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Equity Research - 23 November 2020 20:46 CET
Embracer Group Reason: Post-results comment
Long-term strengthened, Q3 downside risk Company sponsored research
Q2 adj. EBIT SEK 653m, +18% vs. ABG, +21% vs. cons Not rated Long-term outlook enhanced, downside risk in Q3
SOTP fair value SEK 157-228 (156-212) per share Estimate changes (%) 2020e 2021e 2022e Estimate beat and 13 acquisitions in Q2’20/21 Sales 1.4% 9.2% 11.8% Embracer delivered a very strong Q2 report, with adj. EBIT of SEK EBIT (rep) -25.7% 24.8% 25.5% 653m, +18.1% vs. ABGSCe and +20.9% vs. consensus. Revenues were EPS (rep) -2.6% 24.7% 25.1% SEK 2,383m +11.1% vs. ABGSCe and +15.5% vs. consensus. The Source: ABG Sundal Collier Games segment comprised 62.7% of revenues, driven by both strong 23/11/2020 new releases like Destroy All Humans and strong back-catalogue sales Share price (SEK) 164.0 from, for instance, SpongeBob remastered and Metro Exodus. As such, Fair value range (per share) 157-228 the Games segment grew organically by 61% y-o-y according to management. In total, 13 acquisitions were announced (see page 6). IT, Sweden EMBRACB.ST /EMBRACB ST ABGSC Q3e adj. EBIT SEK 455m, -17% vs. cons Looking at Q3’20/21e, we think that the market should be prepared for a MCap (SEKm) 69,586 slightly slower quarter for the Games segments. The new game pipeline MCap (EURm) 6,817 in Q3 is thinner than the last two quarters, with a game development cost Net debt (EURm) -580 of SEK 150-175m (see page 5). As such, the Games segments will have to be driven by back-catalogue sales, which should be strong given the No. of shares (m) 424 seasonally favourable Christmas period, but likely not enough to keep Free float (%) 60 the pace set in Q1 & Q2. We arrive at a Q3e adj. EBIT of SEK 455m, for Av. daily volume (k) 2,917 a margin of 23.8%. This is approximately 17% below the average of FactSet consensus estimates, which were updated after the Q2 report. It Next event Q3 report: 18 Feb is still very early to call the quarter, and back-catalogue sales during the Christmas season could surprise; however, given where we stand today, Performance
we think that consensus could come down ahead of the Q3 report. 700
600 EV/adj. EBIT 25-16x 20/21e-22/23e, in line with peer group 500 Following our estimate changes, which were driven by the inclusion of 400 the 13 acquisitions and the strong Q2 report, we raise our fair value 300 SOTP range to SEK 157-228 (156-212) per share. We base our SOTP 200 100 fair value range on our segment ’21/22e EBITDA estimates, which we 0 18 19 20 17 18 19 20 18 19 20 18 19 20 18 19 20 then discount by a WACC of 7.5% (see page 9 for more details). In 18 19 20
Jul Jul Jul Jan Jan Jan Mar Mar Mar Nov Nov Nov Nov Sep Sep Sep addition, we find that based on our updated estimates, and at the current May Embracer Group May OMX STH PI May share price, Embracer is trading at an EV/adj. EBIT of 25x-16x for 1m 3m 12m 20/21e-22/23e, which is in line with our peer group median. Absolute (%) -8.4 0.7 155.7 OMX STH PI (%) -77.4 -76.4 -74.8 Analyst(s): [email protected], +46 8 566 286 13 [email protected], +46 8 566 286 37 Source: FactSet SEKm 2018 2019 2020e 2021e 2022e 2020e 2021e 2022e Sales 5,754 5,249 8,589 10,960 12,039 P/E (x) 1,826.2 122.9 89.9 EBITDA 1,592 1,821 3,563 4,518 5,021 P/E adj (x) 28.9 22.0 19.4 EBITDA margin (%) 27.7 34.7 41.5 41.2 41.7 P/BVPS (x) 3.39 3.01 2.92 EBIT adj 880 1,033 2,494 3,377 3,871 EV/EBITDA (x) 17.9 13.7 12.1 EBIT adj margin (%) 15.3 19.7 29.0 30.8 32.2 EV/EBIT adj (x) 25.5 18.3 15.7 Pretax profit 545 409 167 765 1,046 EV/sales (x) 7.41 5.65 5.05 EPS rep 4.22 0.91 0.09 1.33 1.82 ROE adj (%) 17.2 14.5 15.2 EPS adj 7.47 3.11 5.67 7.44 8.43 Dividend yield (%) 0 0 0 FCF yield (%) -3.1 2.5 1.6 Sales growth (%) 1,033.7 -8.8 63.6 27.6 9.8 Lease adj. FCF yld (%) -3.1 2.5 1.6 EPS growth (%) 140.3 -78.5 -90.1 1,386.2 36.7 Net IB debt/EBITDA -1.7 -1.7 -1.8 Source: ABG Sundal Collier, Company data Lease adj. ND/EBITDA -1.0 -1.1 -1.1
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
14,000 45.0 3,000 40.0
40.0 35.0 12,000 2,500 35.0 30.0 10,000 30.0 2,000 25.0 8,000 25.0 1,500 20.0 6,000 20.0 15.0 15.0 1,000 4,000 10.0 10.0 2,000 500 5.0 5.0 0 0.0 0 0.0
2014 2015 2016 2017 2018 2019 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 2020e 2021e 2022e Q4'20e Q1'21e 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, 2020e, SEK EPS estimate changes, 2021e, SEK
3.0 3.0
2.5 2.5 2.0
1.5 2.0 1.0
0.5 1.5
0.0 1.0 -0.5
-1.0 0.5
Jul-20 Jul-20 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Aug-20 Sep-20 Oct-20 Nov-20 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Aug-20 Sep-20 Oct-20 Nov-20 ABGSC FactSet Consensus Mean ABGSC FactSet Consensus Mean Source: ABG Sundal Collier, FactSet Source: ABG Sundal Collier, FactSet Net debt and ND/EBITDA adj. 12-month forward-looking P/E
0 0.0 1,000.0 -1,000 -0.2 (0.0) -2,000 -0.4 (1,000.0) -3,000 -0.6 (2,000.0) -4,000 -0.8 (3,000.0) -5,000 -1.0 -6,000 -1.2 (4,000.0) -7,000 -1.4 (5,000.0) -8,000 -1.6 (6,000.0) -9,000 -1.8 (7,000.0) -10,000 -2.0 (8,000.0) 2014 2015 2016 2017 2018 2019 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20 2020e 2021e 2022e 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
23 November 2020 ABG Sundal Collier 2 Embracer Group
Deviations Q2’20/21e Deviations Q2’20/21e vs. ABGSCe vs. FactSet consensus Deviation to estimates (SEKm) Actual Actual ABGSC Deviation Consensus Deviation Net sales Q2'19/20 Q2'20/21 Q2'20/21e SEKm % Q2'20/21e SEKm % Games - THQ Nordic 330 567 510 56.9 11.2% Games - Deep Silver 442 507 475 31.8 6.7% Games - Coffee Stain 45 130 110 19.9 18.1% Games - Saber Interactive n.a. 259 270 -10.9 -4.0% Games - DECA Games n.a. 33 30 2.7 9.0% Games Total 816 1,495 1,395 100.4 7.2% Partner Publishing/Film 444 888 750 137.8 18.4% Group 1,260 2,383 2,145 238.2 11.1% 2,063 320 15.5%
COGS -635 -1,034 -973 -60.8 - Gross profit 625 1,349 1,172 177.4 15.1% 1,167 182 15.6%
Operating costs -450 -759 -697 -61.9 - EBITDA 418 969 828 141.1 17.0% 844 125 14.8%
Depreciation & amortization -342 -796 -820 24.4 -
Adj. EBIT 241 653 553 99.8 18.1% 540 113 20.9%
EBIT 76 174 8 165.5 2077.9%
Net financials 3 90 -6 96.2 - Taxes -15 -36 -1 -35.3 n.a.
