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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 5847 6350
Sales growth (%) 1033,7 1,6 8,6
EBITDA 1593 1943 2262
EBITDA margin (%) 27,7 33,2 35,6
EBIT adj 575 638 759
EBIT adj margin (%) 10 10,9 11,9
Pretax profit 545 613 734
EPS rep 4,22 1,58 1,94
EPS growth (%) 140,4 -62,6 22,7
EPS adj 4,22 1,58 1,94
DPS 0 0 0
EV/EBITDA (x) 1,6 10,8 9,1
EV/EBIT adj (x) 4,4 32,8 27,2
P/E (x) 11,4 50,6 41,2
P/E adj (x) 11,4 50,6 41,2
EV/sales (x) 0,4 3,6 3,3
FCF yield (%) -47,3 0,3 1,2
Dividend yield (%) 0 0 0
Net IB debt/EBITDA -1,4 -0,9 -0,9
SEKm 2018 2019e 2020e
Sales 5754 5847 6350
COGS -3261 -2851 -3031
Gross profit 2493 2996 3320
Other operating items -901 -1053 -1057
EBITDA 1593 1943 2262
Depreciation on tangibles 0 0 0
Depreciation on intangibles -1018 -1305 -1504
EBITA 575 638 759
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 575 638 759
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 545 613 734
Tax -149 -171 -191
Net profit 397 443 543
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 397 443 543
EPS 4,22 1,58 1,94
EPS Adj 4,22 1,58 1,94
Total extraordinary items after tax 0 0 0
Tax rate (%) -27,2 -27,8 -26
Gross margin (%) 43,3 51,2 52,3
EBITDA margin (%) 27,7 33,2 35,6
EBITA margin (%) 10 10,9 11,9
EBIT margin (%) 10 10,9 11,9
Pretax margin (%) 9,5 10,5 11,6
Net margin (%) 6,9 7,6 8,6
Growth rates Y/Y 2018 2019 2020
Sales growth (%) 1033,7 1,6 8,6
EBITDA growth (%) 484,2 22 16,4
EBIT growth (%) 205,3 11 19
Net profit growth (%) 185,1 11,6 22,7
EPS growth (%) 140,4 -62,6 22,7
Profitability 2018 2019 2020
ROE (%) 10,6 6,7 7,7
ROE Adj (%) 10,6 6,7 7,7
ROCE (%) 13,6 8,5 9,5
ROCE Adj(%) 13,6 8,5 9,5
ROIC (%) 17,5 9,9 10,6
ROIC Adj (%) 17,5 9,9 10,6
Adj earnings numbers 2018 2019 2020
EBITDA Adj 1593 1943 2262
EBITDA Adj margin (%) 27,7 33,2 35,6
EBITA Adj 575 638 759
EBITA Adj margin (%) 10 10,9 11,9
EBIT Adj 575 638 759
EBIT Adj margin (%) 10 10,9 11,9
Pretax profit Adj 545 613 734
Net profit Adj 397 443 543
Net profit to shareholders Adj 397 443 543
Net Adj margin (%) 6,9 7,6 8,6
SEKm 2018 2019e 2020e
EBITDA 1593 1943 2262
Net financial items -29 -24 -25
Paid tax -149 -171 -191
Non-cash items 0 0 0
Cash flow before change in WC 1415 1748 2047
Change in WC -294 -42 2
Operating cash flow 1121 1707 2048
CAPEX tangible fixed assets -140 -58 -64
CAPEX intangible fixed assets -1335 -1579 -1715
Acquisitions and disposals -1787 0 0
Free cash flow -2142 69 270
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 -531 270
Balance Sheet (SEKm) 2018 2019 2020
Goodwill 0 0 0
Indefinite intangible assets 0 0 0
Definite intangible assets 3707 4580 4791
Tangible fixed assets 156 214 278
Other fixed assets 196 196 196
Fixed assets 4059 4991 5265
Inventories 323 351 349
Receivables 1297 1316 1429
Other current assets 0 0 0
Cash and liquid assets 2929 2399 2669
