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THQ Nordic

Game developer and publisher focusing on the PC and console market

THQ Nordic acquires, develops and publishes PC and console games for the global gaming market. Its core business model consists of acquiring established gaming brands and gradually improving them. Much of THQ’s soul stems from entrepreneur, founder and CEO Lars Wingefors, who at the age of 16 founded Nordic Games, which we today associate with THQ Nordic. The game changer came in 2013 when most of today’s brand portfolio was acquired from THQ Inc’s insolvency. At the start of 2018, the company acquired Koch Media, which focuses on game development and gives THQ a larger publishing business.

A large part of the IP portfolio is still not generating any income, but the pipeline of game launches is strong, including a few AAA titles. Together with a strong management with a clear M&A agenda, THQ is well suited for future value-adding acquisitions, which could mean securing more IPs and portfolio expansion. The acquisition of Koch Media further adds new distribution/publishing channels, an opportunity to reach further and wider with the current portfolio and expected pipeline, aligning them for additional growth.

Despite THQ Nordic’s broad portfolio, there are risks associated with larger title releases as they have a relatively large impact on sales right after launch. Moreover, disappointing releases or reviews could dent end-customer enthusiasm and hurt the company's finances, especially during the launch period. Delays in planned and ongoing gaming projects could adversely affect the group’s profitability. Acquiring established but temporarily underperforming gaming brands and gradually improving them increases the potential risk of performing below market expectations.

SEKm 2018 2019e 2020e
Sales 5754 5055 5680
Sales growth (%) 1033,8 -12,1 12,4
EBITDA 1593 1400 1634
EBITDA margin (%) 27,7 27,7 28,8
EBIT adj 575 632 782
EBIT adj margin (%) 10 12,5 13,8
Pretax profit 545 614 764
EPS rep 4,22 5,09 6,34
EPS growth (%) 140,3 20,7 24,5
EPS adj 4,22 9,08 10,33
DPS 0 0 0
EV/EBITDA (x) 7,3 14 11,7
EV/EBIT adj (x) 20,1 31,1 24,5
P/E (x) 34,2 44,2 35,5
P/E adj (x) 34,2 24,8 21,8
EV/sales (x) 2 3,9 3,4
FCF yield (%) -8,8 -2,4 2,1
Dividend yield (%) 0 0 0
Net IB debt/EBITDA -1,4 -1,2 -1,3
SEKm 2018 2019e 2020e
Sales 5754 5055 5680
COGS -3261 -2834 -3145
Gross profit 2493 2222 2535
Other operating items -901 -821 -901
EBITDA 1593 1400 1634
Depreciation on tangibles 0 0 0
Depreciation on intangibles -1018 -393 -477
EBITA 575 1007 1158
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 -375 -375
EBIT 575 632 782
Other financial items 0 0 0
Net financial items -29 -18 -18
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 545 614 764
Tax -149 -135 -168
Net profit 397 479 596
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 397 479 596
EPS 4,22 5,09 6,34
EPS Adj 4,22 9,08 10,33
Total extraordinary items after tax 0 0 0
Tax rate (%) -27,2 -22 -22
Gross margin (%) 43,3 43,9 44,6
EBITDA margin (%) 27,7 27,7 28,8
EBITA margin (%) 10 19,9 20,4
EBIT margin (%) 10 12,5 13,8
Pretax margin (%) 9,5 12,1 13,4
Net margin (%) 6,9 9,5 10,5
Growth rates Y/Y 2018 2019 2020
Sales growth (%) 1033,8 -12,1 12,4
EBITDA growth (%) 484,2 -12,1 16,7
EBIT growth (%) 205,3 10 23,8
Net profit growth (%) 185,1 20,7 24,5
EPS growth (%) 140,3 20,7 24,5
Profitability 2018 2019 2020
ROE (%) 11,7 8 9,2
ROE Adj (%) 11,7 14,3 15
ROCE (%) 14,8 9,2 10,6
ROCE Adj(%) 14,8 14,7 15,6
ROIC (%) 21 12,3 13,4
ROIC Adj (%) 21 12,3 13,4
Adj earnings numbers 2018 2019 2020
EBITDA Adj 1593 1400 1634
EBITDA Adj margin (%) 27,7 27,7 28,8
EBITA Adj 575 1007 1158
EBITA Adj margin (%) 10 19,9 20,4
EBIT Adj 575 632 782
EBIT Adj margin (%) 10 12,5 13,8
Pretax profit Adj 545 989 1139
Net profit Adj 397 854 971
Net profit to shareholders Adj 397 854 971
Net Adj margin (%) 6,9 16,9 17,1
SEKm 2018 2019e 2020e
EBITDA 1593 1400 1634
Net financial items -29 -18 -18
Paid tax -149 -135 -168
Non-cash items -321 0 0
Cash flow before change in WC 1094 1247 1448
Change in WC 263 -773 47
Operating cash flow 1356 474 1494
CAPEX tangible fixed assets 0 0 0
CAPEX intangible fixed assets -2547 -976 -1056
Acquisitions and disposals 0 0 0
Free cash flow -1190 -502 438
Dividend paid 0 0 0
Share issues and buybacks 0 0 0
Other non cash items 2809 0 0
Decrease in net IB debt 1619 -502 438
Balance Sheet (SEKm) 2018 2019 2020
Goodwill 0 0 0
Indefinite intangible assets 0 0 0
Definite intangible assets 3707 3915 4119
Tangible fixed assets 156 156 156
Other fixed assets 196 196 196
Fixed assets 4059 4266 4470
Inventories 0 0 0
Receivables 1620 1767 1562
Other current assets 0 0 0
Cash and liquid assets 2929 2427 2866
Total assets 8608 8461 8898
Shareholders equity 5713 6191 6787
Minority 0 0 0
Total equity 5713 6191 6787
Long-term debt 918 918 918
Pension debt 0 0 0
Convertible debt 0 0 0
Deferred tax 0 0 0
Other long-term liabilities 0 0 0
Short-term debt 0 0 0
Accounts payable 1977 1352 1193
Other current liabilities 0 0 0
Total liabilities and equity 465 1329 8608
Net IB debt -2207 -1706 -2144
Net IB debt excl. pension debt -2207 -1706 -2144
Capital invested 3505 4486 4643
Working capital -357 416 369
EV breakdown 2018 2019 2020
Market cap. diluted (m) 13574 21150 21150
Net IB debt Adj -2011 -1509 -1948
Market value of minority 0 0 0
Reversal of shares and participations 0 0 0
Reversal of conv. debt assumed equity 0 0 0
EV 11563 19641 19202
Capital efficiency (%) 2018 2019 2020
Total assets turnover (%) 115,8 59,2 65,4
Capital invested turnover (%) 288,4 126,5 124,4
Capital employed turnover (%) 148,6 73,6 76,7
Inventories / sales (%) 0 0 0
Customer advances / sales (%) 0 0 0
Payables / sales (%) 19 32,9 22,4
Working capital / sales (%) -3,9 0,6 6,9
Financial risk and debt service 2018 2019 2020
Net debt / equity (%) -38,6 -27,5 -31,6
Net debt / market cap (%) -14,3 -8,1 -10,1
Equity ratio (%) 66,4 73,2 76,3
Net IB debt adj. / equity (%) -35,2 -24,4 -28,7
Current ratio (%) 230,1 310,4 371,2
EBITDA / net interest (%) 5448,7 7683,5 8900,6
Net IB debt / EBITDA (%) -138,6 -121,8 -131,2
Interest cover (%) 1965,7 5526,3 6304,3
SEKm 2018 2019e 2020e
Shares outstanding adj. 94 94 94
Fully diluted shares Adj 94 94 94
EPS 4,22 5,09 6,34
Dividend per share Adj 0 0 0
EPS Adj 4,22 9,08 10,33
BVPS 60,77 65,87 72,21
BVPS Adj 21,34 24,22 28,39
Net IB debt / share -23,5 -18,1 -22,8
Share price 164,63 225 225
Market cap. (m) 15475 21150 21150
Valuation 2018 2019 2020
P/E 34,2 44,2 35,5
EV/sales 2,01 3,89 3,38
EV/EBITDA 7,3 14 11,7
EV/EBITA 20,1 19,5 16,6
EV/EBIT 20,1 31,1 24,5
Dividend yield (%) 0 0 0
FCF yield (%) -8,8 -2,4 2,1
P/BVPS 2,38 3,42 3,12
P/BVPS Adj 6,77 9,29 7,93
P/E Adj 34,2 24,8 21,8
EV/EBITDA Adj 7,3 14 11,7
EV/EBITA Adj 20,1 19,5 16,6
EV/EBIT Adj 20,1 31,1 24,5
EV/cap. employed 1,7 2,8 2,5
Investment ratios 2018 2019 2020
Capex / sales 44,3 19,3 18,6
Capex / depreciation 250,1 248,2 221,5
Capex tangibles / tangible fixed assets 0 0 0
Capex intangibles / definite intangibles 68,7 24,9 25,6
Depreciation on intangibles / definite intangibles 27,5 10 11,6
Depreciation on tangibles / tangibles 0 0 0

