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 (Note) Empfehlung: BUY
Kursziel: 4.05 EUR
Letzte Ratingänderung:
Analyst: Marcel Goldmann, Cosmin Filker

HY1 2023: Solid sales development despite economic headwinds; stable operating earnings development due to strict cost management; GBC estimates and price target adjusted after guidance reduction  
Business development in HY1 2023
 
Media and Games Invest SE (MGI) published its half-year figures for the current financial year on 31 August 2023. Based on this, the ad tech platform group achieved a stable revenue development in the first six months despite an economic headwind that led to a weakening of the advertising industry. Compared to the same period last year, digital group revenues increased slightly by around 1.0% to € 144.93 million (HY1 2022: € 143.93 million). This revenue growth was achieved despite past divestments (streamlining of the gaming portfolio) and an unfavourable exchange rate development.
 
Both advertising segments (Demand Side Platforms - DSP, Supply Side Platforms - SSP) contributed to the robust Group revenue development with stable or growing segment revenue development. In the first half of the year, the SSP business segment was able to confirm the high half-year revenue level of the previous year (HY1 2022: € 131.62 million) with segment revenue of € 130.84 million. In contrast, the DSP business unit even increased its segment revenue significantly by 14.5% to € 14.10 million (HY1 2022: € 12.31 million) compared to the same period of the previous year.
 
In parallel to the stable revenue development, the consolidated operating result (EBITDA) increased slightly by 1.4% to € 37.41 million (HY1 2022: € 36.91 million) compared to the same period of the previous year. Adjusted for one-off costs and special effects (e.g. M&A costs), adjusted EBITDA (Adj. EBITDA) for the first half of 2023 amounted to € 40.40 million, which increased moderately by 4.6% compared to the same period of the previous year (HY1 2022: € 38.60 million). At the same time, the adjusted EBITDA margin increased slightly to 27.9% (HY1 2022: 26.8%).  
On the net level, however, MGI suffered a 54.0% year-on-year decline in net income (after minorities) to € 2.57 million in the first six months of the current financial year (HY1 2022: € 5.59 million). This was mainly due to higher tax and interest charges compared to the same period of the previous year.
 
Business development in Q2 2023
 
The stable revenue development of the MGI Group is also evident at the quarterly level. Despite difficult general conditions, the Group's revenue remained at a high level in the second quarter with a revenue volume of € 76.18 million compared to the same quarter of the previous year (Q2 2022: € 78.06 million). Adjusted for currency effects, organic revenue growth in the second quarter was 1.0% compared to the same quarter of the previous year. Excluding divestment and currency effects, an adjusted increase in turnover of 3.0% was even achieved.
 
According to the company, the technology company also succeeded in the past quarter in further increasing its market share and thus expanding its market position through innovative AI-based targeting products such as Moments.AI, which significantly improve advertising results for publishers and advertisers. MGI's strong market position is also reflected in the top rankings achieved by various market segments. While MGI was already the leading provider of in-app advertising on Android, the technology company has also managed to be the leading provider on Apple's IOS in North America and Europe since Q2 2023.
 
The robust (organic) business development in Q2 was supported in particular by a renewed increase in software customers and advertising volume (ad impressions). Compared to the previous year, ad impressions increased significantly by 13.0% and the number of software clients also increased significantly by 9.0%. Thus, the software client base (so-called total software clients with an annual turnover of more than USD 100,000) was expanded by 46 new software clients in the second quarter compared to the same quarter of the previous year to a total of 559 (Q2 2022: 513).  
At segment level, the previously smaller Demand Side Segment (DSP) was able to further expand its digital business volume with a slight year-on-year revenue increase of 2.3% to € 7.88 million (Q2 2022: € 7.70 million). In contrast, the Supply-Side segment suffered a slight year-on-year decline in segment revenue of 3.0% to € 68.30 million (Q2 2022: € 70.36 million), due in particular to the divestments of small non-strategic games made in Q4 2022.
 
At the operating earnings level, MGI achieved an EBITDA of € 19.99 million in the second quarter of 2023, which was almost at the previous year's level (Q2 2022: € 20.04 million), in parallel with the solid revenue development. In contrast, Group EBITDA adjusted for one-off and special effects (e.g. M&A costs or headquarters relocation costs) increased slightly by around 1.0% to € 21.30 million (Q2 2022: € 21.10 million). In the same step, the adjusted EBITDA margin grew to 28.0% (Q2 2022: 27.0%). The increased profitability also underlines the company's general strict cost management.
 
Forecasts and evaluation
 
In order to further improve their earnings situation and to counteract their lower growth dynamics, MGI has initiated a cost-saving programme in the current third quarter. This cost-optimisation programme, which is primarily aimed at reducing personnel costs, includes annual cost savings of € 10.0 million. The main effects of the planned cost reduction measures are expected to take effect from the fourth quarter of 2024.  
Against the backdrop of the weakening advertising market and the lower growth expected by MGI in the second half of 2023, the technology company has reduced its previous corporate guidance (revenue of € 335.0 million to € 345.0 million and Adj. EBITDA of € 95.0 million to € 105.0 million) for the current financial year. The company now expects consolidated revenue of approximately € 303.0 million and Adj. EBITDA of € 93.0 million.  
In the context of the publication of the Q2 and half-year figures at the 'MGI Capital Markets Day 2023', the technology company confirmed its medium-term corporate guidance (revenue CAGR: 25.0% to 30.0%; Adj. EBITDA margin: 25.0% to 30.0%). Accordingly, the technology company expects higher growth momentum again in the medium term.  
In view of the lowered corporate guidance, we have also adjusted our previous turnover and earnings forecasts for the current financial year and the following years downwards. For the current financial year, we now expect consolidated revenue of € 303.21 million (previously: € 340.12 million) and EBITDA of € 85.37 million (previously: € 89.44 million). With regard to the subsequent years 2024 and 2025, we expect, under conservative premises, a turnover (EBITDA) of € 324.74 million (€ 95.56 million) and € 357.66 million (€ 108.49 million) respectively.  
Despite our reduced revenue and earnings estimates, the MGI Group should be able to return to its growth path from the 2024 financial year onwards, based on the gradual recovery of the advertising market that we expect. In particular, the strong positioning of the ad tech company in the programmatic advertising market, the fastest-growing segment of the digital advertising market, should ensure further gains in market share and outperformance compared to the overall advertising market in the future. Our forecast EBITDA growth for the future financial years should also be boosted by the expected positive effects from the company's initiated cost-efficiency programme (targeted annual cost savings of € 10.0 million from FY 2024).
 
Against the backdrop of our adjusted revenue and earnings forecasts, we are lowering our previous price target to € 4.05 (previously: € 5.30) per share. In view of the current share price level, we continue to give the MGI share a 'buy' rating and continue to see significant upside potential.  

Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/27697.pdf

Kontakt für Rückfragen
GBC AG
Halderstrasse 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Date (time) of completion: 11/09/2023 (8:59 am) Date (time) of first distribution: 11/09/2023 (10:30 am)

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