Verve Group SE
Original-Research: Media and Games Invest PLC (von GBC AG):
Original-Research: Media and Games Invest PLC – von GBC AG
Einstufung von GBC AG zu Media and Games Invest PLC
Unternehmen: Media and Games Invest PLC
ISIN: MT0000580101
Anlass der Studie: Managementinterview
Letzte Ratingänderung:
Analyst: Dario Maugeri, Cosmin Filker
“I would be proud if we can build a Europe based Unicorn”
Media and Games Invest plc (formerly blockescence plc) is a holding company
focused on the synergetic gaming and media sectors. In the fiscal year
2018, the company significantly changed its corporate strategy with the
complete acquisition of the shares of Samarion SE. At that time, Samarion
SE held 38.7 % stake in the online game publisher gamigo AG, which has thus
advanced to become Media and Games’ most important operative investment.
All previous (real estate) assets of the holding were sold, making Media
and Games Invest (with by now 53% of the gamigo shares) a pure play
tech-company in the games and media sector. GBC analyst Dario Maugeri spoke
with Remco Westermann, CEO of Media and Games:
GBC AG: Mr. Westermann, following the acquisition of Samarion SE and thus
gamigo AG, the business model of Media and Games has changed significantly.
Can you briefly outline this?
Remco Westermann: Media and Games Invest’s strategy is based on, and wants
to strengthen and further build on, the successful strategy of gamigo AG;
building critical mass in the digital gaming and media markets via a
combination of bolt-on acquisitions and organic growth. Our 53% subsidiary
gamigo has been implementing this strategy now for over six years,
continuously showing steady, profitable growth, with an average 32% revenue
and 65% Ebitda growth per year in the last 4½ years.
The digital markets for gaming and media/advertising are both very
substantial with approx. 150 billion USD in digital gaming and approx. 300
Billion USD in digital advertising worldwide, each growing with over 10%
year on year. The two sectors have strong synergies; own advertising
inventory on the gaming side enables a clear USP on the media side,
whereas, the broad media expertise and scale advantage in media buying
build a user acquisition USP for the gaming side.
Both sectors demonstrate a strong technological edge. Many players lack
critical mass, therefore creating a great space for us as a market
consolidator. With Media and Games Invest as a holding company, having
access to capital markets, we can speed-up the growth of gamigo in the
gaming segment, while also increasing our stake in gamigo by buying out
non-strategic minority shareholders. In parallel MGI is also driving
forward our growth in the online media/advertising segment via focus on
organic growth as well as via further acquisitions.
GBC AG: An important growth factor for gamigo AG in recent financial years
has been the acquisition of gaming companies or the expansion of gaming
licenses. Most recently, two American companies were acquired. Should
inorganic growth continue to be the focus and how is your company
financially positioned in this respect?
Remco Westermann: gamigo has performed well over 20 acquisitions in the
past six years, acquiring gaming assets as well as complete companies. The
most recent additions are Trion Worlds, a well-known publisher massively
multiplayer games for online and console, in Redwood City and Austin (USA),
acquired in October 2018, and WildTangent, a leading casual games publisher
and platform, based in Seattle, acquired in April 2019.
In both cases, significant assets of the companies were acquired, leading
to immediate contribution of earnings and profits of the group. With its
positive operating cashflow and a substantial amount of cash from its bond
(listed on the regulated market in Sweden at Nasdaq Stockholm) in
combination with many available targets, gamigo will, supported by the
listed MGI, further drive the acquisitive growth. On top of acquisitive
growth, gamigo and the MGI group also focus on organic growth via a.o.
licensed game launches, game sequels, internationalization and user
acquisition. As such, organic growth is an important pillar of the overall
growth strategy.
GBC AG: How is the integration progressing and what synergy effects can be
demonstrated for example by the recently acquired American companies from
gamigo AG?
Remco Westermann: Post-acquisition there is a strong focus on realizing
synergies, e.g. by merging back-end platforms and migrating the services
into the cloud, which creates substantial cost savings. One example are the
data platforms: Trion Worlds operated several datacenters with much spare
capacity to enable further growth of the games. Now, based on the setup of
gamigo, the games are moved into the cloud. This lead to only paying for
capacity that is used, while still having the option to scale-up fast, and
results in much lower total costs, thanks to economies of scale of the
group. Also there are no further capex investments required and a much
better performance with fewer downtimes is guaranteed. The WildTangent
platform also poses many synergies on the cost side as well as on the
revenue side, with additional revenue possibilities for the distribution of
other game titles by the group.
