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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 5155 7993 8134
Sales growth (%) -10,4 55,1 1,8
EBITDA 1753 2786 3013
EBITDA margin (%) 34 34,8 37
EBIT adj 311 1092 1140
EBIT adj margin (%) 6 13,7 14
Pretax profit 298 1072 1120
EPS rep 0,68 2,79 2,91
EPS growth (%) -83,8 308,6 4,5
EPS adj 0,68 2,79 2,91
DPS 0 0 0
EV/EBITDA (x) 14,1 9,5 8,6
EV/EBIT adj (x) 79,6 24,2 22,8
P/E (x) 137,8 33,7 32,3
P/E adj (x) 137,8 33,7 32,3
EV/sales (x) 4,8 3,3 3,2
FCF yield (%) -3,5 -2,2 1,6
Dividend yield (%) 0 0 0
Net IB debt/EBITDA -1,3 -0,2 -0,3
SEKm 2019 2020e 2021e
Sales 5155 7993 8134
COGS -2504 -3802 -3641
Gross profit 2651 4191 4493
Other operating items -898 -1406 -1480
EBITDA 1753 2786 3013
Depreciation on tangibles 0 0 0
Depreciation on intangibles -1442 -1694 -1873
EBITA 311 1092 1140
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 311 1092 1140
Other financial items 0 0 0
Net financial items -13 -20 -20
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 298 1072 1120
Tax -104 -279 -291
Net profit 194 794 829
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 194 794 829
EPS 0,68 2,79 2,91
EPS Adj 0,68 2,79 2,91
Total extraordinary items after tax 0 0 0
Tax rate (%) -34,8 -26 -26
Gross margin (%) 51,4 52,4 55,2
EBITDA margin (%) 34 34,8 37
EBITA margin (%) 6 13,7 14
EBIT margin (%) 6 13,7 14
Pretax margin (%) 5,8 13,4 13,8
Net margin (%) 3,8 9,9 10,2
Growth rates Y/Y 2019 2020 2021
Sales growth (%) -10,4 55,1 1,8
EBITDA growth (%) 10,1 58,9 8,2
EBIT growth (%) -45,9 251 4,4
Net profit growth (%) -51,1 308,6 4,5
EPS growth (%) -83,8 308,6 4,5
Profitability 2019 2020 2021
ROE (%) 2,9 9,2 7,9
ROE Adj (%) 2,9 9,2 7,9
ROCE (%) 4,3 11,5 10,1
ROCE Adj(%) 4,3 11,5 10,1
ROIC (%) 4,4 11,2 8,7
ROIC Adj (%) 4,4 11,2 8,7
Adj earnings numbers 2019 2020 2021
EBITDA Adj 1753 2786 3013
EBITDA Adj margin (%) 34 34,8 37
EBITA Adj 311 1092 1140
EBITA Adj margin (%) 6 13,7 14
EBIT Adj 311 1092 1140
EBIT Adj margin (%) 6 13,7 14
Pretax profit Adj 298 1072 1120
Net profit Adj 194 794 829
Net profit to shareholders Adj 194 794 829
Net Adj margin (%) 3,8 9,9 10,2
SEKm 2019 2020e 2021e
EBITDA 1753 2786 3013
Net financial items -13 -20 -20
Paid tax -104 -279 -291
Non-cash items 0 0 0
Cash flow before change in WC 1636 2487 2702
Change in WC 1123 -53 -8
Operating cash flow 1559 2434 2694
CAPEX tangible fixed assets -52 -80 -81
CAPEX intangible fixed assets -1547 -1998 -2196
Acquisitions and disposals -890 -950 0
Free cash flow -929 -594 417
Dividend paid 0 0 0
Share issues and buybacks 0 0 0
Other non cash items -264 -1050 0
Decrease in net IB debt 7 -1644 417
Balance Sheet (SEKm) 2019 2020 2021
Goodwill 1112 1112 1112
Indefinite intangible assets 0 0 0
Definite intangible assets 4521 8825 9149
Tangible fixed assets 207 287 368
Other fixed assets 196 196 196
Fixed assets 6036 10421 10825
Inventories 387 440 447
Receivables 1547 1798 1830
Other current assets 0 0 0
Cash and liquid assets 2936 1292 1709
Total assets 10905 13951 14812
Shareholders equity 7241 10034 10863
Minority 0 0 0