Adj. Net profit 229 707 546 161.1 29.5% 499 208 41.8%
Net profit 65 228 1 226.4 15561.0% -3 231 -
EPS Adj. (SEK) 0.82 1.84 1.42 0.42 29.5% 1.25 0.59 46.8% EPS Basic (SEK) 0.23 0.59 0.00 0.6 15561.0% -0.03 0.6 - Net sales grow th y-o-y Q2'19/20 Q2'20/21 Q2'20/21 Percentage point Q2'20/21e Percentage point Games - THQ Nordic 165.4% 72.0% 54.7% 17.3 pp n.a. n.a. Games - Deep Silver 75.4% 14.7% 7.5% 7.2 pp n.a. n.a. Games - Coffee Stain n.a. 190.6% 146.1% 44.5 pp n.a. n.a. Games - Saber Interactive n.a. n.a. n.a. n.a. n.a. n.a. Games - DECA Games n.a. n.a. n.a. n.a. n.a. n.a. Games Total 105.1% 83.3% 71.0% 12.3 pp n.a. n.a. Partner Publishing/Film -50.5% 100.1% 69.1% 31.1 pp n.a. n.a. Group -1.0% 89.2% 70.3% 18.9 pp 63.8% 25.4 pp
Margins Q2'19/20 Q2'20/21 Q2'20/21 Percentage point Q2'20/21e Percentage point Gross margin 49.6% 56.6% 54.6% 2.0 pp 56.6% 0.0 pp EBITDA margin 33.2% 40.7% 38.6% 2.1 pp 40.9% -0.3 pp Adj. EBIT margin 19.1% 27.4% 25.8% 1.6 pp 26.2% 1.2 pp EBIT margin 6.1% 7.3% 0.4% 6.9 pp 0.0% 7.3 pp Adj. Net margin 18.2% 29.7% 25.5% 4.2 pp 24.2% 5.5 pp Net margin 5.1% 9.6% 0.1% 9.5 pp -0.1% 9.7 pp Source: ABG Sundal Collier, FactSet, company data
23 November 2020 ABG Sundal Collier 3 Embracer Group
Estimate changes ABGSC estimate changes, 20/21e-22/23e, (SEKm) Estimate changes (SEKm) Old forecast New forecast Change Net sales 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e Games THQ Nordic 1,873 2,000 2,100 2,005 2,100 2,357 7.0% 5.0% 12.2% Games Deep Silver 2,248 3,400 3,700 2,050 3,700 4,185 -8.8% 8.8% 13.1% Games Coffee Stain 423 310 330 502 370 370 18.9% 19.4% 12.1% Games Saber Interactive 1,169 1,275 1,415 1,133 1,350 1,460 -3.1% 5.9% 3.2% Games DECA Games 165 250 275 215 640 717 30.1% 156.0% 160.7% Games Total 5,877 7,235 7,820 5,905 8,160 9,089 0.5% 12.8% 16.2% Partner Publishing/Film 2,597 2,800 2,950 2,684 2,800 2,950 3.4% 0.0% 0.0% Group 8,474 10,035 10,770 8,589 10,960 12,039 1.4% 9.2% 11.8%
COGS -3,649 -4,224 -4,456 -3,589 -4,502 -4,851 -1.7% 6.6% 8.9% Gross profit 4,825 5,811 6,314 5,000 6,458 7,188 3.6% 11.1% 13.8%
Capitalized costs & other income 1,388 1,661 2,057 1,441 1,754 2,227 3.8% 5.6% 8.3% Operating costs -2,860 -3,412 -3,931 -2,879 -3,694 -4,394 0.7% 8.3% 11.8%
EBITDA 3,353 4,060 4,440 3,563 4,518 5,021 6.2% 11.3% 13.1%
Depreciation & amortization -3,186 -3,431 -3,591 -3,438 -3,733 -3,956 7.9% 8.8% 10.2%
Adj. EBIT 2,294 2,919 3,289 2,494 3,377 3,871 8.7% 15.7% 17.7%
EBIT 167 629 849 124 785 1,066 -25.7% 24.8% 25.5%
Net financials -54 -20 -20 43 -20 -20 -179.5% 0.0% 0.0% Taxes -75 -158 -216 -129 -199 -272 72.1% 25.7% 26.1%
Adj. Net profit 2,166 2,741 3,054 2,408 3,158 3,579 11.2% 15.2% 17.2%
Net profit 39 451 614 38 566 774 -1.9% 25.7% 26.1%
EPS Adj. (SEK) 5.14 6.51 7.25 5.67 7.44 8.43 10.3% 14.4% 16.3% EPS Basic (SEK) 0.09 1.07 1.46 0.09 1.33 1.82 -2.6% 24.7% 25.1% Net sales grow th y-o-y 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e Games THQ Nordic 62.2% 6.8% 5.0% 73.6% 4.8% 12.2% 11.4 pp -2.0 pp 7.2 pp Games Deep Silver 25.1% 51.3% 8.8% 14.1% 80.5% 13.1% -11.0 pp 29.3 pp 4.3 pp Games Coffee Stain 71.9% -26.6% 6.5% 104.4% -26.4% 0.0% 32.5 pp 0.3 pp -6.5 pp Games Saber Interactive 16.9% 9.0% 11.0% 13.3% 19.1% 8.1% -3.6 pp 10.1 pp -2.8 pp Games DECA Games n.a. 13.6% 10.0% n.a. 190.9% 12.0% - 177.3 pp 2.0 pp Games Total 83.9% 23.1% 8.1% 84.7% 38.2% 11.4% 0.9 pp 15.1 pp 3.3 pp Partner Publishing/Film 26.4% 7.8% 5.4% 30.7% 4.3% 5.4% 4.3 pp -3.5 pp 0.0 pp Group 61.4% 18.4% 7.3% 63.6% 27.6% 9.8% 2.2 pp 9.2 pp 2.5 pp
Margins 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e 2020/21e 2021/22e 2022/23e Gross margin 56.9% 57.9% 58.6% 58.2% 58.9% 59.7% 1.3 pp 1.0 pp 1.1 pp EBITDA margin 39.6% 40.5% 41.2% 41.5% 41.2% 41.7% 1.9 pp 0.8 pp 0.5 pp Adj. EBIT margin 27.1% 29.1% 30.5% 29.0% 30.8% 32.2% 2.0 pp 1.7 pp 1.6 pp EBIT margin 2.0% 6.3% 7.9% 1.4% 7.2% 8.9% -0.5 pp 0.9 pp 1.0 pp Adj. Net margin 25.6% 27.3% 28.4% 28.0% 28.8% 29.7% 2.5 pp 1.5 pp 1.4 pp Net margin 0.5% 4.5% 5.7% 0.4% 5.2% 6.4% 0.0 pp 0.7 pp 0.7 pp Source: ABG Sundal Collier, company data
ABGSCe vs. FactSet consensus (SEKm) Actual ABGSC Cons ABG vs. Cons ABGSC Cons ABG vs. Cons ABGSC Cons ABG vs. Cons Q3'19/20 Q3'20/21e Q2'20/21e % 20/21e 20/21e % 21/22e 21/22e % Net Sales 1,509 1,910 2,108 -9.4% 8,589 8,723 -1.5% 10,960 10,611 3.3% EBITDA 518 700 840 -16.6% 3,563 3,668 -2.9% 4,518 4,707 -4.0% EBITDA margin 34.4% 36.7% 39.8% 41.5% 42.0% 41.2% 44.4% Adj. EBIT 302 455 547 -16.8% 2,494 2,504 -0.4% 3,377 3,254 3.8% EBIT margin 20.0% 23.8% 25.9% 29.0% 28.7% 30.8% 30.7% Adj. EPS (SEK) 0.87 1.06 1.33 -20.4% 5.67 5.16 10.0% 7.44 6.57 13.3% Source: ABG Sundal Collier, FactSet, company data
23 November 2020 ABG Sundal Collier 4 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, Deep Silver, THQ Nordic, Coffee Stain, Saber Interactive and for its Partner Publishing division, which in turn is based on its partners’ – Square Enix and Capcom to name two – video game pipelines.
We have made a few changes to our pipeline estimates since our latest update. For Deep Silver, we added the release of Shenmue III on Steam to our Q3’20/21e release schedule. We also moved Chorus from Q4’20/21e into the next financial year, given recent delays following COVID-19. For Coffee Stain, we added the release of Update 4 for Satisfactory to Q4’20/21e.
