Verve Group SE
Original-Research: Media and Games Invest SE (von GBC AG): BUY

Original-Research: Media and Games Invest SE – von GBC AG

Einstufung von GBC AG zu Media and Games Invest SE

Unternehmen: Media and Games Invest SE
ISIN: SE0018538068

Anlass der Studie: Research study (Comment)
Empfehlung: BUY
Kursziel: 4.05 EUR
Letzte Ratingänderung:
Analyst: Marcel Goldmann, Cosmin Filker

Nine months 2023: Solid sales and operating earnings performance despite
challenging conditions; positive effects from the initiated savings
programme enabled an increase in profitability; GBC estimates and price
target confirmed
 
Business performance 9M 2023
 
Media and Games Invest (SE) published its nine-month and Q3 figures for the
current financial year on 30 November 2023. Based on these figures, the ad
tech group saw a moderate decline in digital Group revenue of 3.6% to €
223.27 million in the past nine months (9M 2022: € 231.55 million),
primarily due to divestments (in the games segment) and unfavourable
exchange rate developments. The revenue generated was primarily driven by
the traditionally largest advertising segment ‘Supply Side Platform’
(revenue share: 89.7%), which generated revenue of € 200.35 million (9M
2022: € 209.65 million).
 
According to the company, an organic increase in consolidated sales was
achieved on a comparable basis. This revenue growth is primarily the result
of an increase in the software customer base and the volume of advertising
placed. The number of customers on MGI’s digital advertising platform
increased significantly by 9.0% to 2,068 software customers at the end of
the third quarter compared to the same quarter of the previous year
(software customers at the end of Q3 2022: 1,898). At the same time, the
digital advertising volume delivered increased significantly by 8.0% to 186
billion at the end of the third quarter (advertising ads at the end of Q3
2022: 172 billion).
 
Thanks to the noticeable expansion of the software customer base, the
Ad-Tech Group was able to perform well amid the challenging market
situation and thus slightly overcompensate for negative market aspects such
as reduced customer advertising budgets and lower CPMs (cost-per-mile).
 
In addition, further market share was gained, enabling this technology
company to further expand its leading market position. According to a
recent Pixalate market study, MGI’s subsidiary Verve Group remains the
market leader on Android and iOS in the US market with a market share of
11.0% and 28.0% respectively. In Europe, Verve recently achieved a
market-leading position on Android (No. 2 with a market share of 15.0%) and
iOS (No. 3 with a market share of 9.0%). In our view, MGI has thus
outperformed the general advertising market and the advertising industry as
a whole.
 
In contrast to the sales trend, MGI achieved growth at all earnings levels,
primarily due to the revaluation of the AxesInMotion earn-out payment
liability (positive one-off effect of € 62.76 million). EBITDA increased
dynamically by 73.6% to € 101.15 million compared to the same quarter of
the previous year (9M 2022: € 58.28 million). Adjusted for one-off effects
(e.g. M&A and restructuring costs or revaluations of balance sheet items),
adjusted EBITDA (Adj. EBITDA) totalled € 63.50 million, which was slightly
higher than in the same period of the previous year (9M 2022: € 61.70
million).
 
In terms of operating profitability, an increase in profitability to 28.4%
(9M 2022: 26.6%) was achieved on the basis of the adjusted EBITDA margin
(Adj. EBITDA margin). This improvement in profitability reflects the first
positive effects of the company’s cost-cutting programme, which is expected
to generate annual cost savings of around € 10.0 million once successfully
implemented.
 
After the first nine months of the financial year, consolidated net income
(after minority interests) totalled € 41.83 million (9M 2022: € 8.77
million), which was significantly higher than the previous year’s level.
This significant increase in net income was mainly due to the positive
one-off effect from the revaluation of an M&A-related payment obligation
described above.
 
Business development Q3 2023

The negative effects of divestments and unfavourable exchange rate
developments were particularly noticeable in the third quarter.
Accordingly, the MGI Group suffered a significant year-on-year decline in
digital Group sales of 10.6% to € 78.34 million (Q3 2022: € 87.62 million).
Adjusted for these negative currency effects, however, organic sales growth
of 1.0% was achieved at Group level, according to the company. This revenue
growth was primarily the result of an increase in the software customer
base and the volume of advertising delivered.
 
At operating earnings level, adjusted EBITDA (Adj. EBITDA) of € 23.10
million was achieved, mainly thanks to efficiency gains from the
cost-saving programme that has been initiated, thus confirming the high
earnings level of the previous year (Q3 2022: € 23.00 million). At the same
time, the adjusted EBITDA margin increased significantly to 29.5% (Q3 2022:
26.3%)
 
Forecast and price target

Against the backdrop of the company’s solid performance in the first nine
months of 2023, MGI’s management has confirmed its previously adjusted
guidance (dated 31 August 2023) for the current 2023 financial year with
the publication of its nine-month and Q3 figures. Accordingly, the
technology company continues to expect consolidated sales of around € 303.0
million and Adj. EBITDA of € 93.0 million. At the same time, the company
has also confirmed its medium-term guidance (Revenue CAGR: 25.0% to 30.0%;
Adj. EBITDA margin: 25.0% to 30.0%). As a result, MGI anticipates
significantly higher growth momentum again in the medium term on the basis
of an expected recovery in the advertising market.
 
Overall, we remain convinced that the ad tech group will be able to return
to growth from the 2024 financial year onwards, based on the gradual
recovery of the advertising market that we expect. In particular, the MGI
Group’s strong positioning in the growth areas of programmatic advertising
and connected TV (CTV) in combination with innovative advertising solutions
(Moments.AI, ATOM etc.) should ensure further market share gains and a
significant outperformance compared to the general advertising industry in
the future. The significant expansion of their software customer base
achieved in recent quarters also provides a good basis for driving
(organic) growth even more strongly.
 
In light of the company’s solid performance, the confirmed outlook and
their promising growth strategy, we confirm our previous revenue and
earnings estimates for the current financial year and subsequent years.
Accordingly, we also confirm our previous price target of € 4.05 per share.
With regard to the current share price level, we therefore continue to
assign a ‘buy’ rating and see significant upside potential in the MGI
share.
 

Die vollständige Analyse können Sie hier downloaden:
http://www.more-ir.de/d/28503.pdf

Kontakt für Rückfragen
GBC AG
Halderstrasse 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG und Art. 20 MAR. Beim oben analysierten Unternehmen ist folgender möglicher Interessenkonflikt gegeben: (5a,7,11); Einen Katalog möglicher Interessenkonflikte finden Sie unter: http://www.gbc-ag.de/de/Offenlegung
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Date (time) of completion: 07/12/2023 (9:35 am)
Date (time) of first distribution: 07/12/2023 (10:30 am)

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