Total equity 7241 10034 10863
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 1547 1798 1830
Other current liabilities 1200 1200 1200
Total liabilities and equity 10905 13951 14812
Net IB debt -2214 -570 -987
Net IB debt excl. pension debt -2214 -570 -987
Capital invested 5027 9464 9877
Working capital -813 -760 -753
EV breakdown 2019 2020 2021
Market cap. diluted (m) 26770 26770 26770
Net IB debt Adj -2018 -374 -791
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 24752 26396 25980
Capital efficiency (%) 2019 2020 2021
Total assets turnover (%) 52,8 64,3 56,6
Capital invested turnover (%) 112,1 110,3 84,1
Capital employed turnover (%) 66,7 83,6 71,6
Inventories / sales (%) 6,9 5,2 5,5
Customer advances / sales (%) 0 0 0
Payables / sales (%) 27,7 20,9 22,3
Working capital / sales (%) -4,9 -9,8 -9,3
Financial risk and debt service 2019 2020 2021
Net debt / equity (%) -30,6 -5,7 -9,1
Net debt / market cap (%) -10,9 -2,1 -3,7
Equity ratio (%) 66,4 71,9 73,3
Net IB debt adj. / equity (%) -27,9 -3,7 -7,3
Current ratio (%) 177,3 117,7 131,6
EBITDA / net interest (%) 13183,1 14212,4 15066,9
Net IB debt / EBITDA (%) -126,3 -20,5 -32,7
Interest cover (%) 978,5 4459,3 4581,1
SEKm 2019 2020e 2021e
Shares outstanding adj. 285 285 285
Fully diluted shares Adj 285 285 285
EPS 0,68 2,79 2,91
Dividend per share Adj 0 0 0
EPS Adj 0,68 2,79 2,91
BVPS 25,44 35,25 38,16
BVPS Adj 5,65 0,34 2,12
Net IB debt / share -7,8 -2 -3,5
Share price 71,46 94,04 94,04
Market cap. (m) 20344 26770 26770
Valuation 2019 2020 2021
P/E 137,8 33,7 32,3
EV/sales 4,8 3,3 3,19
EV/EBITDA 14,1 9,5 8,6
EV/EBITA 79,6 24,2 22,8
EV/EBIT 79,6 24,2 22,8
Dividend yield (%) 0 0 0
FCF yield (%) -3,5 -2,2 1,6
P/BVPS 3,7 2,67 2,46
P/BVPS Adj 16,65 276,87 44,43
P/E Adj 137,8 33,7 32,3
EV/EBITDA Adj 14,1 9,5 8,6
EV/EBITA Adj 79,6 24,2 22,8
EV/EBIT Adj 79,6 24,2 22,8
EV/cap. employed 3 2,4 2,2
Investment ratios 2019 2020 2021
Capex / sales 31 26 28
Capex / depreciation 110,8 122,7 121,6
Capex tangibles / tangible fixed assets 24,9 27,8 22,1
Capex intangibles / definite intangibles 34,2 22,6 24
Depreciation on intangibles / definite intangibles 31,9 19,2 20,5
Depreciation on tangibles / tangibles 0 0 0

Equity research

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Main shareholders - Embracer Group

Main shareholders Share capital % Voting shares % Verified
Lars Wingefors 34.6 % 51.1 % 29 Feb 2020
Erik Stenberg 7.5 % 11.1 % 29 Feb 2020
Swedbank Robur Fonder 8.5 % 4.8 % 29 Feb 2020
CMB Holding AB 2.6 % 3.8 % 29 Feb 2020
Handelsbanken Fonder 6.5 % 3.7 % 29 Feb 2020
Första AP-fonden 4.7 % 2.7 % 29 Feb 2020
Didner & Gerge Fonder 3.2 % 1.8 % 29 Feb 2020
Livförsäkringsbolaget Skandia 1.4 % 0.8 % 29 Feb 2020
ODIN Fonder 1.3 % 0.7 % 29 Feb 2020
Dan Sten Olsson med familj och stiftelse 1.2 % 0.7 % 16 Mar 2020
Source: Holdings by Modular Finance AB

Insider list - Embracer Group

Name Quantity Code Date
Anton Westbergh - 93 978 SELL 19 Feb 2020
Anton Westbergh - 300 000 SELL 19 Feb 2020
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

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