Estimated release dates for select titles Pipeline estimates - ABGSC
Apr-Jun '20 Jul-Sep '20 Oct-Dec '20 Jan-Mar '21 Apr '21-Mar '22 Games Segment Q1'20/21 Q2'20/21 Q3'20/21e Q4'20/21e 2021/2022e Dead Island 2 Deep Silver X Saints Row V Deep Silver X Iron Harvest Deep Silver X MotoGP20 Deep Silver X Saints Row 3 Remastered 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 After the Fall Deep Silver X SpongeBob SquarePants: Battle for Bikini Bottom THQ Nordic X Biomutant 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 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 World War Z (Game of the Year Edition) Saber Interactive X Snow Runner Saber Interactive X WWE Battlegrounds Saber Interactive X
Sales Segment Q1'20/21 Q2'20/21 Q3'20/21e Q4'20/21e 2021/2022e Steam publisher w eekend Deep Silver X Steam publisher w eekend THQ Nordic X Steam Christmas & Winter sales (ABGSC projection) Games segments X
Partner Publishing Segment Q1'20/21 Q2'20/21 Q3'20/21e Q4'20/21e 2021/2022e 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 Dying Light 2 Partner Publishing X Resident Evil 3 Remake Partner Publishing X F1 2020 Partner Publishing X Source: ABG Sundal Collier, company data
23 November 2020 ABG Sundal Collier 5 Embracer Group
M&A overview Q2’20/21 In association with the Q2’20/21 report, Embracer announced a total of 13 new acquisitions, a new record. Six of the acquisitions were implemented by Saber Interactive, two through DECA Games, one for THQ Nordic, one for Amplifier Game Invest, one for Partner Publishing, one for Coffee Stain and one for Deep Silver. We provide a complete breakdown below.
M&A overview Q2’20/21e THQ Nordic Deep Silver Coffee Stain Saber Interactive Amplifier DECA Games Partner Publishing Purple Lamp Studios Flying Wild Hog Coffee Stain North Zen Studios Silent Games A Thinking Ape Quantic Lab Snapshot Games IUGO Mobile Nimble Giant Entertainment 34BigThings Mad Head Games Sandbox Strategies Source: ABG Sundal Collier, company data
In terms of financial contribution to Embracer Group’s next financial year, ’21/’22e, management estimates that the abovementioned acquisitions will add revenues of SEK 850-1,050m (8.4-10.5%) and adj. EBIT of SEK 300-400m (10.2-13.7%). In addition, we estimate that the acquisitions will contribute cost synergies of SEK 50- 100m; as such, we expect the combined adj. EBIT to reach SEK 350-500m (11.9- 17.1%) for ‘21/’22e.
Embracer will pay an upfront price of approximately SEK 2.0bn for the 13 acquisitions on a cash and debt-free basis, of which SEK 1.7bn is paid in cash and SEK 0.3bn through newly issued b-shares. In addition, earn-outs over 10-years (depending on the acquisitions fulfilling operational and financial milestones) can total SEK 1.8bn ─ 50% in cash and 50% in newly issued b-shares.
Thus, the total price of SEK 3.8bn, which includes all potential earn-outs, corresponds to a combined ‘21/’22e EV/sales multiple of 3.6-4.5x and a combined ‘21/’22e EV/adj. EBIT multiple of 7.6-10.8x.
Flying Wild Hog In terms of the implemented acquisitions, we are most excited about the studio from Poland, Flying Wild Hog (“FWH”), which will become part of Deep Silver. The studio is an independent developer of “AA+” games for PC and consoles, best known for the Shadow Warrior franchise. According to management, FWH’s released games have a sold more than 9.5m copies, and the studio’s team of ~260 developers, spread out over three studios in Poland, is currently working on four projects with external publishers such as Devolver Digital, Focus Home Interactive and Jagex.
The four upcoming titles will be released during Embracer’s next financial year, ‘21/’22e, all of which feature a revenue share component for FWH, according to management. Management reports that, over time, FWH will also start developing AAA-titles, which can further facilitate Embracer’s organic growth.
The contribution of 260 “AA+” developers is a welcomed addition to the company, in our opinion, since more quality developers are exactly what a company like Embracer, which owned 195 IPs at the end of September 2020, needs to facilitate further organic growth.
23 November 2020 ABG Sundal Collier 6 Embracer Group
Quarterly overview Quarterly overview, Q1’16-Q4’20/21e, (SEKm) Quarterly overview (SEKm) Q1'16 Q2'16 Q3'16 Q4'16 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 Q3'20/21e Q4'20/21e Games - THQ Nordic 43 53 78 128 82 86 85 255 135 146 124 352 143 185 330 333 307 488 567 375 575 Games - Deep Silver 0 0 0 0 0 0 0 0 257 338 252 187 794 373 442 467 515 613 507 425 505 Games - Coffee Stain 0 0 0 0 0 0 0 0 0 0 0 14 98 83 45 36 82 173 130 90 110 Games - Saber Interactive 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 349 259 250 275 Games - DECA Games 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 33 70 112 Partner Publishing/Film 0 0 0 0 0 0 0 0 242 354 897 828 596 501 444 673 436 447 888 700 650 Net Sales 43 53 78 128 82 86 85 255 633 837 1,273 1,381 1,631 1,142 1,260 1,509 1,339 2,069 2,383 1,910 2,227
Capitalized w ork 6 8 10 12 13 14 19 33 58 93 102 106 116 131 177 221 224 248 273 273 261 Other operating income 1 3 3 3 1 2 -3 3 34 29 64 90 116 45 67 72 122 65 106 105 111 Total operating income 50 63 91 143 96 102 101 291 725 960 1,439 1,576 1,862 1,318 1,503 1,801 1,685 2,381 2,762 2,288 2,599
COGS -13 -18 -37 -51 -25 -24 -30 -69 -320 -466 -895 -838 -741 -528 -635 -747 -666 -760 1,034 -881 -914 Gross profit 30 35 41 77 57 61 55 186 313 371 377 542 889 614 625 762 673 1,309 1,349 1,029 1,313
Opex -13 -22 -29 -32 -29 -38 -37 -65 -179 -287 -329 -412 -503 -401 -450 -536 -524 -656 -759 -707 -757 Of w hich Other external expenses -4 -10 -14 -15 -11 -15 -16 -33 -75 -120 -158 -224 -291 -178 -192 -231 -183 -292 -360 -287 -323 Personnel expenses -9 -12 -15 -17 -18 -21 -22 -33 -104 -167 -171 -188 -211 -223 -258 -305 -344 -379 -399 -420 -434 Other operating expenses -1 0 0 1 -1 -2 1 1 0 0 0 0 0 0 0 0 3 15 -1 0 0
EBITDA 23 23 25 61 42 40 35 156 226 207 215 326 619 389 418 518 495 965 969 700 928
D&A -9 -9 -9 -10 -10 -9 -11 -54 -119 -154 -124 -174 -447 -308 -342 -427 -399 -746 -796 -879 -1,018
Adj. EBIT 18 18 19 54 36 34 28 113 125 67 99 194 396 204 241 302 286 712 653 455 633
EBIT 14 14 16 51 32 30 24 102 107 53 91 152 172 81 76 91 97 219 174 -178 -90
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 0 -1 0 0 -1 -5 -9 -4 -3 -4 -9 2 3 -15 73 -36 90 -6 -6
PTP 14 14 16 50 31 30 23 97 98 49 88 148 163 83 80 76 170 184 264 -184 -96
Taxes -3 -3 -3 -12 -8 -7 -4 -24 -17 -15 -23 -34 -60 -31 -15 -43 -37 -93 -36 0 0 Tax rate 23.5% 23.3% 18.4% 23.3% 25.3% 22.6% 18.8% 24.4% 17.3% 31.2% 25.7% 23.1% 36.7% 36.7% 18.9% 56.0% 21.9% 50.7% 13.6% 0.0% 0.0%
