regulatory disclosures to make in relation to an ownership position for the analyst(s) and members of the analyst's household, ownership by ABG Sundal Collier, ownership in ABG Sundal Collier by the company(ies) to whom the report(s) refer(s) to, market making, managed or co-managed public offerings, compensation for provision of certain services, directorship of the analyst, or a member of the analyst's household, or in relation to any contractual obligations to the issuance of this research report. ABG Sundal Collier has undertaken a contractual obligation to issue this report and receives predetermined compensation from the company covered in this report.
mo ABG Sundal Collier is not aware of any other actual, material conflicts of interest of the analyst or ABG Sundal Collier of which the analyst knows or has reason to know at the time of the publication of this report. Production of report: 09/08/2021 21:00 CET. All prices are as of market close on 08 August, 2021 unless otherwise noted.
Disclaimer This document has been prepared by ABG Sundal Collier which is the marketing name referring to all or any of ABG Sundal Collier ASA, ABG Sundal Collier AB or ABG Sundal Collier Partners LLP and any of their affiliated or associated companies and their directors, officers, representatives and employees.
This research product is commissioned and paid for by the company covered in this report. As such, this report is deemed to constitute an acceptable minor non-monetary benefit (i.e. not investment research) as defined in MiFID II.
This research product has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination.
This report is provided solely for the information and use of investors who are able to make their own investment decisions without undue reliance on this report. The information contained herein does not apply to, and should not be relied upon by, investors with no or limited experience and knowledge from investments in financial instruments. This report is for distribution only under such circumstances as may be permitted by applicable law. Research reports prepared by ABG Sundal Collier are for information purposes only. ABG Sundal Collier accepts no liability whatsoever for any losses arising from any use of this report or its contents. This report is not to be used or considered as an offer to sell, or a solicitation of an offer to buy. The information herein has been obtained from, and any opinions herein are based upon, sources believed reliable, but ABG Sundal Collier makes no representation as to its accuracy or completeness and it should not be relied upon as such. All opinions and estimates herein reflect the judgment of ABG Sundal Collier on the date of this report and are subject to change without notice. Past performance is not indicative of future results.
This research report does not, and does not attempt to contain everything material that there is to be said about Embracer Group.
The compensation of our research analysts is determined exclusively by research management and senior management, but not including investment banking management. Compensation is not based on specific investment banking revenues, however, it is determined from the profitability of the ABG Sundal Collier Group, which includes earnings from investment banking operations and other business. Investors should assume that ABG Sundal Collier is seeking or will seek investment banking or other business relationships with the companies in this report. The research analyst(s) responsible for the preparation of this report may interact with trading desk and sales personnel and other departments for the purpose of gathering, synthesizing and interpreting market information. From time to time, ABG Sundal Collier and its affiliates and any shareholders, directors, officers or employees thereof may (I) have a position in, or otherwise be interested in, any securities directly or indirectly connected to the subject of this report, or (II) perform investment banking or other services for, or solicit investment banking or other services from, a company mentioned in this report. ABG Sundal Collier relies on information barriers to control the flow of information contained in one or more areas of ABG Sundal Collier, into other areas, units, groups or affiliates of ABG Sundal Collier.
Norway: ABG Sundal Collier ASA is regulated by the Financial Supervisory Authority of Norway (Finanstilsynet); Sweden: ABG Sundal Collier AB is regulated by the Swedish Financial Supervisory Authority (Finansinspektionen); UK: This report is a communication made, or approved for communication in the UK, by ABG Sundal Collier Partners LLP, authorised and regulated by the Financial Conduct Authority in the conduct of its business. US: This report is being distributed in the United States in accordance with FINRA Rule 1050(f)(3)(B) by ABG Sundal Collier Inc., a FINRA member which accepts responsibility for its content. Research analysts are not registered/qualified as research analysts with FINRA or the NYSE, and are not associated persons of ABG Sundal Collier Inc. and therefore not subject to FINRA Rule 2241, the research analyst conflict rules. Research reports distributed in the U.S are intended solely for “major institutional investors”, as defined under Rule 15a-6 of the Securities Exchange Act of 1934. Each U.S major institutional investor that receives a copy of this research report by its acceptance represents that it agrees it will not distribute this research report to any other person. Any U.S. major institutional investor receiving this report who wishes to effect
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transactions in any securities referred to herein should contact ABG Sundal Collier Inc., not its affiliates. Further information on the securities referred to herein may be obtained from ABG Sundal Collier Inc., on request.
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