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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 5624 5390 5670
Sales growth (%) 1008 -4,2 5,2
EBITDA 1319 1486 1700
EBITDA margin (%) 23,5 27,6 30
EBIT adj 560 704 878
EBIT adj margin (%) 10 13,1 15,5
Pretax profit 535 680 854
EPS rep 4,51 5,79 7,27
EPS growth (%) 156,5 28,6 25,5
EPS adj 4,51 5,79 7,27
DPS 0 0 0
EV/EBITDA (x) 14,5 12,7 10,9
EV/EBIT adj (x) 34,2 26,8 21,2
P/E (x) 45,1 35 27,9
P/E adj (x) 45,1 35 27,9
EV/sales (x) 3,4 3,5 3,3
FCF yield (%) -8,9 1,5 1,7
Dividend yield (%) 0 0 0
Net IB debt/EBITDA 0,3 0,1 -0,1
SEKm 2018 2019e 2020e
Sales 5624 5390 5670
COGS -3411 -3088 -3143
Gross profit 2212 2302 2527
Other operating items -893 -816 -827
EBITDA 1319 1486 1700
Depreciation on tangibles 0 0 0
Depreciation on intangibles -759 -782 -822
EBITA 560 704 878
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 560 704 878
Other financial items 0 0 0
Net financial items -25 -24 -24
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 535 680 854
Tax -122 -150 -188
Net profit 413 531 666
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 413 531 666
EPS 4,51 5,79 7,27
EPS Adj 4,51 5,79 7,27
Total extraordinary items after tax 0 0 0
Tax rate (%) -22,9 -22 -22
Gross margin (%) 39,3 42,7 44,6
EBITDA margin (%) 23,5 27,6 30
EBITA margin (%) 10 13,1 15,5
EBIT margin (%) 10 13,1 15,5
Pretax margin (%) 9,5 12,6 15,1
Net margin (%) 7,3 9,8 11,7
Growth rates Y/Y 2018 2019 2020
Sales growth (%) 1008 -4,2 5,2
EBITDA growth (%) 383,9 12,6 14,4
EBIT growth (%) 197,7 25,6 24,7
Net profit growth (%) 196,4 28,6 25,5
EPS growth (%) 156,5 28,6 25,5
Profitability 2018 2019 2020
ROE (%) 17,6 13,6 14,8
ROE Adj (%) 17,6 13,6 14,8
ROCE (%) 25,1 17,1 19,9
ROCE Adj(%) 25,1 17,1 19,9
ROIC (%) 19,4 13,4 15,5
ROIC Adj (%) 19,4 13,4 15,5
Adj earnings numbers 2018 2019 2020
EBITDA Adj 1319 1486 1700
EBITDA Adj margin (%) 23,5 27,6 30
EBITA Adj 560 704 878
EBITA Adj margin (%) 10 13,1 15,5
EBIT Adj 560 704 878
EBIT Adj margin (%) 10 13,1 15,5
Pretax profit Adj 535 680 854
Net profit Adj 413 531 666
Net profit to shareholders Adj 413 531 666
Net Adj margin (%) 7,3 9,8 11,7
SEKm 2018 2019e 2020e
EBITDA 1319 1486 1700
Net financial items -25 -24 -24
Paid tax -122 -150 -188
Non-cash items -117 0 0
Cash flow before change in WC 1055 1313 1488
Change in WC -515 64 -12
Operating cash flow 540 1377 1476
CAPEX tangible fixed assets 0 0 0
CAPEX intangible fixed assets -2193 -1097 -1167
Acquisitions and disposals 0 0 0
Free cash flow -1652 280 309
Dividend paid 0 0 0
Share issues and buybacks 0 0 0
Other non cash items 705 0 0
Decrease in net IB debt -948 280 309
Balance Sheet (SEKm) 2018 2019 2020
Goodwill 0 0 0
Indefinite intangible assets 0 0 0
Definite intangible assets 3410 3724 4069
Tangible fixed assets 152 152 152
Other fixed assets 211 211 211
Fixed assets 3772 4087 4432
Inventories 0 0 0
Receivables 1950 1514 1559
Other current assets 0 0 0
Cash and liquid assets 616 895 1205
Total assets 6338 6496 7195
Shareholders equity 3622 4153 4819
Minority 0 0 0
Total equity 3622 4153 4819
Long-term debt 1186 1186 1186
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 1530 1158 1191
Other current liabilities 0 0 0
Total liabilities and equity 465 1329 6338
Net IB debt 359 79 -230
Net IB debt excl. pension debt 359 79 -230
Capital invested 3981 4232 4589
Working capital 420 356 369
EV breakdown 2018 2019 2020
Market cap. diluted (m) 18588 18588 18588
Net IB debt Adj 570 290 -19
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 19158 18879 18569
Capital efficiency (%) 2018 2019 2020
Total assets turnover (%) 146,7 84 82,8
Capital invested turnover (%) 251,8 131,2 128,5
Capital employed turnover (%) 251,8 131,2 128,5
Inventories / sales (%) 0 0 0
Customer advances / sales (%) 0 0 0
Payables / sales (%) 15,5 24,9 20,7
Working capital / sales (%) 2,9 7,2 6,4
Financial risk and debt service 2018 2019 2020
Net debt / equity (%) 9,9 1,9 -4,8
Net debt / market cap (%) 2,4 0,4 -1,2
Equity ratio (%) 57,2 63,9 67
Net IB debt adj. / equity (%) 15,7 7 -0,4
Current ratio (%) 167,7 208,1 232,1
EBITDA / net interest (%) 5203,6 6313,4 7168,4
Net IB debt / EBITDA (%) 27,2 5,3 -13,5
Interest cover (%) 2210 2990,1 3701,4
SEKm 2018 2019e 2020e
Shares outstanding adj. 92 92 92
Fully diluted shares Adj 92 92 92
EPS 4,51 5,79 7,27
Dividend per share Adj 0 0 0
EPS Adj 4,51 5,79 7,27
BVPS 39,56 45,35 52,63
BVPS Adj 2,32 4,68 8,19
Net IB debt / share 3,9 0,9 -2,5
Share price 164,63 203 203
Market cap. (m) 15075 18588 18588
Valuation 2018 2019 2020
P/E 45,1 35 27,9
EV/sales 3,41 3,5 3,28
EV/EBITDA 14,5 12,7 10,9
EV/EBITA 34,2 26,8 21,2
EV/EBIT 34,2 26,8 21,2
Dividend yield (%) 0 0 0
FCF yield (%) -8,9 1,5 1,7
P/BVPS 5,13 4,48 3,86
P/BVPS Adj 87,38 43,38 24,78
P/E Adj 45,1 35 27,9
EV/EBITDA Adj 14,5 12,7 10,9
EV/EBITA Adj 34,2 26,8 21,2
EV/EBIT Adj 34,2 26,8 21,2
EV/cap. employed 4,8 4,5 4
Investment ratios 2018 2019 2020
Capex / sales 39 20,4 20,6
Capex / depreciation 288,9 140,2 141,9
Capex tangibles / tangible fixed assets 0 0 0
Capex intangibles / definite intangibles 64,3 29,5 28,7
Depreciation on intangibles / definite intangibles 22,3 21 20,2
Depreciation on tangibles / tangibles 0 0 0

