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G5 Entertainment

Free-to-play games for mobile devices

G5 Entertainment develops and publishes free-to-play games for smartphones and tablets. The games are family-friendly, easy to learn and target a wide audience of experienced and inexperienced players. Distribution is achieved digitally through the various app stores of Apple, Google, Amazon and Windows. In addition to its proprietary games, the company is also a publisher of games licensed by other developers, in which case a royalty is paid to the developer based on the game’s sales performance.

As the total amount of revenue from fully owned games increases, stronger margins are expected due to the lower royalty costs that G5 today pays to external developers. As a market-leader within the hidden object game category, along with a strong fan base, newly launched games are easily adopted by the market. In addition, newly launched games within new gaming categories increase their list positions in app stores without significant marketing due to cross selling.

Despite the business model's stickiness, the company faces the risk that users may stop playing certain games. Risks hence arise if the main driver games, which generate most of G5's revenues, start to lose their momentum. The scenario hence requires other games to drive revenue or else a higher amount of UA costs will be necessary. Also, having its distribution through different app stores, G5 is dependent on both the relationship with the distributers as well as their standard terms and conditions.

SEKm 2018 2019e 2020e
Sales 1450 1221 1343
Sales growth (%) 27,7 -15,8 10
EBITDA 232 213 272
EBITDA margin (%) 16 17,4 20,3
EBIT adj 143 111 137
EBIT adj margin (%) 9,9 9,1 10,2
Pretax profit 144 111 137
EPS rep 14,34 11,02 12,91
EPS growth (%) 47,4 -23,1 17,1
EPS adj 14,34 11,02 12,91
DPS 2,5 4,7 5,7
EV/EBITDA (x) 4,3 5,3 4,1
EV/EBIT adj (x) 6,9 10,2 8
P/E (x) 8,8 12,9 11
P/E adj (x) 8,8 12,9 11
EV/sales (x) 0,7 0,9 0,8
FCF yield (%) 6,6 3 5,6
Dividend yield (%) 2 3,3 4
Net IB debt/EBITDA -0,9 -0,9 -0,8
SEKm 2018 2019e 2020e
Sales 1450 1221 1343
COGS -703 -559 -608
Gross profit 747 662 735
Other operating items -515 -450 -462
EBITDA 232 213 272
Depreciation on tangibles 0 0 0
Depreciation on intangibles -89 -101 -135
EBITA 143 111 137
Goodwill impairment charges 0 0 0
Other impairment and amortisation 0 0 0
EBIT 143 111 137
Other financial items 0 0 0
Net financial items 0 0 0
Associated income 0 0 0
Other EO items 0 0 0
Pretax profit 144 111 137
Tax -15 -12 -21
Net profit 129 99 116
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 129 99 116
EPS 14,34 11,02 12,91
EPS Adj 14,34 11,02 12,91
Total extraordinary items after tax 0 0 0
Tax rate (%) -10,3 -10,6 -15
Gross margin (%) 51,5 54,3 54,7
EBITDA margin (%) 16 17,4 20,3
EBITA margin (%) 9,9 9,1 10,2
EBIT margin (%) 9,9 9,1 10,2
Pretax margin (%) 9,9 9,1 10,2
Net margin (%) 8,9 8,1 8,7
Growth rates Y/Y 2018 2019 2020
Sales growth (%) 27,7 -15,8 10
EBITDA growth (%) 54,2 -8,5 28
EBIT growth (%) 41 -22,4 23,4
Net profit growth (%) 44,2 -22,8 17,1
EPS growth (%) 47,4 -23,1 17,1
Profitability 2018 2019 2020
ROE (%) 44,6 25,5 24,8
ROE Adj (%) 44,6 25,5 24,8
ROCE (%) 49 28,3 28,8
ROCE Adj(%) 49 28,3 28,8
ROIC (%) 96,9 52,4 45,4
ROIC Adj (%) 96,9 52,4 45,4
Adj earnings numbers 2018 2019 2020
EBITDA Adj 232 213 272
EBITDA Adj margin (%) 16 17,4 20,3
EBITA Adj 143 111 137
EBITA Adj margin (%) 9,9 9,1 10,2
EBIT Adj 143 111 137
EBIT Adj margin (%) 9,9 9,1 10,2
Pretax profit Adj 144 111 137
Net profit Adj 129 99 116
Net profit to shareholders Adj 129 99 116
Net Adj margin (%) 8,9 8,1 8,7
SEKm 2018 2019e 2020e
EBITDA 232 213 272
Net financial items 0 0 0
Paid tax -15 -12 -21
Non-cash items 0 0 0
Cash flow before change in WC 218 201 251
Change in WC 62 -38 -3
Operating cash flow 218 170 248
CAPEX tangible fixed assets 0 0 0
CAPEX intangible fixed assets -143 -131 -177
Acquisitions and disposals 0 0 0
Free cash flow 75 39 71
Dividend paid -22 -22 -42
Share issues and buybacks 0 0 0
Other non cash items 41 -22 0
Decrease in net IB debt 93 -6 29
Balance Sheet (SEKm) 2018 2019 2020
Goodwill 0 0 0
Indefinite intangible assets 0 0 0
Definite intangible assets 198 230 272
Tangible fixed assets 11 32 32
Other fixed assets 64 48 48
Fixed assets 274 310 352
Inventories 0 0 0
Receivables 121 159 177
Other current assets 0 0 0
Cash and liquid assets 139 157 187
Total assets 533 626 716
Shareholders equity 347 432 506
Minority 0 0 0
Total equity 347 432 506
Long-term debt 0 8 8
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 186 186 201
Other current liabilities 0 0 0
Total liabilities and equity 260 424 533
Net IB debt -203 -197 -226
Net IB debt excl. pension debt -203 -197 -226
Capital invested 145 235 280
Working capital -65 -27 -24
EV breakdown 2018 2019 2020
Market cap. diluted (m) 1127 1282 1282
Net IB debt Adj -139 -149 -178
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 989 1132 1103
Capital efficiency (%) 2018 2019 2020
Total assets turnover (%) 303 210,6 200,2
Capital invested turnover (%) 1092,3 643,8 522,1
Capital employed turnover (%) 495,2 310,1 281,5
Inventories / sales (%) 0 0 0
Customer advances / sales (%) 0 0 0
Payables / sales (%) 12,8 15,2 14,4
Working capital / sales (%) -2,3 -3,8 -1,9
Financial risk and debt service 2018 2019 2020
Net debt / equity (%) -58,4 -45,6 -44,7
Net debt / market cap (%) -6,7 -15,4 -17,7
Equity ratio (%) 65,1 69 70,7
Net IB debt adj. / equity (%) -39,9 -34,5 -35,2
Current ratio (%) 139,7 169,9 180,6
EBITDA / net interest (%) -147108,2 510805,7 82989,8
Net IB debt / EBITDA (%) -87,3 -92,7 -83,1
Interest cover (%) -90788,6 267260,6 41841,3
SEKm 2018 2019e 2020e
Shares outstanding adj. 9 9 9
Fully diluted shares Adj 9 9 9
EPS 14,34 11,02 12,91
Dividend per share Adj 2,5 4,7 5,7
EPS Adj 14,34 11,02 12,91
BVPS 38,68 48,08 56,33
BVPS Adj 16,63 22,48 26,08
Net IB debt / share -22,6 -21,9 -25,2
Share price 338,35 142,1 142,1
Market cap. (m) 3040 1277 1277
Valuation 2018 2019 2020
P/E 8,8 12,9 11
EV/sales 0,68 0,93 0,82
EV/EBITDA 4,3 5,3 4,1
EV/EBITA 6,9 10,2 8
EV/EBIT 6,9 10,2 8
Dividend yield (%) 2 3,3 4
FCF yield (%) 6,6 3 5,6
P/BVPS 3,24 2,96 2,52
P/BVPS Adj 7,55 6,32 5,45
P/E Adj 8,8 12,9 11
EV/EBITDA Adj 4,3 5,3 4,1
EV/EBITA Adj 6,9 10,2 8
EV/EBIT Adj 6,9 10,2 8
EV/cap. employed 2,8 2,6 2,1
Investment ratios 2018 2019 2020
Capex / sales 9,8 10,7 13,2
Capex / depreciation 160,5 129,1 131
Capex tangibles / tangible fixed assets 0 0 0
Capex intangibles / definite intangibles 72,1 56,9 65,1
Depreciation on intangibles / definite intangibles 44,9 44,1 49,7
Depreciation on tangibles / tangibles 0 0 0