GBC AG: What measures can be taken to promote organic growth, i.e. the
expansion of games developed in-house or the acquisition of active players?
Remco Westermann: For clarification; we do not take any new game
development risks. With our current size, developing new games is too
risky; developing a MMO (massive multiplayer online game) costs e.g.
between 2 and 50 million USD, takes 3 up to 5 years and has statistically a
below 10% chance of success. We do however license new games for certain
territories that were developed by independent studios or foreign, mostly
Asian game publishers. In licensing we are highly selective and do thorough
testing beforehand.
Apart from entirely new games, we like to launch game sequels and extensive
updates for games where we already have a strong userbase. This reduces the
risk of game launches substantially and poses a massive opportunity. We are
concentrating on games with sustainable revenues; MMO’s which generally
have live times of over 10 years and long-term customer relations as well
as subscriptions for the usage of mostly casual games. Also,
internationalization and user acquisition for our current games are
important for growth.
GBC AG: In addition to being a publisher of online games, Media and Games
is also active in the media sector, i.e. in the B2B segment. What products
are offered here and what is your growth strategy in this segment?
Remco Westermann: While building critical mass for efficiency reasons,
gamigo also concluded that for organic growth it needs more capabilities
and know-how in the field of online marketing and user acquisition. As
such, media companies and assets were acquired; e.g. Adspree (formerly
SevenGames Network, acquired from ProsiebenSat.1), a performance-based
online user acquisition company also operating portals such as
browsergames.de, and Mediakraft, an innovator in influencer marketing. This
gives the group in-house media and advertising capabilities, that are
leveraged by selling their services to competitors and into other sectors,
leading to efficiency and substantial earnings. Thanks to this, the gaming
group has a strong USP in the field of user acquisition. As part of the MGI
Strategy further media companies have been acquired in 2019: ReachHero (a
Saas Influencer platform), AppLift (a mobile performance agency) and
PubNative (a SaaS supply side platform for mobile apps advertising). With
these acquisitions, the MGI group now is generating substantial revenues
next to the gamigo group.
GBC AG: With rising sales, gamigo AG achieved significantly improved
profitability figures in the first half of 2019. What kind of growth can be
achieved and how can you actively manage this?
Remco Westermann: The gamigo business model strongly profits from synergies
of the acquired entities in combination with more volume via organic
growth, leading to revenue growth but even stronger EBITDA and EBIT growth.
Over the last 4 ½ years, gamigo had an average annual 32% revenue and 65%
EBITDA growth.
Only since two years we have put focus on organic growth, as the years
before the company concentrated on M&A and the integration of these M&A
cases only. Organic growth is nowaccounting for a more significant part of
growth every year. With three game launches coming up in H2-2019, each of
them being within an already existing customer base, we expect to boost our
organic growth even further in 2019 as well as in the following years. In
the coming years, gamigo expects to also continue to grow, with an average
of 25 – 30% per year. M&A targets are widely available, and we have a
strong line-up for organic growth.
On the EBITDA side gamigo expects further 25-30% EBITDA, which results in a
positive cash-flow from operations, further enabling strong growth. Just
for clarification; gamigo’s financials are only part of the overall growth
of MGI, next to the participation in gamigo, which we further expect to
increase, MGI also holds several participations in the media sector that
will start contributing to revenue and EBITDA growth of MGI from H2 2019
onwards.
GBC AG: Finally, a question for investors with a long-term investment
horizon. Where do you see the Media and Games in five years?
Remco Westermann: We are already one of the leading game companies in
Europe and certainly one of the fastest-growing ones. We choose public
market access with listed stock to be more flexible in doing acquisitions
in shares next to with cash. Looking back I think we already achieved quite
a bit and showed that our business model makes sense and works. Looking
forward, we have the chance to build a listed European gaming and media
powerhouse. I would be proud if we can build a Europe based Unicorn
together with our team, our partners and our investors.
GBC: Mr. Westermann, thank you for the interview.
Die vollständige Analyse können Sie hier downloaden:
http://www.more-ir.de/d/19067.pdf
Kontakt für Rückfragen
Jörg Grunwald
Vorstand
GBC AG
Halderstraße 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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http://www.gbc-ag.de/de/Offenlegung.htm
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