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Main shareholders

THQ Nordic

Main shareholders Share capital % Voting shares % Verified
Lars Wingefors 35.1 % 51.5 % 31 Mar 2019
Erik Stenberg 7.6 % 11.2 % 31 Mar 2019
Swedbank Robur Fonder 9.0 % 5.0 % 31 Mar 2019
Handelsbanken Fonder 7.2 % 4.0 % 31 Mar 2019
CMB Holding AB 2.6 % 3.8 % 31 Mar 2019
Didner & Gerge Fonder 2.3 % 1.3 % 31 Mar 2019
Familjen Olsson med stiftelse 2.1 % 1.2 % 28 Feb 2019
Första AP-fonden 2.1 % 1.1 % 31 Mar 2019
Livförsäkringsbolaget Skandia 1.8 % 1.0 % 31 Mar 2019
SEB Fonder 1.5 % 0.8 % 31 Mar 2019
Source: Holdings by Modular Finance AB

Insider list

THQ Nordic

Name Quantity Code Date
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
Lars Wingefors AB -3 250 733 SELL 27 Dec 2018
Wingefors Depå Tre AB +3 250 733 BUY 27 Dec 2018
Lars Wingefors AB -3 250 733 SELL 20 Dec 2018
Wingefors Depå Två AB +3 250 733 BUY 20 Dec 2018
Lars Wingefors AB -3 250 733 SELL 20 Dec 2018
Wingefors Depå Två AB +3 250 733 BUY 20 Dec 2018

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