Archive | June, 2011

G5 Entertainment: Android market a major potential

30 Jun

As of today, G5 Entertainment is also present on the Android market. This morning the app developer published its first 5 games for Android. All are well-known games from its iPhone and iPad line-up: Supermarket Mania, Success Story, Mahjong Artifacts, Mahjong Artifacts: Chapter 2 and Stand O’Food. G5 uses its recently strategy to publish the games free of charge, with an option to unlock the full content using in-app purchase. For more information, please visit the games’ homepages at www.g5e.com

Following the tremendous success on Apple’s platforms, G5 Entertainmet is now finally also set to benefit from the rapid growth of Android-based smartphones and tablets. According to computerworld.com, Apple’s iOS still has a commanding lead in the table market, with Android being the only other OS that registers a market share in the double digits. In the smartphone arena, there are other significant competitors such as BlackBerry and Windows. However, BlackBerry’s market share is dropping according to recent statistics.

According to Gartner, the iPad held a 83.9% share in the global tablet market in 2010, with Android tables being far behind at 14.2%. However, going forward Gartner expects the market share difference to narrow considerably over the next few years, with iOS holding around 50% by 2015 and Android growing to 40% during the same period.

When it comes to the smartphone market, several analysts expect the iPhone to slip worldwide in the coming years as both Android and Windows Phone are expected to gain traction. According to the latest stats from comScore, Android became the US smartphone market leader early this year, overtaking the BlackBerry. The iPhone was on third place. In April, Google said that there are now more than 350,000 Android smartphones activated every day. When it comes to available apps iOS is still clearly in the lead with ca. 350,000 compared with 88,000 for Android. Both are growing rapidly.

What’s most important in my opinion is that BOTH iOS and Android are experience very rapid growth. Gartner forecasts media-tablet shipments to soar from 17 million units in 2010 to 70 million in 2011 and 294 million by 2015. Worldwide smartphone shipments are expected to more than triple from 2010 to 2015, also according to Gartner. Android growth is forecast to jump from 67 million units shipped to 539 million as its market share more than doubles. Apple’s global market share is alsoexpected to rise but more modestly, from 47 million to 190 million units shipped. 

CONCLUSION: G5 Entertainment has a proven business model that is creating extremely profitable growth in a fast growing market. With its Talisman-technology it can convert games among different platforms at a low cost and in  a short time. Its games are successful on the iOS market and there is no reason why they should not be as successful on the Android market. This should bode well for growth beyond 2011 and I wonder when the market will start to look at potential 2012 numbers. Continued annual earnings growth of 100% does not seem unrealistic.

http://www.nordicinvestor.de/

Zynga: possible IPO valuation highlights upside potential in G5 Entertainment

29 Jun

As recently as March, Zynga was projecting a 2011 profit of $630 million on revenue of $1.8 billion, according to a New York Post report that cited a prospective investor who had seen Zynga’s financials. Zynga makes money by selling virtual currency for use in its games. Users pay to replenish their “energy,” which allows them to participate more fully in games. The company has about 250 million users.

The public won’t get a glimpse of Zynga’s financial details until the company files its S-1 registration with the SEC, which could come as early as Wednesday. Given Zynga’s rapid growth, which mirrors that of other hot internet firms like Groupon, Facebook and Twitter, it’s entirely possible that the company could raise its revenue forecast.

The valuation is rumoured to be somewhare between USD 15 and USD 20bn. A $15 billion valuation would mean Zynga is worth 23 times its 2011 earnings (using the $630 figure), which is not unreasonable for such a fast-growing company. Even at $20 billion, the company would be worth only 31 times 2011 earnings, which would be high for a mature company with slower growth, but is still reasonable for Zynga.

Listed in Sweden, we have G5 Entertainment (www.g5e/corporate) which is currently valued at less than 12 times its 2011 earnings (using current management guidance of SEK 1.90). G5 Entertainment is enjoying rapid growth as the smartphone market is exploding and and at the same the company is publishing almost 4 times as many games during 2011 compared to 2010.  With an EBIT margin of some 40% it is very profitable and sits on a net cash position. Tomorrow, the company will publish its first 5 games for Android and for early July, management’s mid-quarter update is on the agenda. Some of its latest published games have been very successful, such as ”Jack of all Tribes” which was ranked number 1 top-grossing game in the important German market for several days.  Don’t miss the train…

US gaming stocks rally – Zynga IPO expected for tmrrw

28 Jun

Online game giant Zynga could file for an initial public offering as soon as Wednesday, CNBC reports. The company reportedly wants to raise between $1.5 billion and $2 billion, in a deal to be underwritten by Morgan Stanley and Goldman Sachs. The story says the expected size of the deal implies a valuation for the company in the $15 billion to $20 billion range. CNBC also reports that Zynga is wrapping up discussions with banks about raising at least $1 billion in a debt facility.