Net profit 11 11 13 38 24 23 19 73 81 33 65 114 103 53 65 34 132 90 228 -184 -96 Adj. Net profit 14 14 16 41 27 27 23 77 99 47 73 156 327 175 229 245 322 583 707 449 627
EPS Basic (SEK) 0.18 0.18 0.21 0.59 0.33 0.32 0.26 0.93 1.03 0.42 0.74 1.32 1.10 0.51 0.23 0.12 0.42 0.24 0.59 -0.43 -0.23 Adj. EPS (SEK) 0.23 0.23 0.27 0.64 0.37 0.37 0.31 0.97 1.25 0.59 0.83 1.81 3.48 1.70 0.82 0.87 1.03 1.57 1.84 1.06 1.48 Grow th Q1'16 Q2'16 Q3'16 Q4'16 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 Q3'20/21e Q4'20/21e Sales y-o-y 14.7% 42.9% 94.6% 30.3% 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% 26.6% 66.3% EBITDA y-o-y 32.5% 20.8% 57.2% 16.3% 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% 35.1% 87.4% Adj. EBIT y-o-y 43.9% 14.2% 50.9% 39.9% 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% 50.7% 121.3% EBIT y-o-y 52.8% 13.8% 66.9% 43.8% 124.2% 113.3% 50.3% 101.5% 236.2% 73.0% 278.1% 49.1% 60.6% 54.4% -15.8% -40.2% -43.7% 170.2% 127.1% -296.1% -193.0% Net profit y-o-y 53.1% 11.3% 76.9% 35.2% 119.7% 119.5% 50.1% 93.2% 244.1% 44.1% 241.9% 55.6% 27.2% 57.3% -0.6% -70.6% 28.4% 72.1% 252.8% -648.5% -172.6% Adj.Net profit y-o-y 40.2% 11.9% 54.1% 30.9% 92.2% 91.8% 41.0% 88.4% 266.0% 77.1% 223.4% 102.6% 231.5% 272.0% 214.2% 56.4% -1.6% 232.4% 209.2% 83.5% 95.0% EPS y-o-y 53.1% 11.3% 76.9% 25.8% 83.0% 82.9% 24.5% 57.2% 213.8% 29.2% 180.6% 43.0% 6.9% 22.6% -68.8% -91.0% -61.3% -52.4% 156.9% -462.9% -153.4% Adj. EPS y-o-y 40.2% 11.9% 54.1% 21.9% 60.1% 59.8% 16.9% 53.2% 233.8% 58.8% 165.4% 86.2% 178.6% 190.1% -1.3% -52.0% -70.4% -8.0% 125.2% 21.4% 43.4% Margins Q1'16 Q2'16 Q3'16 Q4'16 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 Q3'20/21e Q4'20/21e Gross margin 69.1% 65.7% 52.8% 60.4% 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% 53.9% 59.0% EBITDA margin 53.5% 44.0% 32.6% 47.4% 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% 36.7% 41.7% Adj. EBIT margin 40.7% 33.4% 24.9% 41.9% 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% 23.8% 28.4% EBIT margin 32.9% 27.0% 20.5% 39.5% 38.9% 35.5% 28.4% 39.9% 16.9% 6.3% 7.1% 11.0% 10.5% 7.1% 6.1% 6.0% 7.2% 10.6% 7.3% -9.3% -4.0% Net margin 24.8% 20.1% 16.3% 29.6% 28.7% 27.1% 22.5% 28.7% 12.8% 4.0% 5.1% 8.3% 6.3% 4.6% 5.1% 2.2% 9.9% 4.4% 9.6% -9.6% -4.3% Adj. Net margin 32.5% 26.3% 20.5% 32.0% 32.9% 31.1% 26.6% 30.2% 15.6% 5.6% 5.7% 11.3% 20.0% 15.4% 18.2% 16.2% 24.0% 28.2% 29.7% 23.5% 28.2% Source: ABG Sundal Collier, company data
23 November 2020 ABG Sundal Collier 7 Embracer Group
Annual overview Annual overview, 2013-2022/23e, (SEKm) Annual overview (SEKm) 2013 2014 2015 2016 2017 2018 2019/20 2020/21e 2021/22e 2022/23e Games - THQ Nordic 102 178 213 302 508 899 1,155 2,005 2,100 2,357 Games - Deep Silver 0 0 0 0 0 1,828 1,796 2,050 3,700 4,185 Games - Coffee Stain 0 0 0 0 0 112 246 502 370 370 Games - Saber Interactive 0 0 0 0 0 0 0 1,133 1,350 1,460 Games - DECA Games 0 0 0 0 0 0 0 215 640 717 Partner Publishing/Film 0 0 0 0 0 2,916 2,054 2,684 2,800 2,950 Net Sales 102 178 213 302 508 5,754 5,249 8,589 10,960 12,039
Capitalized w ork 0 0 8 36 80 475 753 1,055 1,206 1,625 Other operating income 2 4 5 9 3 333 306 386 548 602 Total operating income 104 182 226 347 590 6,562 6,308 10,030 12,714 14,266
COGS -32 -58 -70 -119 -148 -3,261 -2,576 -3,589 -4,502 -4,851 Gross profit 71 121 143 183 360 2,493 2,673 5,000 6,458 7,188
Opex -24 -29 -51 -96 -169 -1,709 -1,911 -2,879 -3,694 -4,394 Of w hich Other external expenses -13 -15 -29 -43 -75 -868 -784 -1,261 -1,502 -1,685 Personnel expenses -10 -14 -22 -52 -94 -841 -1,130 -1,632 -2,192 -2,709 Other operating expenses -1 0 0 0 0 0 3 14 0 0
EBITDA 49 95 105 132 273 1,592 1,821 3,563 4,518 5,021
D&A -17 -27 -38 -37 -84 -1,018 -1,476 -3,438 -3,733 -3,956
Adj. EBIT 49 68 79 108 211 881 1,032 2,494 3,377 3,871
EBIT 32 68 67 95 188 574 345 124 785 1,066
Non-recurring items 0 0 0 0 0 0 0 0 0 0
Net financials -2 -1 -1 -2 -6 -29 63 43 -20 -20
PTP 30 67 66 93 182 545 409 167 765 1,046
Taxes 0 -15 -14 -21 -43 -149 -126 -129 -199 -272 Tax rate 0.4% 22.3% 21.6% 22.6% 23.5% 27.2% 30.7% 77.2% 26.0% 26.0%
Net profit 30 52 52 72 139 397 283 38 566 774 Adj. Net profit 30 52 64 85 153 702 971 2,408 3,158 3,579
EPS Basic (SEK) 0.50 0.87 0.86 1.18 1.88 4.22 0.91 0.09 1.33 1.82 Adj. EPS (SEK) 0.50 0.87 1.07 1.39 2.07 7.47 3.11 5.67 7.44 8.43 Grow th 2013 2014 2015 2016 2017 2018 2019/20 2020/21e 2021/22e 2022/23e Sales y-o-y 74.0% 19.6% 41.8% 68.1% 1033.7% -8.8% 63.6% 27.6% 9.8% EBITDA y-o-y 95.3% 10.4% 26.0% 106.0% 484.1% 14.4% 95.6% 26.8% 11.1% Adj. EBIT y-o-y 39.7% 15.8% 37.2% 94.9% 317.7% 17.2% 141.6% 35.4% 14.6% EBIT y-o-y 115.0% -2.3% 42.7% 98.1% 205.2% -39.9% -64.0% 531.7% 35.7% Net profit y-o-y 74.0% -0.8% 39.1% 93.4% 185.0% -28.6% -86.5% 1386.2% 36.7% EPS y-o-y 74.0% -0.8% 36.5% 59.9% 124.2% -78.5% -90.1% 1386.2% 36.7% Adj. EPS y-o-y 74.0% 22.8% 30.1% 49.3% 260.1% -58.3% 82.4% 31.2% 13.3% Margins 2013 2014 2015 2016 2017 2018 2019/20 2020/21e 2021/22e 2022/23e Gross margin 69.0% 67.7% 67.1% 60.6% 70.9% 43.3% 50.9% 58.2% 58.9% 59.7% EBITDA margin 47.7% 53.5% 49.4% 43.8% 53.7% 27.7% 34.7% 41.5% 41.2% 41.7% Adj. EBIT margin 47.7% 38.3% 37.0% 35.8% 41.5% 15.3% 19.7% 29.0% 30.8% 32.2% EBIT margin 31.0% 38.3% 31.3% 31.5% 37.1% 10.0% 6.6% 1.4% 7.2% 8.9% Net margin 29.3% 29.3% 24.3% 23.8% 27.4% 6.9% 5.4% 0.4% 5.2% 6.4% Adj. Net margin 29.3% 29.3% 30.1% 28.1% 30.2% 12.2% 18.5% 28.0% 28.8% 29.7% Other metrics 2013 2014 2015 2016 2017 2018 2019/20 2020/21e 2021/22e 2022/23e EV/Sales 6.7x 7.4x 5.6x 5.0x EV/EBITDA 19.2x 17.8x 13.7x 12.1x EV/Adj. EBIT 33.9x 25.5x 18.3x 15.7x EV/EBIT 101.4x 510.7x 78.6x 56.9x Adj. P/E 37.0x 28.9x 22.0x 19.4x P/E 126.7x 1,826.2x 122.9x 89.9x ND/EBITDA -0.2x -0.2x -1.1x -2.0x -1.4x -0.5x -1.7x -1.7x -1.8x ROE adj. 165.2% 82.0% 37.9% 20.8% 18.7% 14.1% 17.2% 14.5% 15.2% ROIC adj. 248.7% 113.8% 58.9% 38.1% 26.9% 13.4% 5.4% 16.6% 18.8% ROCE adj. 216.7% 101.9% 45.2% 25.1% 20.7% 14.6% 17.5% 14.9% 15.9% FCF yield -34.1% -5.2% -3.1% 2.5% 1.6% FCF/IC 179.2% 40.7% -35.0% -36.3% -51.4% -28.5% -14.8% 11.4% 7.4% Source: ABG Sundal Collier, company data
23 November 2020 ABG Sundal Collier 8 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) 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 and Coffee Stain 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, so we do not believe that it deserves a valuation along with the likes of, for example, Paradox. For DECA Games, we look at mobile game developers 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 physical distribution of video games, thus we look at peers such as Digital Bros, Focus Home Interactive and GameStop.
