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Embracer Group

Embracer Group

Game developer and publisher focusing on the PC and console market

Embracer Group 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 Embracer Group’s soul stems from entrepreneur, founder and CEO Lars Wingefors, who at the age of 16 founded Nordic Games, which we today associate with Embracer Group. 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 Embracer Group 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, Embracer Group 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 Embracer Group’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 2019 2020e 2021e
Sales 5157 7250 7310
Sales growth (%) -10,4 40,6 0,8
EBITDA 1837 2405 2590
EBITDA margin (%) 35,6 33,2 35,4
EBIT adj 502 877 915
EBIT adj margin (%) 9,7 12,1 12,5
Pretax profit 475 852 882
EPS rep 1,22 2,25 2,32
EPS growth (%) -71 83,4 3,5
EPS adj 1,22 2,25 2,32
DPS 0 0 0
EV/EBITDA (x) 11,4 8,7 8
EV/EBIT adj (x) 41,9 23,9 22,6
P/E (x) 66 36 34,7
P/E adj (x) 66 36 34,7
EV/sales (x) 4,1 2,9 2,8
FCF yield (%) 1 0,2 1,2
Dividend yield (%) 0 0 0
Net IB debt/EBITDA -1 -0,8 -0,8
SEKm 2019 2020e 2021e
Sales 5157 7250 7310
COGS -2459 -3612 -3419
Gross profit 2698 3638 3891
Other operating items -861 -1233 -1301
EBITDA 1837 2405 2590
Depreciation on tangibles 0 0 0
Depreciation on intangibles -1335 -1529 -1675
EBITA 502 877 915
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 502 877 915
Other financial items 0 0 0
Net financial items -26 -25 -33
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 475 852 882
Tax -132 -222 -229
Net profit 344 630 653
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 344 630 653
EPS 1,22 2,25 2,32
EPS Adj 1,22 2,25 2,32
Total extraordinary items after tax 0 0 0
Tax rate (%) -27,7 -26 -26
Gross margin (%) 52,3 50,2 53,2
EBITDA margin (%) 35,6 33,2 35,4
EBITA margin (%) 9,7 12,1 12,5
EBIT margin (%) 9,7 12,1 12,5
Pretax margin (%) 9,2 11,8 12,1
Net margin (%) 6,7 8,7 8,9
Growth rates Y/Y 2019 2020 2021
Sales growth (%) -10,4 40,6 0,8
EBITDA growth (%) 15,3 30,9 7,7
EBIT growth (%) -12,7 74,8 4,4
Net profit growth (%) -13,4 83,4 3,5
EPS growth (%) -71 83,4 3,5
Profitability 2019 2020 2021
ROE (%) 5,2 9 8,5
ROE Adj (%) 5,2 9 8,5
ROCE (%) 6,7 11 10,6
ROCE Adj(%) 6,7 11 10,6
ROIC (%) 8 12,5 12
ROIC Adj (%) 8 12,5 12
Adj earnings numbers 2019 2020 2021
EBITDA Adj 1837 2405 2590
EBITDA Adj margin (%) 35,6 33,2 35,4
EBITA Adj 502 877 915
EBITA Adj margin (%) 9,7 12,1 12,5
EBIT Adj 502 877 915
EBIT Adj margin (%) 9,7 12,1 12,5
Pretax profit Adj 475 852 882
Net profit Adj 344 630 653
Net profit to shareholders Adj 344 630 653
Net Adj margin (%) 6,7 8,7 8,9
SEKm 2019 2020e 2021e
EBITDA 1837 2405 2590
Net financial items -26 -25 -33
Paid tax -132 -222 -229
Non-cash items 0 0 0
Cash flow before change in WC 1679 2159 2328
Change in WC 0 -89 -3
Operating cash flow 1679 2070 2324
CAPEX tangible fixed assets -52 -73 -73
CAPEX intangible fixed assets -1392 -1958 -1974
Acquisitions and disposals 0 0 0
Free cash flow 235 40 278
Dividend paid 0 0 0
Share issues and buybacks 0 0 0
Other non cash items -600 0 0
Decrease in net IB debt -365 40 278
Balance Sheet (SEKm) 2019 2020 2021
Goodwill 0 0 0
Indefinite intangible assets 0 0 0