Equity research

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Media

G5 Entertainment - Interview with CFO Stefan Wikstrand (in Swedish)
G5 Entertainment - Company presentation with CFO Stefan Wikstrand

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Main shareholders

G5 Entertainment

Main shareholders Share capital % Voting shares % Verified
Avanza Pension 7.1 % 7.3 % 31 Aug 2019
Wide Development Ltd 6.7 % 6.8 % 31 Aug 2019
Purple Wolf Ltd 5.6 % 5.7 % 31 Aug 2019
Swedbank Robur Fonder 5.2 % 5.3 % 31 Aug 2019
Proxima Ltd 4.9 % 5.0 % 30 Jun 2019
Aktia Asset Management 4.5 % 4.6 % 31 Aug 2019
Tommy Svensk 4.4 % 4.5 % 31 Aug 2019
Nordnet Pensionsförsäkring 3.7 % 3.8 % 31 Aug 2019
Swedbank Försäkring 1.6 % 1.6 % 31 Aug 2019
G5 Entertainment AB 2.8 % 0.3 % 31 Aug 2019
Source: Holdings by Modular Finance AB

Insider list

G5 Entertainment

Name Quantity Code Date
Jan Stefan Wikstrand - 5 000 SELL 10 Sep 2019
Jan Stefan Wikstrand - 5 000 Redemp 10 Sep 2019
Jan Stefan Wikstrand + 5 000 Redemp 10 Sep 2019
Jan Stefan Wikstrand - 4 000 SELL 10 Sep 2019
Aleksandr Tabunov + 515 000 BUY 20 Jun 2019
Aleksandr Tabunov - 515 000 SELL 20 Jun 2019
Aleksandr Tabunov + 5 000 BUY 12 Mar 2019
Vladislav Suglobov + 5 000 BUY 13 Feb 2019
Jan Stefan Wikstrand + 2 200 BUY 13 Feb 2019
Wide Development Ltd + 10 000 BUY 18 Dec 2018

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