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 1,239 59% 5% Deep Silver 1,806 49% 81% Coffee Stain 222 60% -26% Saber Interactive 702 52% 19% DECA Games 269 42% n.a. Partner Publishing 280 10% 4% Number of shares (m) 424.3 Source: ABG Sundal Collier, company data
Our three SOTP valuations produce a fair value range of SEK 157-228 (156-212) 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 19,824 47 20x EV/EBITDA 24,780 58 24x EV/EBITDA 30,232 71 Deep Silver 14x EV/EBITDA 25,278 60 16x EV/EBITDA 28,890 68 20x EV/EBITDA 36,473 86 Coffee Stain 16x EV/EBITDA 3,552 8 20x EV/EBITDA 4,440 10 24x EV/EBITDA 5,417 13 Saber Interactive 15x EV/EBITDA 10,530 25 20x EV/EBITDA 14,040 33 24x EV/EBITDA 17,129 40 DECA Games 10x EV/EBITDA 2,688 6 14x EV/EBITDA 3,763 9 16x EV/EBITDA 4,301 10 Partner Publishing 6x EV/EBITDA 1,680 4 8x EV/EBITDA 2,240 5 9x EV/EBITDA 2,520 6 Enterprise value 63,552 150 Enterprise value 78,153 184 Enterprise value 96,071 226 Net debt (21/22e) -7,867 -19 Net debt (21/22e) -7,867 -19 Net debt (21/22e) -7,867 -19 Market cap 71,419 168 Market cap 86,020 203 Market cap 103,938 245 WACC 7.5% WACC 7.5% WACC 7.5% Discounted MCAP 66,437 157 Discounted MCAP 80,018 189 Discounted MCAP 96,687 228 Source: ABG Sundal Collier, company data
23 November 2020 ABG Sundal Collier 9 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 '19-'22e Company (SEKm) Ccy SP 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e Sales EBIT
Activision Blizzard 511,176 SEK 661.4 22.0 21.4 18.6 15.6 14.3 11.9 15.2 14.3 12.1 41.5 41.7 43.1 42.4 41.7 42.5 6.5 6.0 5.1 14.3 13.3 14.2 13.0 24.3 Electronic Arts 304,413 SEK 1,049.4 22.6 20.5 18.2 15.6 13.9 12.2 14.6 13.0 11.9 32.7 33.5 34.9 34.9 35.8 35.9 5.1 4.7 4.3 18.2 18.8 9.0 12.5 Take-Tw o 168,427 SEK 1,464.3 30.5 29.5 22.8 22.2 20.8 15.2 21.0 18.8 14.5 23.2 22.4 23.7 24.5 24.9 24.8 5.1 4.7 3.6 20.3 17.2 18.9 13.3 14.8 Ubisoft 98,430 SEK 800.3 40.1 27.2 23.7 25.5 18.0 15.5 10.6 8.7 7.0 18.0 21.8 22.8 43.3 45.4 50.4 4.6 3.9 3.5 6.1 9.4 10.0 21.5 164.7 Bandai Namco 165,701 SEK 754.3 35.6 28.9 24.8 23.4 18.9 16.5 17.7 14.7 12.8 10.9 12.5 13.3 14.4 16.0 17.2 2.6 2.4 2.2 11.8 13.4 13.5 3.7 11.2 Nintendo 538,996 SEK 4,524.7 19.1 17.9 18.1 12.8 11.7 11.6 12.5 11.6 11.5 32.3 33.8 34.0 33.3 34.2 34.3 4.1 3.9 3.9 20.1 19.6 18.0 4.3 12.7 NCsoft 131,852 SEK 6,398.3 27.5 18.2 11.5 19.3 12.0 6.8 18.0 11.4 6.3 35.4 41.4 12.1 38.0 43.6 12.8 6.8 5.0 1.0 19.2 23.5 23.1 29.4 48.6 NEXON 200,457 SEK 226.3 23.2 18.1 17.1 16.5 12.0 10.3 15.8 11.4 10.0 40.4 44.9 45.8 42.4 47.1 47.5 6.7 5.4 4.7 14.2 15.6 14.2 13.6 20.9 Peer average 264,931 27.6 22.7 19.4 18.9 15.2 12.5 15.7 13.0 10.7 29.3 31.5 28.7 34.2 36.1 33.2 5.2 4.5 3.6 15.5 16.4 16.0 13.5 38.7 Peer median 184,442 25.4 21.0 18.4 17.9 14.1 12.1 15.5 12.3 11.7 32.5 33.7 28.8 36.4 38.8 35.1 5.1 4.7 3.8 16.3 16.4 14.2 13.2 17.8 Embracer Group (ABGSCe) 69,586 SEK 164 28.9 22.0 19.4 25.5 18.3 15.7 17.8 13.7 12.1 29.0 30.8 32.2 41.5 41.2 41.7 7.4 5.6 5.0 5.4 16.6 18.8 31.9 55.4 vs peer average 5% -3% 0% 35% 20% 25% 14% 5% 12% -1% -2% 12% 21% 14% 26% 43% 26% 42% -65% 2% 17% 136% 43% vs peer median 14% 5% 6% 42% 29% 30% 15% 11% 3% -11% -9% 12% 14% 6% 19% 45% 21% 34% -67% 1% 32% 142% 211% 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 '19-'22e Company (SEKm) Ccy SP 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e Sales EBIT
Konami 57,347 SEK 430.5 28.2 21.3 18.7 16.6 12.3 10.3 10.7 8.8 7.6 15.2 18.8 20.4 23.5 26.3 27.8 2.5 2.3 2.1 7.5 9.3 9.8 1.9 22.9 CD Projekt 81,810 SEK 851.1 20.5 20.7 26.9 17.4 16.2 20.7 15.9 15.2 18.8 67.0 70.6 68.2 73.0 75.6 75.1 11.6 11.5 14.1 63.5 105.1 Paradox Interactive 27,245 SEK 258.0 45.1 38.9 34.6 33.6 29.1 25.9 23.2 19.1 16.7 40.6 39.7 39.6 58.9 60.5 61.4 13.7 11.6 10.2 23.5 32.2 Frontier Developments 10,807 SEK 278.6 57.3 40.1 30.9 48.0 32.0 23.5 26.1 18.7 14.2 21.8 22.7 23.2 40.0 38.9 38.6 10.5 7.3 5.5 15.8 17.9 17.8 29.4 32.1 Focus Home Interactive 2,210 SEK 415.4 16.6 12.3 10.8 9.8 7.9 5.4 9.4 7.1 5.8 14.3 15.1 16.4 15.0 16.7 15.3 1.4 1.2 0.9 21.8 n.a. n.a. Team17 Group 11,107 SEK 85.8 44.5 40.8 37.1 35.8 31.8 27.6 31.9 28.3 24.8 33.1 33.0 33.6 37.1 37.0 37.5 11.8 10.5 9.3 15.7 16.5 Remedy Entertainment 3,660 SEK 303.2 33.7 32.5 19.6 27.5 25.4 14.9 26.4 24.4 13.0 29.0 26.2 33.6 30.2 27.2 38.5 8.0 6.6 5.0 n.a. n.a. 11 Bit Studios 2,677 SEK 1,134.2 31.0 55.9 16.8 32.2 59.1 12.4 23.3 39.4 10.9 41.4 28.3 56.0 57.1 42.4 63.7 13.3 16.7 7.0 n.a. n.a. Code Masters 8,579 SEK 56.3 29.8 26.2 25.1 24.8 21.7 20.3 22.0 19.0 19.2 26.3 26.7 26.5 29.5 30.5 28.0 6.5 5.8 5.4 25.0 23.7 18.5 23.0 Digital Bros 2,606 SEK 182.7 23.7 15.3 12.1 15.7 9.8 7.7 5.2 13.2 15.6 17.0 29.2 2.1 1.5 1.3 8.1 n.a. Sumo Group 4,805 SEK 29.2 43.8 30.1 25.9 37.1 23.8 19.8 30.9 19.5 16.2 19.5 19.9 20.1 23.4 24.4 24.6 7.2 4.8 4.0 9.0 13.7 14.0 30.7 25.0 Koei Tecmo 55,394 SEK 435.5 32.6 29.9 25.2 21.8 20.4 14.8 38.7 42.6 44.0 7.1 5.9 5.2 