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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 5547 6150
Sales growth (%) 1033,7 -3,6 10,9
EBITDA 1593 1893 2256
EBITDA margin (%) 27,7 34,1 36,7
EBIT adj 575 587 752
EBIT adj margin (%) 10 10,6 12,2
Pretax profit 545 563 727
EPS rep 4,22 3,94 5,23
EPS growth (%) 140,4 -6,7 32,7
EPS adj 4,22 3,94 5,23
DPS 0 0 0
EV/EBITDA (x) 7,3 11,9 9,9
EV/EBIT adj (x) 20,1 38,4 29,6
P/E (x) 34,2 59,4 44,8
P/E adj (x) 34,2 59,4 44,8
EV/sales (x) 2 4,1 3,6
FCF yield (%) -15,8 0,6 1,3
Dividend yield (%) 0 0 0
Net IB debt/EBITDA -1,4 -0,9 -0,9
SEKm 2018 2019e 2020e
Sales 5754 5547 6150
COGS -3261 -2652 -2871
Gross profit 2493 2895 3280
Other operating items -901 -1002 -1024
EBITDA 1593 1893 2256
Depreciation on tangibles 0 0 0
Depreciation on intangibles -1018 -1305 -1504
EBITA 575 587 752
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 575 587 752
Other financial items 0 0 0
Net financial items -29 -24 -25
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 545 563 727
Tax -149 -158 -189
Net profit 397 406 538
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 397 406 538
EPS 4,22 3,94 5,23
EPS Adj 4,22 3,94 5,23
Total extraordinary items after tax 0 0 0
Tax rate (%) -27,2 -28 -26
Gross margin (%) 43,3 52,2 53,3
EBITDA margin (%) 27,7 34,1 36,7
EBITA margin (%) 10 10,6 12,2
EBIT margin (%) 10 10,6 12,2
Pretax margin (%) 9,5 10,2 11,8
Net margin (%) 6,9 7,3 8,8
Growth rates Y/Y 2018 2019 2020
Sales growth (%) 1033,7 -3,6 10,9
EBITDA growth (%) 484,2 18,9 19,2
EBIT growth (%) 205,3 2,2 28
Net profit growth (%) 185,1 2,2 32,7
EPS growth (%) 140,4 -6,7 32,7
Profitability 2018 2019 2020
ROE (%) 10,6 6,2 7,6
ROE Adj (%) 10,6 6,2 7,6
ROCE (%) 13,6 7,8 9,4
ROCE Adj(%) 13,6 7,8 9,4
ROIC (%) 17,5 9,2 10,8
ROIC Adj (%) 17,5 9,2 10,8
Adj earnings numbers 2018 2019 2020
EBITDA Adj 1593 1893 2256
EBITDA Adj margin (%) 27,7 34,1 36,7
EBITA Adj 575 587 752
EBITA Adj margin (%) 10 10,6 12,2
EBIT Adj 575 587 752
EBIT Adj margin (%) 10 10,6 12,2
Pretax profit Adj 545 563 727
Net profit Adj 397 406 538
Net profit to shareholders Adj 397 406 538
Net Adj margin (%) 6,9 7,3 8,8
SEKm 2018 2019e 2020e
EBITDA 1593 1893 2256
Net financial items -29 -24 -25
Paid tax -149 -158 -189
Non-cash items 0 0 0
Cash flow before change in WC 1415 1711 2042
Change in WC -294 -24 -5
Operating cash flow 1121 1688 2036
CAPEX tangible fixed assets -140 -55 -62
CAPEX intangible fixed assets -1335 -1498 -1661
Acquisitions and disposals -1787 0 0
Free cash flow -2142 134 314
Dividend paid 0 0 0
Share issues and buybacks 1448 0 0
Other non cash items 2381 -600 0
Decrease in net IB debt 1688 -466 314
Balance Sheet (SEKm) 2018 2019 2020
Goodwill 0 0 0
Indefinite intangible assets 0 0 0
Definite intangible assets 3707 4500 4656
Tangible fixed assets 156 211 273
Other fixed assets 196 196 196
Fixed assets 4059 4907 5125
Inventories 323 333 338
Receivables 1297 1248 1384
Other current assets 0 0 0
Cash and liquid assets 2929 2463 2778