Total assets 8608 9056 9712
Shareholders equity 6379 6822 7365
Minority 0 0 0
Total equity 6379 6822 7365
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 1316 1429
Other current liabilities 0 0 0
Total liabilities and equity 465 1329 8608
Net IB debt -2207 -1677 -1947
Net IB debt excl. pension debt -2207 -1677 -1947
Capital invested 4172 5145 5418
Working capital 309 351 349
EV breakdown 2018 2019 2020
Market cap. diluted (m) 4525 22400 22400
Net IB debt Adj -2011 -1480 -1751
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 20919 20649
Capital efficiency (%) 2018 2019 2020
Total assets turnover (%) 115,8 66,2 67,7
Capital invested turnover (%) 241,4 125,5 120,2
Capital employed turnover (%) 135,1 77,8 79,3
Inventories / sales (%) 3,1 5,8 5,5
Customer advances / sales (%) 0 0 0
Payables / sales (%) 12,3 22,5 21,6
Working capital / sales (%) 2,8 5,6 5,5
Financial risk and debt service 2018 2019 2020
Net debt / equity (%) -34,6 -24,6 -26,4
Net debt / market cap (%) -42,8 -7,5 -8,7
Equity ratio (%) 74,1 75,3 75,8
Net IB debt adj. / equity (%) -31,5 -21,7 -23,8
Current ratio (%) 347 309 311,2
EBITDA / net interest (%) 5454,9 8018,6 9196
Net IB debt / EBITDA (%) -138,6 -86,3 -86,1
Interest cover (%) 1773,2 2631,3 3084
SEKm 2018 2019e 2020e
Shares outstanding adj. 94 281 281
Fully diluted shares Adj 94 281 281
EPS 4,22 1,58 1,94
Dividend per share Adj 0 0 0
EPS Adj 4,22 1,58 1,94
BVPS 67,86 24,3 26,24
BVPS Adj 28,43 7,99 9,17
Net IB debt / share -23,5 -6 -6,9
Share price 54,88 79,8 79,8
Market cap. (m) 5158 22400 22400
Valuation 2018 2019 2020
P/E 11,4 50,6 41,2
EV/sales 0,44 3,58 3,25
EV/EBITDA 1,6 10,8 9,1
EV/EBITA 4,4 32,8 27,2
EV/EBIT 4,4 32,8 27,2
Dividend yield (%) 0 0 0
FCF yield (%) -47,3 0,3 1,2
P/BVPS 0,71 3,28 3,04
P/BVPS Adj 1,69 9,99 8,7
P/E Adj 11,4 50,6 41,2
EV/EBITDA Adj 1,6 10,8 9,1
EV/EBITA Adj 4,4 32,8 27,2
EV/EBIT Adj 4,4 32,8 27,2
EV/cap. employed 0,3 2,7 2,5
Investment ratios 2018 2019 2020
Capex / sales 25,6 28 28
Capex / depreciation 144,9 125,4 118,3
Capex tangibles / tangible fixed assets 90,2 27,3 22,9
Capex intangibles / definite intangibles 36 34,5 35,8
Depreciation on intangibles / definite intangibles 27,5 28,5 31,4
Depreciation on tangibles / tangibles 0 0 0

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Main shareholders - THQ Nordic

Main shareholders Share capital % Voting shares % Verified
Lars Wingefors 34.6 % 51.1 % 30 Sep 2019
Erik Stenberg 7.5 % 11.1 % 30 Sep 2019
Swedbank Robur Fonder 9.0 % 5.0 % 30 Sep 2019
CMB Holding AB 2.6 % 3.8 % 30 Sep 2019
Handelsbanken Fonder 5.7 % 3.2 % 30 Sep 2019
Didner & Gerge Fonder 3.2 % 1.8 % 30 Sep 2019
Första AP-fonden 3.0 % 1.7 % 30 Sep 2019
SEB Fonder 2.1 % 1.2 % 30 Sep 2019
Familjen Olsson med stiftelse 1.7 % 1.0 % 7 Oct 2019
Livförsäkringsbolaget Skandia 1.5 % 0.9 % 30 Sep 2019
Source: Holdings by Modular Finance AB