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: Research Comment
Empfehlung: BUY
Kursziel: 2.95 EUR
Letzte Ratingänderung:
Analyst: Marcel Goldmann, Cosmin Filker

Significant expansion of the mobile gaming business segment through the
planned acquisition of freenet digital GmbH; start of strategic media
cooperation with the freenet group, thus strengthening the media division

On 28 August 2020, Media and Games Invest plc (MGI) announced that it had
reached agreement on the acquisition of freenet digital GmbH as part of a
strategic partnership with the parent company freenet AG. freenet digital
GmbH was founded in 2000 and specialises in digital mobile entertainment

freenet digital GmbH distributes more than 1,500 mobile games via its own
platforms as well as other digital entertainment products. With the
acquisition of freenet digital GmbH, MGI strengthens its mobile games
offering and greatly expands its business activities towards this fast-
growing business segment. Most recently, mobile games only accounted for
1.0% of total revenues in the gaming division. It should be noted that,
according to market experts, the mobile gaming segment is the fastest
growing area of the gaming industry with double-digit growth rates and at
the same time accounts for a large part of the revenues of the global
gaming market.

According to the company, the purchase price for freenet digital GmbH is in
the upper single-digit million range and is to consist of a cash and share
component. The closing of the M&A deal is scheduled for 30 September 2020.

Besides the acquisition of the gaming and entertainment division, MGI and
freenet AG have announced that both companies intend to enter into
strategic cooperation in the media sector. In this context, MGI is to
support freenet AG in acquiring new customers by means of targeted online
and mobile marketing activities.

The MGI management expects an additional contribution to sales of EUR 13.0
to EUR 15.0 million and an additional EBITDA of EUR 2.0 to EUR 3.0 million
as a result of the takeover. We assume that this expected revenue and
earnings contribution will only be achieved after freenet digital GmbH has
been fully integrated into the group's gaming division and the organization
has been optimized. The company also anticipates additional revenue and
earnings effects from the planned media cooperation.

Through the past takeovers of Verve, Applift and PubNative in the media
segment, MGI has built up comprehensive know-how in the field of mobile
advertising and at the same time acquired a critical mass for a
comprehensive and far-reaching marketing of mobile content. Thus, MGI has
laid a good foundation for dynamic growth in the mobile games sector.

Against the background of the intended acquisition, we have adjusted our
previous sales and earnings forecasts upwards, whereby we had already
partially included M&A activities in our previous estimates from 2021
onwards. For the current financial year, we anticipate only minor effects
on our previous revenue forecast due to the expected first-time
consolidation of the business activities of freenet digital GmbH in the
fourth quarter and no positive effects on our previous earnings forecast
due to expected one-off effects. Specifically, we now expect revenues of
EUR 118.16 million (previously: EUR 116.16 million) and EBITDA of EUR 21.74
million (previously: EUR 21.74 million) for the current 2020 financial

For the two subsequent years 2021 and 2022 we now expect significantly
higher sales and EBITDAs due to the expected acquisition effects.
Specifically, we expect revenues of EUR139.28 million (previously:
EUR132.28 million) and EBITDA of EUR26.98 million (previously: EUR25.87
million) for the 2021 financial year. For the 2022 financial year, which
will follow on from this, we anticipate a further increase in the
additional contribution to revenue and earnings, based on the increased use
of synergies, and are therefore forecasting revenue of EUR162.12m
(previously: EUR152.12m) and EBITDA of EUR32.34m (previously: EUR30.69m).

Based on our upwardly adjusted forecasts, we have also raised our previous
price target to EUR2.95 per share (previously: EUR2.85). In view of the
current price level, we continue to assign the BUY rating. The planned
takeover should enable MGI to significantly expand its mobile games
activities and thereby tap additional growth potential. In addition, the
media division should also be significantly strengthened by the strategic
cooperation with the freenet group and, as part of this, a new major
digital customer should be acquired.

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Date (Time) completion: 08/09/2020 (09:56 am)
Date (Time) first distribution: 08/09/2020 (10:30 am)

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