Total assets 8608 8951 9625
Shareholders equity 6379 6785 7323
Minority 0 0 0
Total equity 6379 6785 7323
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 1311 1248 1384
Other current liabilities 0 0 0
Total liabilities and equity 465 1329 8608
Net IB debt -2207 -1742 -2056
Net IB debt excl. pension debt -2207 -1742 -2056
Capital invested 4172 5043 5267
Working capital 309 333 338
EV breakdown 2018 2019 2020
Market cap. diluted (m) 13574 24102 24102
Net IB debt Adj -2011 -1545 -1860
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 22557 22242
Capital efficiency (%) 2018 2019 2020
Total assets turnover (%) 115,8 63,2 66,2
Capital invested turnover (%) 241,4 120,4 119,3
Capital employed turnover (%) 135,1 74 77,1
Inventories / sales (%) 3,1 5,9 5,5
Customer advances / sales (%) 0 0 0
Payables / sales (%) 12,3 23,1 21,4
Working capital / sales (%) 2,8 5,8 5,5
Financial risk and debt service 2018 2019 2020
Net debt / equity (%) -34,6 -25,7 -28,1
Net debt / market cap (%) -14,3 -7,2 -8,5
Equity ratio (%) 74,1 75,8 76,1
Net IB debt adj. / equity (%) -31,5 -22,8 -25,4
Current ratio (%) 347 324 325,2
EBITDA / net interest (%) 5454,9 7815,2 9168,8
Net IB debt / EBITDA (%) -138,6 -92 -91,2
Interest cover (%) 1773,2 2425,6 3056,8
SEKm 2018 2019e 2020e
Shares outstanding adj. 94 103 103
Fully diluted shares Adj 94 103 103
EPS 4,22 3,94 5,23
Dividend per share Adj 0 0 0
EPS Adj 4,22 3,94 5,23
BVPS 67,86 65,87 71,1
BVPS Adj 28,43 22,19 25,89
Net IB debt / share -23,5 -16,9 -20
Share price 164,63 234 234
Market cap. (m) 15475 24102 24102
Valuation 2018 2019 2020
P/E 34,2 59,4 44,8
EV/sales 2,01 4,07 3,62
EV/EBITDA 7,3 11,9 9,9
EV/EBITA 20,1 38,4 29,6
EV/EBIT 20,1 38,4 29,6
Dividend yield (%) 0 0 0
FCF yield (%) -15,8 0,6 1,3
P/BVPS 2,13 3,55 3,29
P/BVPS Adj 5,08 10,55 9,04
P/E Adj 34,2 59,4 44,8
EV/EBITDA Adj 7,3 11,9 9,9
EV/EBITA Adj 20,1 38,4 29,6
EV/EBIT Adj 20,1 38,4 29,6
EV/cap. employed 1,6 2,9 2,7
Investment ratios 2018 2019 2020
Capex / sales 25,6 28 28
Capex / depreciation 144,9 119 114,5
Capex tangibles / tangible fixed assets 90,2 26,3 22,6
Capex intangibles / definite intangibles 36 33,3 35,7
Depreciation on intangibles / definite intangibles 27,5 29 32,3
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 34.7 % 51.1 % 31 Aug 2019
Erik Stenberg 7.5 % 11.1 % 31 Aug 2019
Swedbank Robur Fonder 9.0 % 5.0 % 31 Aug 2019
CMB Holding AB 2.6 % 3.8 % 31 Aug 2019
Handelsbanken Fonder 5.6 % 3.2 % 31 Aug 2019
Didner & Gerge Fonder 2.8 % 1.6 % 31 Aug 2019
Första AP-fonden 2.3 % 1.3 % 31 Aug 2019
SEB Fonder 2.2 % 1.2 % 31 Aug 2019
Livförsäkringsbolaget Skandia 1.8 % 1.0 % 31 Aug 2019
Familjen Olsson med stiftelse 1.7 % 1.0 % 10 Sep 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 Received loan 15 Mar 2019
Lars Wingefors +4 732 662 Received loan 28 Feb 2019
Lars Wingefors -11 000 000 Received loan 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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