19.0 31.1 Square Enix 53,066 SEK 444.6 20.7 17.5 16.6 10.7 8.9 8.1 9.0 8.0 7.2 15.4 16.5 16.9 18.2 18.4 19.0 1.6 1.5 1.4 12.7 13.6 13.2 8.7 19.9 Capcom 47,548 SEK 445.4 28.9 24.3 22.0 23.0 18.8 16.5 19.9 15.8 13.9 32.0 34.0 35.4 37.0 40.6 42.0 7.4 6.4 5.8 16.7 17.4 17.0 10.2 19.6 Peer average 26,347 32.6 29.0 23.0 25.3 22.7 16.3 20.7 17.6 14.0 29.1 29.3 32.2 36.9 36.0 39.3 7.5 6.7 5.5 14.5 16.8 14.4 20.8 32.7 Peer median 10,957 30.4 28.1 23.6 23.9 21.0 15.7 22.6 18.7 14.0 27.6 26.4 30.0 33.6 30.5 38.0 7.3 6.1 5.3 14.2 17.4 14.0 18.5 24.0 Embracer Group (ABGSCe) 69,586 SEK 164 28.9 22.0 19.4 25.5 18.3 15.7 17.8 13.7 12.1 29.0 30.8 32.2 41.5 41.2 41.7 7.4 5.6 5.0 5.4 16.6 18.8 31.9 55.4 vs peer average -11% -24% -16% 1% -19% -4% -14% -22% -14% 0% 5% 0% 12% 15% 6% -1% -16% -9% -63% -1% 31% 53% 69% vs peer median -5% -21% -17% 7% -13% 0% -21% -27% -14% 5% 17% 7% 23% 35% 10% 1% -8% -5% -62% -5% 34% 73% 130% Mobile developers & publishers Mcap Share price P/E (x)* EV/EBIT (x)* EV/EBITDA (x) EBIT-margin (%)* EBITDA-margin (%) EV/Sales (x) ROIC (%)* CAGR '19-'22e Company (SEKm) Ccy SP 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e 2020e 2021e 2022e Sales EBIT
Com2us 11,254 SEK 935.8 14.9 10.8 9.7 7.8 4.6 3.5 7.1 4.4 3.3 23.9 27.0 27.6 25.9 28.4 29.1 1.9 1.2 1.0 10.8 13.2 12.9 n.a. n.a. Stillfront 32,644 SEK 942.0 32.3 22.5 19.6 22.8 16.0 13.5 19.5 13.1 11.1 33.3 35.0 35.9 39.0 42.5 43.7 7.6 5.6 4.8 47.3 51.6 Zynga 77,582 SEK 71.9 22.5 20.2 18.5 17.6 13.8 11.7 16.4 12.3 10.2 22.0 21.5 21.9 23.6 24.1 25.0 3.9 3.0 2.6 11.7 11.8 9.9 23.3 30.1 G5 Entertainment 3,567 SEK 403.2 21.3 18.0 14.3 17.0 13.4 9.9 9.5 7.5 5.9 12.2 12.8 14.5 21.7 22.8 24.3 2.1 1.7 1.4 13.4 71.6 Rovio Entertainment 3,663 SEK 49.9 10.0 13.2 13.0 5.5 6.8 6.2 4.5 5.5 5.1 18.1 12.9 12.6 22.0 15.9 15.3 1.0 0.9 0.8 -0.2 21.0 Glu Mobile 14,263 SEK 82.9 23.7 17.9 14.1 19.5 14.3 10.0 18.2 12.6 9.5 12.2 14.0 16.5 13.0 16.0 17.4 2.4 2.0 1.6 17.0 18.5 18.0 17.1 43.2 Peer average 23,829 20.8 17.1 14.9 15.0 11.5 9.1 12.6 9.2 7.5 20.3 20.5 21.5 24.2 24.9 25.8 3.1 2.4 2.0 13.2 14.5 13.6 20.2 43.5 Peer median 12,758 21.9 17.9 14.2 17.3 13.6 9.9 13.0 9.9 7.7 20.0 17.8 19.2 22.8 23.4 24.6 2.2 1.9 1.5 11.7 13.2 12.9 17.1 43.2 Embracer Group (ABGSCe) 69,586 SEK 164 28.9 22.0 19.4 25.5 18.3 15.7 17.8 13.7 12.1 29.0 30.8 32.2 41.5 41.2 41.7 7.4 5.6 5.0 5.4 16.6 18.8 31.9 55.4 vs peer average 39% 29% 31% 69% 59% 72% 42% 48% 61% 43% 50% 50% 71% 65% 62% 136% 135% 147% -59% 15% 38% 58% 27% vs peer median 32% 23% 37% 47% 35% 57% 37% 38% 57% 45% 73% 67% 82% 76% 69% 233% 202% 226% -54% 26% 45% 86% 28% *Adjusted P/E, EV/EBIT, EBIT-margin and ROIC for Embracer Group to ease comparison to IFRS 16 peers Source: ABG Sundal Collier (for Embracer), FactSet, company data
Mid-sized peers, EV/sales vs. EBIT margin, ’20e Mid-sized peers, EV/sales vs. EBIT margin, ’21e 16x 20x Paradox 18x 14x 11 Bit 11 Bit Team17 16x 12x Frontier 14x Paradox e e 10x Embracer 1
0 12x 2 2 Team17 ' '
s s e e Sumo Group l l 8x 10x a a S S Frontier / / Remedy Remedy V V Capcom 8x E E 6x Koei Tecmo Capcom Sumo Group Digital Bros Code Masters 6x 4x Koei Tecmo Embracer Konami 4x Digital Bros Code Masters 2x Focus Home 2x Konami Square Enix Square Enix Focus Home 0x 0x 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% EBIT margin '20e EBIT margin '21e
Source: ABG Sundal Collier (for Embracer), FactSet Source: ABG Sundal Collier (for Embracer), FactSet
23 November 2020 ABG Sundal Collier 10 Embracer Group
Based on FactSet consensus, Embracer is currently trading at a f12m EV/adj. EBIT of approximately 17.9x, which is approximately -4.4% below the four-year historical average of 18.7x. Looking at the f12m adjusted P/E, we find that Embracer is trading at around 26.4x, which is +2.2% above the four-year historical average of 25.9x.
F12m EV/adj. EBIT F12m adj. P/E
50x 100.0% 90.0% 35x 26.4 80.0% 17.9 60.0% 30x 60.0% 40x 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/EBIT Avg. EV/EBIT Premium/Discount F12m P/E Avg. P/E
Source: ABG Sundal Collier, FactSet, company data Source: ABG Sundal Collier, FactSet, company data
23 November 2020 ABG Sundal Collier 11 Embracer Group
ESG profile
Sustainability framework rollout initiated… Key issues* ABGSC weight In conjunction with Embracer’s 2018/2019 annual report, the company announced that it had launched a sustainability framework to promote Environment 25% Financing environmental impact what it termed “Smarter business”. The framework seeks to create Packaging material and waste further long-term value for the company’s shareholders through four Climate change pillars: 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 Sense pillar seeks to increase transparency, combat corruption and Building energy efficiency, Recycling, Plastic waste, 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 2018/19 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.