Definite intangible assets 4364 4793 5091
Tangible fixed assets 207 280 353
Other fixed assets 196 196 196
Fixed assets 4767 5269 5640
Inventories 309 399 402
Receivables 1160 1631 1645
Other current assets 0 0 0
Cash and liquid assets 2564 2604 2882
Total assets 8801 9903 10569
Shareholders equity 6723 7353 8006
Minority 0 0 0
Total equity 6723 7353 8006
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 1160 1631 1645
Other current liabilities 0 0 0
Total liabilities and equity 1329 8608 8801
Net IB debt -1842 -1882 -2160
Net IB debt excl. pension debt -1842 -1882 -2160
Capital invested 4880 5471 5846
Working capital 309 399 402
EV breakdown 2019 2020 2021
Market cap. diluted (m) 22675 22675 22675
Net IB debt Adj -1646 -1686 -1963
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 21029 20989 20712
Capital efficiency (%) 2019 2020 2021
Total assets turnover (%) 59,2 77,5 71,4
Capital invested turnover (%) 113,9 140,1 129,2
Capital employed turnover (%) 69 91,1 85
Inventories / sales (%) 6,1 4,9 5,5
Customer advances / sales (%) 0 0 0
Payables / sales (%) 24 19,3 22,4
Working capital / sales (%) 6 4,9 5,5
Financial risk and debt service 2019 2020 2021
Net debt / equity (%) -27,4 -25,6 -27
Net debt / market cap (%) -9,2 -8,3 -9,5
Equity ratio (%) 76,4 74,3 75,8
Net IB debt adj. / equity (%) -24,5 -22,9 -24,5
Current ratio (%) 347,7 284,1 299,6
EBITDA / net interest (%) 6976,8 9777,2 7836,5
Net IB debt / EBITDA (%) -100,3 -78,3 -83,4
Interest cover (%) 1904,8 3563,4 2768,4
SEKm 2019 2020e 2021e
Shares outstanding adj. 281 281 281
Fully diluted shares Adj 281 281 281
EPS 1,22 2,25 2,32
Dividend per share Adj 0 0 0
EPS Adj 1,22 2,25 2,32
BVPS 23,95 26,2 28,52
BVPS Adj 8,4 9,12 10,38
Net IB debt / share -6,6 -6,7 -7,7
Share price 71,46 80,78 80,78
Market cap. (m) 20060 22675 22675
Valuation 2019 2020 2021
P/E 66 36 34,7
EV/sales 4,08 2,9 2,83
EV/EBITDA 11,4 8,7 8
EV/EBITA 41,9 23,9 22,6
EV/EBIT 41,9 23,9 22,6
Dividend yield (%) 0 0 0
FCF yield (%) 1 0,2 1,2
P/BVPS 3,37 3,08 2,83
P/BVPS Adj 9,61 8,86 7,78
P/E Adj 66 36 34,7
EV/EBITDA Adj 11,4 8,7 8
EV/EBITA Adj 41,9 23,9 22,6
EV/EBIT Adj 41,9 23,9 22,6
EV/cap. employed 2,8 2,5 2,3
Investment ratios 2019 2020 2021
Capex / sales 28 28 28
Capex / depreciation 108,1 132,8 122,2
Capex tangibles / tangible fixed assets 24,9 25,9 20,7
Capex intangibles / definite intangibles 31,9 40,8 38,8
Depreciation on intangibles / definite intangibles 30,6 31,9 32,9
Depreciation on tangibles / tangibles 0 0 0

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Main shareholders - Embracer Group

Main shareholders Share capital % Voting shares % Verified
Lars Wingefors 34.7 % 51.1 % 31 Dec 2019
Erik Stenberg 7.5 % 11.1 % 31 Dec 2019
Swedbank Robur Fonder 8.5 % 4.8 % 31 Dec 2019
CMB Holding AB 2.6 % 3.8 % 31 Dec 2019
Handelsbanken Fonder 6.7 % 3.7 % 31 Dec 2019
Första AP-fonden 4.8 % 2.7 % 31 Dec 2019
Didner & Gerge Fonder 3.7 % 2.1 % 31 Dec 2019
Livförsäkringsbolaget Skandia 1.4 % 0.8 % 31 Dec 2019
ODIN Fonder 1.3 % 0.7 % 31 Dec 2019
Avanza Pension 1.2 % 0.7 % 31 Dec 2019
Source: Holdings by Modular Finance AB

Insider list - Embracer Group

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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