Equity research

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Main shareholders

THQ Nordic

Main shareholders Share capital % Voting shares % Verified
Lars Wingefors 35.1 % 51.5 % 31 May 2019
Erik Stenberg 7.6 % 11.2 % 31 May 2019
Swedbank Robur Fonder 9.0 % 5.0 % 31 May 2019
CMB Holding AB 2.6 % 3.8 % 31 May 2019
Handelsbanken Fonder 6.1 % 3.4 % 31 May 2019
Didner & Gerge Fonder 2.3 % 1.3 % 31 May 2019
Familjen Olsson med stiftelse 2.1 % 1.2 % 28 Feb 2019
Första AP-fonden 2.1 % 1.1 % 31 May 2019
SEB Fonder 1.9 % 1.1 % 31 May 2019
Livförsäkringsbolaget Skandia 1.9 % 1.0 % 31 May 2019
Source: Holdings by Modular Finance AB

Insider list

THQ Nordic

Name Quantity Code Date
Dr. Klemens Kundratitz - 611 989 SELL 3 Jun 2019
Lars Wingefors +6 267 338 AKLÅN 15 Mar 2019
Lars Wingefors +4 732 662 AKLÅN 28 Feb 2019
Lars Wingefors -11 000 000 AKLÅN 20 Feb 2019
Reinhard Gratl - 1 686 SELL 14 Feb 2019
Wingefors Depå Tre AB +3 250 733 BUY 27 Dec 2018
Lars Wingefors AB -3 250 733 SELL 27 Dec 2018
Wingefors Depå Två AB +3 250 733 BUY 20 Dec 2018
Wingefors Depå Två AB +3 250 733 BUY 20 Dec 2018
Lars Wingefors AB -3 250 733 SELL 20 Dec 2018

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