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Embracer Group

Embracer Group

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 5982 6500
Sales growth (%) 1033,7 4 8,7
EBITDA 1593 1979 2281
EBITDA margin (%) 27,7 33,1 35,1
EBIT adj 575 630 745
EBIT adj margin (%) 10 10,5 11,5
Pretax profit 545 604 720
EPS rep 4,22 1,56 1,9
EPS growth (%) 140,4 -63 21,5
EPS adj 4,22 1,56 1,9
DPS 0 0 0
EV/EBITDA (x) 1,6 9 7,7
EV/EBIT adj (x) 4,4 28,4 23,7
P/E (x) 11,4 44,2 36,3
P/E adj (x) 11,4 44,2 36,3
EV/sales (x) 0,4 3 2,7
FCF yield (%) -47,3 0,3 1,3
Dividend yield (%) 0 0 0
Net IB debt/EBITDA -1,4 -0,8 -0,8
SEKm 2018 2019e 2020e
Sales 5754 5982 6500
COGS -3261 -2959 -3137
Gross profit 2493 3023 3364
Other operating items -901 -1044 -1082
EBITDA 1593 1979 2281
Depreciation on tangibles 0 0 0
Depreciation on intangibles -1018 -1349 -1536
EBITA 575 630 745
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 575 630 745
Other financial items 0 0 0
Net financial items -29 -26 -25
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 545 604 720
Tax -149 -165 -187
Net profit 397 439 533
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 397 439 533
EPS 4,22 1,56 1,9
EPS Adj 4,22 1,56 1,9
Total extraordinary items after tax 0 0 0
Tax rate (%) -27,2 -27,3 -26
Gross margin (%) 43,3 50,5 51,7
EBITDA margin (%) 27,7 33,1 35,1
EBITA margin (%) 10 10,5 11,5
EBIT margin (%) 10 10,5 11,5
Pretax margin (%) 9,5 10,1 11,1
Net margin (%) 6,9 7,3 8,2
Growth rates Y/Y 2018 2019 2020
Sales growth (%) 1033,7 4 8,7
EBITDA growth (%) 484,2 24,2 15,3
EBIT growth (%) 205,3 9,6 18,2
Net profit growth (%) 185,1 10,5 21,5
EPS growth (%) 140,4 -63 21,5
Profitability 2018 2019 2020
ROE (%) 10,6 6,6 7,5
ROE Adj (%) 10,6 6,6 7,5
ROCE (%) 13,6 8,4 9,3
ROCE Adj(%) 13,6 8,4 9,3
ROIC (%) 17,5 9,8 10,4
ROIC Adj (%) 17,5 9,8 10,4
Adj earnings numbers 2018 2019 2020
EBITDA Adj 1593 1979 2281
EBITDA Adj margin (%) 27,7 33,1 35,1
EBITA Adj 575 630 745
EBITA Adj margin (%) 10 10,5 11,5
EBIT Adj 575 630 745
EBIT Adj margin (%) 10 10,5 11,5
Pretax profit Adj 545 604 720
Net profit Adj 397 439 533
Net profit to shareholders Adj 397 439 533
Net Adj margin (%) 6,9 7,3 8,2
SEKm 2018 2019e 2020e
EBITDA 1593 1979 2281
Net financial items -29 -26 -25
Paid tax -149 -165 -187
Non-cash items 0 0 0
Cash flow before change in WC 1415 1787 2069
Change in WC -294 -50 1
Operating cash flow 1121 1738 2071
CAPEX tangible fixed assets -140 -60 -65
CAPEX intangible fixed assets -1335 -1615 -1755
Acquisitions and disposals -1787 0 0
Free cash flow -2142 63 251
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 -537 251
Balance Sheet (SEKm) 2018 2019 2020
Goodwill 0 0 0
Indefinite intangible assets 0 0 0
Definite intangible assets 3707 4573 4792
Tangible fixed assets 156 215 280
Other fixed assets 196 196 196
Fixed assets 4059 4985 5269
Inventories 323 359 358
Receivables 1297 1346 1463
Other current assets 0 0 0
Cash and liquid assets 2929 2392 2643
Total assets 8608 9082 9731
