21. November 2019 | 20:57 CET
Media and Games Invest plc - steady growth with increasing number of users
Media and Games Invest plc is a profitable investment company with a focus on game publishing and media. Since May 2018, the Group has changed its business purpose by separating the real estate business from the scope of consolidation and acquiring a majority interest in the game-publishing platform gamigo AG. Currently, the strategy is based on four pillars: "Buy, Integrate, Expand and Improve" and is implemented through organic and inorganic growth. The division is divided into two segments: 1) Game Publishing, which includes a broad portfolio of online, mobile and console games; and 2) Digital Media, which includes online advertising and social marketing services for Group and third-party games.
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Daily access to customers
Most of the consolidated revenue is attributable to gamigo's free-to-play games, where users can purchase virtual items for a more intense or successful gaming experience. Every day, the group registers the activities of more than 600,000 users. More than 50% of core game revenues are generated by users who have been on the platform for more than five years.
Therefore, gamigo video games usually have a long lifespan and customer loyalty is high. Since the first half of 2019, the Digital Media division has been further expanded through the acquisition of online advertisers ReachHero, Applift and PubNative.
Intangible assets increase
The gamigo AG brand includes titles such as Fiesta, Desert Operations and Trove, which have a long service life and a high conversion rate for customers who have to pay users. The latter is an important figure in relation to free-to-play games, in which revenues are generated from in-game sales of virtual objects and microtransactions.
In October 2018, gamigo initially acquired the assets of Trion Worlds Inc. and the casual games publisher WildTangent Inc. in order to expand its business in the high-volume and highly dynamic US market. As is customary with a technology company, the acquisitions led to a sharp increase in intangible assets, which increased from EUR 18.13 million to EUR 38.84 million by the end of 2018 compared with the previous year.
EBITDA margin increased
Integrations and synergy effects led to higher profitability for gamigo AG in the first six months of 2019. According to GBC Research, an important key figure was the EBITDA margin, which rose from 24.3% to 29.3% in the first half of 2019 compared with the previous year.
To finance growth, bonds with an outstanding volume of around EUR 55 million were issued: a) EUR 50 million at gamigo level with a coupon of 7.75% above the 3-month Euribor; b) EUR 5 million at MGI level with a coupon of 7.00%. However, the acquisition costs of the two US transactions could be financed with the clearly positive operating cash flow e.g. in 2018 of around EUR 10.5 million.
Revenue per customer increases
In the second quarter of 2019, gamigo AG recorded an increase in active users per month of 149% from 0.5 million to 1.3 million, and at the same time an increase in average monthly expenditure per player of 1.1% to EUR 46.1.
The experts at GBC forecast revenues of EUR 74.46 million for the Media and Games Group in 2019 and EUR 90.96 million for 2020. They also expect a gradual improvement in profitability. As part of their DCF valuation model, they have calculated a price target of EUR 1.90 and issued a BUY rating.