US gaming stocks such as Glu Mobile (GLUU) and Majesco Entertainment (COOL) rallied on Tuesday by 15% and 10% respectively. Expect some positve sentiment also for G5 Entertainment as Zynga IPO will increase overall focus on gaming valuations. Also, G5 will soon release its mid-quarter update and a hike of its 2011 earnings guidance is highly likely!

http://www.nordicinvestor.de/

PopCap: Takeover by EA imminent?

26 Jun

I have been away for a couple of days celebrating the Swedish “Midsommar” so please excuse that I am taking up a piece of news from last Thursday.

A rather big deal is about to happen in the mobile gaming world which further emphasizes the rapid pace of consolidation and growth in this sector. Rumor has it that gaming giant Electronic Arts (EA) is in talks to acquire PopCap Games in a deal worth more than $1 billion. The TechCrunch blog cited unnamed sources as saying the two companies are in “late-stage” discussions over a deal; representatives for EA and PopCap could not be immediately reached for comment. If true, it would be EA’s largest acquisition to date, according to data from FactSet Research. PopCap is a maker of popular mobile and casual games such as “Plants vs. Zombies,” “Bejeweled” and “Peggle.” EA has made several acquisitions in this space over the past two years, including its purchase of social game maker Playfish in 2009 for around $400 million, as well as the acquisition of Chillingo late last year and Firemint, which makes the popular “Flight Control” game, in May. The other name that has been attached to the deal is Zynga, the undisputed rulers of the social and Facebook gaming sector. The purchase would sense for Zynga; it would give them a ready made way of entering the console, computer, and mobile markets outside of their games which tend to be tied to services such as Facebook.

With a $1 billion price tag the deal values PopCap at a EV/Sales multiple as high as 10x (with PopCap’s revenue estimated at about $100 – $150 million according to several sources). The valuation shows the growth potential that the industry leaders are seeing in this segment. My favourite stock pick, G5 Entertainment, currently trades at a EV/Sales multiple of closer to 3x (based on a rather conservatione sales forecast of SEK 45m for 2011) . I would not be surprised if sooner or later one of the bigger software companies will put a bid for G5 Entertainment if the low valuation continues to persist.

http://www.nordicinvestor.de/

G5 Entertainment: enters Android market on June 30th

21 Jun

Today officially announced: G5 Entertainment releases 5 games for Android on June 30th.

From G5′s homepage:

“5 games, massively popular on iOS and PC, are finally making their way to the Android platform. The first five games in the line-up are Supermarket Mania, Success Story, Mahjongg Artifacts, Mahjongg Artifacts: Chapter 2, and Stand O’Food.

Get ready to download and tell all your friends! Your favorite games will be available on the Android Market starting June 30th for free, with option to unlock the full content using in-app purchase”

Japan ‘s mobile gaming company Gree starts global expansion

15 Jun

Just wanted to share an interesting article with you which I came across in the online version of the Wall Street Journal: http://online.wsj.com/article/SB10001424052702303654804576342843805321706.html

 The Japanese company “Gree” is a leading domestic mobile gaming company and its founder has apparently indicated in a recent interview that “the rise of smartphones around the world has paved the way for his business to go global. He continues by adding that “now is the chance to enter the race at its early stages” and that “the fact that our business is very lucrative in Japan enables us to invest in overseas  acquisitions and other steps to expand abroad“.  The WSJ article points out that mobile gaming is one of the few areas where Japan could lead the world and the country’s two biggest competitors – Gree and DeNA Co – see a major growth opportunity. Both Gree and DeNA operate gaming-oriented social-networking services where videogames allow players to interact with each other. Interestingly, Gree signed a USD 104m million deal to buy OpenFeint in April. OpenFeint is a US bades gaming service for smartphones with 75 million users around the world.

Nothing tremendously new in this article but nevertheless one more proof that many players are out on a shopping spree in the global mobile gaming market. You know that my absolute favourite pick in this sector is the Swedish-listed company G5 Entertainment (www.g5e.com/corporate) whose share stubbornly keeps trading at a PER of 11x. In my opinion, if the market doesn’t put a reasonable valuation on it soon, somebody else will (i.e. takeover). Profitable growth stories do not go unnoticed forever…

G5 Entertainment: Jack of All Tribes hits number 1 spot in Germany

13 Jun

G5 Entertainment’s recently released iPad version of “Jack of All Tribes” is apparently selling very well. In the important German market, the game is now ranked number 1 top grossing game and in China it’s in the top 10. Happy days…

For an overview of G5 game rankings in the most important markets please go to: http://www.g5info.se/spelstatistik_ipad.htm

G5 Entertainment: Upbeat CEO at investor presentation

7 Jun

G5 Entertainment hosted an investor presentation today in Stockholm and CEO Vlad Suglobov gave an upbeat message to the audience.