Shareholders equity 6379 6818 7351
Minority 0 0 0
Total equity 6379 6818 7351
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 1346 1463
Other current liabilities 0 0 0
Total liabilities and equity 465 1329 8608
Net IB debt -2207 -1670 -1921
Net IB debt excl. pension debt -2207 -1670 -1921
Capital invested 4172 5148 5430
Working capital 309 359 358
EV breakdown 2018 2019 2020
Market cap. diluted (m) 4525 19374 19374
Net IB debt Adj -2011 -1474 -1725
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 2514 17900 17649
Capital efficiency (%) 2018 2019 2020
Total assets turnover (%) 115,8 67,6 69,1
Capital invested turnover (%) 241,4 128,4 122,9
Capital employed turnover (%) 135,1 79,6 81,2
Inventories / sales (%) 3,1 5,7 5,5
Customer advances / sales (%) 0 0 0
Payables / sales (%) 12,3 22,2 21,6
Working capital / sales (%) 2,8 5,6 5,5
Financial risk and debt service 2018 2019 2020
Net debt / equity (%) -34,6 -24,5 -26,1
Net debt / market cap (%) -42,8 -8,6 -9,9
Equity ratio (%) 74,1 75,1 75,5
Net IB debt adj. / equity (%) -31,5 -21,6 -23,5
Current ratio (%) 347 304,4 305,1
EBITDA / net interest (%) 5454,9 7514,5 9273,4
Net IB debt / EBITDA (%) -138,6 -84,4 -84,2
Interest cover (%) 1773,2 2392,3 3027,9
SEKm 2018 2019e 2020e
Shares outstanding adj. 94 281 281
Fully diluted shares Adj 94 281 281
EPS 4,22 1,56 1,9
Dividend per share Adj 0 0 0
EPS Adj 4,22 1,56 1,9
BVPS 67,86 24,29 26,19
BVPS Adj 28,43 8 9,12
Net IB debt / share -23,5 -5,9 -6,8
Share price 54,88 69,02 69,02
Market cap. (m) 5158 19374 19374
Valuation 2018 2019 2020
P/E 11,4 44,2 36,3
EV/sales 0,44 2,99 2,72
EV/EBITDA 1,6 9 7,7
EV/EBITA 4,4 28,4 23,7
EV/EBIT 4,4 28,4 23,7
Dividend yield (%) 0 0 0
FCF yield (%) -47,3 0,3 1,3
P/BVPS 0,71 2,84 2,64
P/BVPS Adj 1,69 8,63 7,57
P/E Adj 11,4 44,2 36,3
EV/EBITDA Adj 1,6 9 7,7
EV/EBITA Adj 4,4 28,4 23,7
EV/EBIT Adj 4,4 28,4 23,7
EV/cap. employed 0,3 2,3 2,1
Investment ratios 2018 2019 2020
Capex / sales 25,6 28 28
Capex / depreciation 144,9 124,2 118,5
Capex tangibles / tangible fixed assets 90,2 27,8 23,2
Capex intangibles / definite intangibles 36 35,3 36,6
Depreciation on intangibles / definite intangibles 27,5 29,5 32,1
Depreciation on tangibles / tangibles 0 0 0

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Main shareholders - THQ Nordic

Main shareholders Share capital % Voting shares % Verified
Lars Wingefors 34.7 % 51.1 % 30 Nov 2019
Erik Stenberg 7.5 % 11.1 % 30 Nov 2019
Swedbank Robur Fonder 8.5 % 4.8 % 30 Nov 2019
CMB Holding AB 2.6 % 3.8 % 30 Nov 2019
Handelsbanken Fonder 6.4 % 3.6 % 30 Nov 2019
Första AP-fonden 4.8 % 2.7 % 30 Nov 2019
Didner & Gerge Fonder 3.6 % 2.0 % 30 Nov 2019
Familjen Olsson med stiftelse 1.7 % 1.0 % 7 Oct 2019
Livförsäkringsbolaget Skandia 1.5 % 0.9 % 30 Nov 2019
ODIN Fonder 1.3 % 0.7 % 30 Nov 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
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

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