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Placing and dual listing in Stockholm

Media and Games Invest 1 October 2020 Flash note
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Media and Games Invest

Placing and dual listing in Stockholm

Software & computer services

Scale research report - Flash

1 October 2020

Price

€1.30

Market cap

€152m

Share price graph

Share details

Code

M8G

Listing

Deutsche Börse Scale, Nasdaq First North

Shares in issue (post-placing)

117.1m

Last reported net debt at 30 June 2020

€70.7m

Business description

Media and Games Invest (MGI) is a fast-growing games and media company, following a ‘buy, integrate, build and improve’ M&A strategy. Its principal divisions are Gaming (online games) and Media (online marketing).

Bull

Management team with a proven track record.

Capitalising on surge in gaming demand and also set to benefit from long-term growth trends.

Low-risk ‘buy, integrate, build & improve’ M&A strategy, focused on distressed assets.

Bear

Full benefits of the recently completed transformation programme are yet to be realised.

Reduced levels of debt in the near term.

Free float significantly extended to c 60%.

Analysts

Richard Williamson

+44 (0) 20 3077 5700

Dan Ridsdale

+44 (0) 20 3077 5700

Media and Games Invest (MGI) has successfully completed its placing, announced on 29 September 2020, issuing 25m new shares at a price per share of SEK12.00 (€1.14/share) raising proceeds of SEK300m (c €29m). The placing price represents a c 10% discount to the two-day volume weighted average price. It increases the number of shares in issue by c 21% to 117.1m. Gross proceeds from the placing will be used to finance acquisitions of new franchises, game publishers and development studios, as well as to invest in organic growth. MGI expects to complete its dual listing on the Nasdaq First North Premier Growth Market in Stockholm on or around 6 October 2020.

Private placing raises €28.5m

The private placing will result in gross proceeds of €28.5m, leading to adjusted net debt at 30 June 2020 of c €45m. The placing helps to reduce gearing to 2.1x adjusted net debt/FY20e consensus EBITDA and FY20e EV/EBITDA to 8.9x, providing additional headroom for further value-accretive acquisitions. The fund-raising reduces any concerns over high levels of short-term debt and extends the free float of MGI’s shares to c 60% (excluding shares subject to lock-up).

Dual listing on Nasdaq First North

In parallel with the private placement, MGI announced that it has applied for a dual listing of its shares on the Nasdaq First North Premier Growth Market in Stockholm, with the shares expected to be listed on 6 October. Sweden is a jurisdiction with a number of games companies, including MGI’s closest peer, Stillfront. The ability to tap into this pool of experienced games investors appears a very sensible strategy to diversify MGI’s shareholder base.

Valuation: Growth story at an attractive price

As was seen in the H120 results, MGI has benefited from lockdown with a surge in demand for its games in Q220, leading the company to raise its revenue guidance and introduce EBITDA guidance. FY20 revenues are now expected to be in the range of €115–125m (consensus of €119.2m) with EBITDA between €20–23m (consensus of €22.1m). This implies 40%+ y-o-y revenue and EBITDA growth (20%+ adjusted EBITDA growth). Looking at an FY20e EV/Sales multiple of 1.9x and an FY20e EV/EBITDA multiple of 10.1x, MGI starts to look very good value, particularly when set against soaring share prices elsewhere in the sector.

Consensus estimates

Year
end

Revenue
(€m)

Adjusted EBITDA* (€m)

PBT
(€)

EPS
(€)

EV/EBITDA*
(x)

P/E
(x)

12/18

32.6

13.4

0.7

0.01

16.6

100.7

12/19

83.9

18.1

(0.8)

(0.01)

12.3

NM

12/20e

119.2

22.1

1.8

0.02

10.1

57.8

12/21e

137.2

28.0

6.2

0.05

8.0

24.8

Source: MGI accounts (historical figures), Refinitiv consensus (forecasts). Note: *EBITDA adjusted for one-off M&A and financing costs.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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