23 November 2020 ABG Sundal Collier 12 Embracer Group
Income Statement (SEKm) Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020e Q1 2021e Sales 1,142 1,260 1,509 1,339 2,069 2,383 1,910 2,227 COGS -528 -635 -747 666 760 1,034 -881 -914 Gross profit 614 625 762 2,005 2,829 3,417 1,029 1,313 Other operating items -225 -206 -244 -1,510 -1,864 -2,448 -329 -385 EBITDA 390 418 518 495 965 969 700 928 Depreciation and amortisation -308 -342 -427 -399 -746 -796 -879 -1,018 EBITA 81 76 91 97 219 174 -178 -90 EO items -123 -164 -211 -189 -493 -521 -633 -723 Impairment and PPA amortisation 0 0 0 0 0 0 0 0 EBIT 81 76 91 97 219 174 -178 -90 Net financial items 2 3 -15 73 -36 90 -6 -6 Pretax profit 83 80 76 170 184 264 -184 -96 Tax -31 -15 -43 -37 -93 -36 0 0 Net profit 53 65 34 132 91 228 -184 -96 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 53 65 34 132 91 228 -184 -96 EPS 0.61 0.21 0.11 0.42 0.29 0.73 -0.59 0 EPS Adj 2.03 0.73 0.78 1.03 0.29 0.73 -0.59 0 Total extraordinary items after tax -123 -164 -211 -189 -493 -521 -633 -723 Tax rate (%) 36.7 18.9 56.0 21.9 50.7 13.6 0 0 Gross margin (%) 53.8 49.6 50.5 149.7 136.7 143.4 53.9 59.0 EBITDA margin (%) 34.1 33.2 34.4 37.0 46.7 40.7 36.7 41.7 EBITA margin (%) 7.1 6.1 6.0 7.2 10.6 7.3 -9.3 -4.0 EBIT margin (%) 7.1 6.1 6.0 7.2 10.6 7.3 -9.3 -4.0 Pretax margin (%) 7.3 6.3 5.1 12.7 8.9 11.1 -9.6 -4.3 Net margin (%) 4.6 5.1 2.2 9.9 4.4 9.6 -9.6 -4.3 Growth rates Y/Y Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020e Q1 2021e Sales growth (%) 36.4 -1.0 9.3 -17.9 81.1 89.2 26.6 66.3 EBITDA growth (%) 88.9 94.7 58.7 -19.9 147.8 131.7 35.1 87.4 EBIT growth (%) 54.4 -15.8 -40.2 -43.7 170.2 127.1 -chg -chg Net profit growth (%) 57.3 -0.6 -70.6 28.4 72.1 252.8 -chg -chg EPS growth (%) 57.3 -0.6 -70.6 28.4 72.1 252.8 -chg -chg Adj earnings numbers Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020e Q1 2021e EBITDA Adj 512 582 729 685 1,458 1,490 1,334 1,651 EBITDA Adj margin (%) 44.9 46.2 48.4 51.1 70.5 62.5 69.8 74.2 EBITA Adj 204 241 302 286 712 694 455 633 EBITA Adj margin (%) 17.9 19.1 20.0 21.4 34.4 29.1 23.8 28.4 EBIT Adj 204 241 302 286 712 694 455 633 EBIT Adj margin (%) 17.9 19.1 20.0 21.4 34.4 29.1 23.8 28.4 Pretax profit Adj 206 244 287 359 676 784 449 627 Net profit Adj 175 229 245 322 583 749 449 627 Net profit to shareholders Adj 175 229 245 322 583 749 449 627 Net Adj margin (%) 15.4 18.2 16.2 24.0 28.2 31.4 23.5 28.2 Source: ABG Sundal Collier, Company data
23 November 2020 ABG Sundal Collier 13 Embracer Group
Income Statement (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Sales na 178 213 302 508 5,754 5,249 8,589 10,960 12,039 COGS na -58 -70 -119 -148 -3,261 -2,576 -3,589 -4,502 -4,851 Gross profit na 121 143 183 360 2,493 2,673 5,000 6,458 7,188 Other operating items na -25 -38 -51 -96 -902 -852 -1,438 -1,940 -2,167 EBITDA na 95 105 132 264 1,592 1,821 3,563 4,518 5,021 Depreciation and amortisation na -27 -39 -37 -76 -1,017 -1,476 -3,438 -3,733 -3,956 Of which leasing depreciation na 0 0 0 0 0 0 0 0 0 EBITA na 68 67 95 188 574 345 124 785 1,066 EO items na 0 -12 -13 -14 -305 -687 -2,370 -2,592 -2,805 Impairment and PPA amortisation na 0 0 0 0 0 0 0 0 0 EBIT na 68 67 95 188 574 345 124 785 1,066 Net financial items na -1 -1 -2 -6 -29 63 43 -20 -20 Pretax profit na 67 66 93 182 545 409 167 765 1,046 Tax na -15 -14 -21 -43 -149 -126 -129 -199 -272 Net profit na 52 52 72 139 397 283 38 566 774 Minority interest na 0 -1 0 0 0 0 0 0 0 Net profit discontinued na 0 0 0 0 0 0 0 0 0 Net profit to shareholders na 52 51 72 139 397 283 38 566 774 EPS na 0.87 0.85 1.00 1.76 4.22 0.91 0.09 1.33 1.82 EPS Adj na 0.87 1.06 1.18 1.93 7.47 3.11 5.67 7.44 8.43 Total extraordinary items after tax na 0 -12 -13 -14 -305 -687 -2,370 -2,592 -2,805 Leasing payments na 0 0 0 0 0 0 0 0 0 Tax rate (%) na 22.3 21.6 22.6 23.5 27.2 30.7 77.2 26.0 26.0 Gross margin (%) na 67.7 67.1 60.6 70.9 43.3 50.9 58.2 58.9 59.7 EBITDA margin (%) na 53.5 49.4 43.8 52.0 27.7 34.7 41.5 41.2 41.7 EBITA margin (%) na 38.3 31.3 31.5 37.1 10.0 6.6 1.4 7.2 8.9 EBIT margin (%) na 38.3 31.3 31.5 37.1 10.0 6.6 1.4 7.2 8.9 Pretax margin (%) na 37.7 31.0 30.8 35.9 9.5 7.8 1.9 7.0 8.7 Net margin (%) na 29.3 24.3 23.8 27.4 6.9 5.4 0.4 5.2 6.4 Growth rates Y/Y na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Sales growth (%) na na 19.6 41.8 68.1 1,033.7 -8.8 63.6 27.6 9.8 EBITDA growth (%) na na 10.4 25.7 99.9 502.6 14.4 95.6 26.8 11.1 EBIT growth (%) na na -2.3 42.7 98.1 205.2 -39.9 -64.0 531.7 35.7 Net profit growth (%) na na -0.8 39.1 93.4 185.0 -28.6 -86.5 1,386.2 36.7 EPS growth (%) na na -1.8 17.0 75.8 140.3 -78.5 -90.1 1,386.2 36.7 Profitability na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e ROE (%) na na 66.2 32.1 18.9 10.6 4.1 0.3 2.6 3.3 ROE Adj (%) na na 82.0 37.9 20.8 18.7 14.1 17.2 14.5 15.2 ROCE (%) na na 86.0 39.8 23.4 13.6 5.8 1.6 3.5 4.4 ROCE Adj(%) na na 101.9 45.2 25.1 20.7 14.6 17.5 14.9 15.9 ROIC (%) na na 96.0 51.9 35.4 17.5 4.5 0.3 3.9 5.2 ROIC Adj (%) na na 113.8 58.9 38.1 26.9 13.4 5.4 16.9 19.0 Adj earnings numbers na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e EBITDA Adj na 95 117 145 278 1,897 2,509 5,932 7,110 7,826 EBITDA Adj margin (%) na 53.5 55.1 48.0 54.8 33.0 47.8 69.1 64.9 65.0 EBITDA lease Adj na 95 117 145 278 1,897 2,509 5,932 7,110 7,826 EBITDA lease Adj margin (%) na 53.5 55.1 48.0 54.8 33.0 47.8 69.1 64.9 65.0 EBITA Adj na 68 79 108 202 880 1,033 2,494 3,377 3,871 EBITA Adj margin (%) na 38.3 37.1 35.7 39.9 15.3 19.7 29.0 30.8 32.2 EBIT Adj na 68 79 108 202 880 1,033 2,494 3,377 3,871 EBIT Adj margin (%) na 38.3 37.1 35.7 39.9 15.3 19.7 29.0 30.8 32.2 Pretax profit Adj na 67 78 106 196 850 1,096 2,537 3,357 3,851 Net profit Adj na 52 64 85 153 702 971 2,408 3,158 3,579 Net profit to shareholders Adj na 52 64 85 153 702 971 2,408 3,158 3,579 Net Adj margin (%) na 29.3 30.1 28.1 30.2 12.2 18.5 28.0 28.8 29.7 Source: ABG Sundal Collier, Company data
23 November 2020 ABG Sundal Collier 14 Embracer Group