My main takeaways in summary:

  • CEO is confident that G5 will release 80 new games during 2011. So far, 22 have been released and the CEO reminded the audience that 2011 will be “tail-heavy” in terms of game releases, similar to 2010. In other words: Expect revenue and earnings growth to accelerate as the year develops
  • G5 Entertainment aims to release a new game app every week trying to position itself as an “entertainment service” which enables the customer to download a new game to play during the weekend. In order to facilitate a constant flow of games, G5 is co-operating with 18 partner studios around the world, publishing their games under a licensing agreement and the company is signing up new studios every month
  • The CEO also reminded the audience that in 2010, G5 had to upgrade the forecast a number of times towards the end of the year. My interpretation: Expect a similar pattern also during 2011 as new games will be released
  • Encouragingly, G5 is gaining more and more ground also in Asia. In 2010, roughly 45% of sales came from Europe, 35% from North America and 20% from Asia & other. In the more recently published games, the geographical split looks like this: 25% Europe, 40% North America, 35% Asia & other
  • Ipad games are gaining share as % of total sales. In 2o1o, 33% of Apple related revenues came from iPad games, in 2011 year-to-date this number is 47%. on top of that Mac sales represent 13% of Apple related sales. This is interesting since it is contributing to a positive mix shift as games for iPad and Mac are usually more expensive than iPhone games
  • Strong and wide spread portfolio of games: No single game accounts fore more than ca. 15% of sales, making G5 Entertainment less vulnerable for “fashion misses”. In my opinion, this is a great strength and sign of stability. Yes, there is no big hit like “angry birds”, but on the other hand there are no real dogs either
  • Very encouragingly, CEO Suglobov reported that the average price has increased from USD 2 to USD 5 over the last to years as players are willing to pay more for quality games
  • CEO statement: “G5 can be a company with SEK 300m revenue and SEK 100m operating result in the next few years”! (Current forecast for 2011 is SEK 45m in revenue and SEK 16m operating result)

So all in all, I feel confirmed in my positive stance towards G5 Entertainment. It is always good to talk to management in person and the CEO left a competent and confident impression.

You know I am long G5 and you should be too!

PS: you can check out the presentation material on the company’s website: http://www.g5e.com/corporate?t=rep&y=2011#20110607

Glu Mobile: US analyst pushing mobile gaming stock

3 Jun

According to www.seekingalpha.com, US analyst firm “ThinkEquity” is pushing the Glu Mobile (GLUU) case, saying the stock could be worth USD 6.00. Glu Mobile designs and markets games for mobile phones and is benefitting from the success of Apple’s iPhone and iPad. The ThinkEquity-analyst raised its price target and reiterated its Buy rating on the stock citing the company’s alternative monetization mechanisms and new games. The price target reflects a significant 20% premium to the current market price. Since the beginning of May, Glu Mobile’s share price has risen some 40% and is up more than 160% year-to-date.

The company has been seeing a lot of success, having recently raised its quarterly and yearly guidance. Meanwhile, with Zynga expected to file paperwork for its IPO in the near future, the mobile and online gaming sector could also see its multiples rapidly expand. Combined, these events could lead to significant value being unlocked for this well-positioned stock.

I am certainly a fan of the Glu Mobile story since I strongly believe in a continuation of the smartphone boom. However, as argued by me so many times: an even better bet on the industry trend is G5 Entertainment, listed in Sweden (www.g5e.com/investor). While Glu Mobile is still losing money, G5 Entertainment has impressive margins and is expanding its net cash position every quarter. With a strong line-up of new game releases for the coming weeks, the company seems well prepared to deliver on its target to release 80 new games during 2011. G5 management is currently guiding for a 2011 EPS of SEK 1.90 (up from SEK 1.01 in 2010) and they have indicated in the recently published Q1 report that this guidance is rather conservative. As we speak, the G5 share is trading at SEK 21.40, implying a PER of 11x…

I am long G5 Entertainment and I hope you are too!

www.nordicinvestor.de

G5 Entertainment: new games on the way

3 Jun

G5 Entertainment has published two new games this week and is changing its communication policy concerning new game releases due to a “denser release schedule than before”, in other words: the line-up of new games is so high that they simply cannot send out separate press releases all the time.
From this week on, G5 Entertainment will send out a weekly digest, describing the games announced and released during the week.

This week’s digest looks as follows:
Stand O’Food 3 was released for both Mac and PC. It’s a game that’s developed and published by G5 Entertainment itself, implying a relatively higher profitability as revenues don’t need to be shared with other developers. Furthermore, the company will release Jack of All Tribes for iPhone and iPad on June 9th, Supermarket Management for Mac on June 9th and Dress up Rush for iPad on June 16th.

It’s good to see that G5 is delivering on its strategy to publish 80 new games during 2011. The change of communication policy is a good sign that the coming weeks will be busy in terms of game releases – perfect for the vacation season here in Europe!