Cash Flow Statement (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e EBITDA na 95 105 132 264 1,592 1,821 3,563 4,518 5,021 Net financial items na -1 -1 -2 -6 -29 63 43 -20 -20 Paid tax na -15 -14 -21 -43 -149 -126 -129 -199 -272 Non-cash items na 0 0 0 0 0 0 0 0 0 Cash flow before change in WC na 79 90 109 215 1,414 1,759 3,476 4,299 4,729 Change in WC na 33 7 -26 -30 -294 -84 1,124 530 124 Operating cash flow na 112 97 84 185 1,120 1,675 4,600 4,829 4,853 CAPEX tangible fixed assets na 0 0 -3 -5 -140 -42 -86 -110 -120 CAPEX intangible fixed assets na -36 -71 -157 -305 -1,335 -1,653 -2,577 -2,959 -3,612 Acquisitions and disposals na 0 0 0 -91 -1,787 -1,840 -4,103 0 0 Free cash flow na 76 27 -76 -216 -2,143 -1,861 -2,165 1,760 1,121 Dividend paid na 0 0 0 0 0 0 0 0 0 Share issues and buybacks na 0 0 0 598 1,448 0 6,000 0 0 Lease liability amortisation na 0 0 0 0 0 0 0 0 0 Other non cash items na -56 -22 190 -1 2,382 523 1,203 0 0 Balance Sheet (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Goodwill na 0 0 0 0 830 1,412 10,512 12,512 12,512 Other intangible assets na 75 104 229 571 2,877 4,521 4,559 3,786 3,442 Tangible fixed assets na 1 2 4 8 156 198 284 393 514 Right-of-use asset na 0 0 0 0 0 0 0 0 0 Total other fixed assets na 3 0 0 3 196 196 196 196 196 Fixed assets na 78 106 232 582 4,059 6,327 15,551 16,887 16,664 Inventories na 8 13 18 30 323 394 472 603 662 Receivables na 26 31 47 90 1,297 1,575 1,975 2,521 2,769 Other current assets na 0 0 0 0 0 0 0 0 0 Cash and liquid assets na 18 26 167 627 2,929 1,591 6,829 8,589 9,710 Total assets na 131 175 465 1,329 8,608 9,886 24,827 28,600 29,805 Shareholders equity na 63 92 357 1,114 6,379 7,393 20,531 23,098 23,872 Minority na 0 0 0 0 0 0 0 0 0 Total equity na 63 92 357 1,114 6,379 7,393 20,531 23,098 23,872 Long-term debt na 0 0 29 110 918 918 918 918 918 Pension debt na 0 0 0 0 0 0 0 0 0 Convertible debt na 0 0 0 0 0 0 0 0 0 Leasing liability na 0 0 0 0 0 0 0 0 0 Total other long-term liabilities na 0 0 0 0 0 0 0 0 0 Short-term debt na 0 0 0 0 0 0 0 0 0 Accounts payable na 68 84 80 105 1,311 1,575 3,178 4,384 4,816 Other current liabilities na 0 0 0 0 0 0 200 200 200 Total liabilities and equity na 131 175 465 1,329 8,608 9,886 24,827 28,600 29,805 Net IB debt na -21 -26 -139 -520 -2,207 -869 -6,107 -7,867 -8,988 Net IB debt excl. pension debt na -21 -26 -139 -520 -2,207 -869 -6,107 -7,867 -8,988 Net IB debt excl. leasing na -21 -26 -139 -520 -2,207 -869 -6,107 -7,867 -8,988 Capital invested na 43 66 218 594 4,172 6,524 14,425 15,231 14,883 Working capital na -33 -40 -15 15 309 394 -930 -1,460 -1,584 EV breakdown na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Market cap. diluted (m) na na na 797 2,093 4,525 22,083 69,586 69,586 69,586 Net IB debt Adj na -18 -26 -139 -517 -2,011 -673 -5,910 -7,671 -8,792 Market value of minority na 0 0 0 0 0 0 0 0 0 Reversal of shares and participations na 0 0 0 0 0 0 0 0 0 Reversal of conv. debt assumed equity na 0 0 0 0 0 0 0 0 0 EV na na na 658 1,576 2,514 21,410 63,676 61,916 60,794 Capital efficiency na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Total assets turnover (%) na na 139.0 94.3 56.6 115.8 56.8 49.5 41.0 41.2 Working capital/sales (%) na na -17.2 -9.1 0.1 2.8 6.7 -3.1 -10.9 -12.6 Financial risk and debt service na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Net debt/equity na -0.33 -0.28 -0.39 -0.47 -0.35 -0.12 -0.30 -0.34 -0.38 Net debt/market cap na na na -0.23 -0.37 -0.43 -0.04 -0.09 -0.11 -0.13 Equity ratio (%) na 48.2 52.3 76.7 83.8 74.1 74.8 82.7 80.8 80.1 Net IB debt adj./equity na -0.28 -0.28 -0.39 -0.46 -0.32 -0.09 -0.29 -0.33 -0.37 Current ratio na 0.77 0.83 2.92 7.11 3.47 2.26 2.75 2.56 2.62 EBITDA/net interest na 98.25 177.18 62.35 42.67 54.51 -28.73 -83.63 225.89 251.06 Net IB debt/EBITDA na -0.22 -0.24 -1.05 -1.97 -1.39 -0.48 -1.71 -1.74 -1.79 Net IB debt/EBITDA lease Adj na -0.22 -0.22 -0.96 -1.87 -1.16 -0.35 -1.03 -1.11 -1.15 Interest cover na 52.96 106.56 44.82 30.36 17.73 9.75 3.32 31.61 42.83 Source: ABG Sundal Collier, Company data
23 November 2020 ABG Sundal Collier 15 Embracer Group
Valuation and Ratios (SEKm) na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Shares outstanding adj. na 60 60 61 74 94 312 424 424 424 Fully diluted shares Adj na 60 60 72 79 94 312 424 424 424 EPS na 0.87 0.85 1.00 1.76 4.22 0.91 0.09 1.33 1.82 Dividend per share Adj na 0 0 0 0 0 0 0 0 0 EPS Adj na 0.87 1.06 1.18 1.93 7.47 3.11 5.67 7.44 8.43 BVPS na 1.05 1.53 5.83 15.07 67.86 23.70 48.39 54.44 56.26 BVPS Adj na -0.19 -0.21 2.09 7.34 28.43 4.68 12.87 16.03 18.66 Net IB debt / share na -0.3 -0.4 -2.3 -7.0 -23.5 -2.8 -14.4 -18.5 -21.2 Share price na na na 11.07 26.42 48.13 70.78 164.00 164.00 164.00 Market cap. (m) na na na 676 1,953 4,525 22,083 69,586 69,586 69,586 Valuation na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e P/E na na na 11.1 15.0 11.4 78.0 1,826.2 122.9 89.9 EV/sales na na na 2.18 3.11 0.44 4.08 7.41 5.65 5.05 EV/EBITDA na na na 5.0 6.0 1.6 11.8 17.9 13.7 12.1 EV/EBITA na na na 6.9 8.4 4.4 62.0 512.3 78.8 57.0 EV/EBIT na na na 6.9 8.4 4.4 62.0 512.3 78.8 57.0 Dividend yield (%) na na na 0 0 0 0 0 0 0 FCF yield (%) na na na -9.6 -10.3 -47.4 -8.4 -3.1 2.5 1.6 Lease adj. FCF yield (%) na na na -9.6 -10.3 -47.4 -8.4 -3.1 2.5 1.6 P/BVPS na na na 1.90 1.75 0.71 2.99 3.39 3.01 2.92 P/BVPS Adj na na na 5.29 3.60 1.69 15.12 12.74 10.23 8.79 P/E Adj na na na 9.4 13.7 6.4 22.8 28.9 22.0 19.4 EV/EBITDA Adj na na na 4.5 5.7 1.3 8.5 10.7 8.7 7.8 EV/EBITA Adj na na na 6.1 7.8 2.9 20.7 25.5 18.3 15.7 EV/EBIT Adj na na na 6.1 7.8 2.9 20.7 25.5 18.3 15.7 EV/cap. employed na na na 1.7 1.3 0.3 2.6 3.0 2.6 2.5 Investment ratios na 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e Capex/sales na 20.2 33.1 52.9 61.1 25.6 32.3 31.0 28.0 31.0 Capex/depreciation na 132.6 183.2 430.7 408.8 145.1 114.9 77.4 82.2 94.4 Capex tangibles/tangible fixed assets na 0 0 72.4 60.5 90.2 21.4 30.3 27.9 23.4 Capex intangibles/definite intangibles na 48.1 67.5 68.7 53.5 46.4 36.6 56.5 78.2 104.9 Depreciation on intangibles/definite intangibles na 36.3 36.8 16.2 13.3 35.4 32.7 75.4 98.6 114.9 Depreciation on tangibles/tangibles na 0 0 0 0 0 0 0 0 0 Source: ABG Sundal Collier, Company data
23 November 2020 ABG Sundal Collier 16 Embracer Group
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: 23/11/2020 20:46 CET. All prices are as of market close on 22 November, 2020 unless otherwise noted.
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23 November 2020 ABG Sundal Collier 17 Embracer Group
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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23 November 2020 ABG Sundal Collier 18 Embracer Group
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Joint Global Head of Research John Olaisen +47 22 01 61 87 Christer Linde +46 8 566 286 90
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23 November 2020 ABG Sundal Collier 19