in Mobile Gaming

Gameloft Q4 revenues up on smartphone and tablet strength – Buy G5

Gameloft, French publisher of digital and social games, reported its Q4 2011 revenue numbers on February 1st, 2012. Gameloft recorded sales of EUR 47m during the quarter, marking an organic increase of 20% year-over-year.

Gameloft creates games for all digital platforms, including mobile phones, smartphones and tablets and consoles. Smartphones and tablets are still in the minority for the company and represented some 40% during Q4.

We find it interesting to note that Gameloft highlights “the massive success of Gameloft games on smartphones and tablets around the world”, as the major reason for its strong operating development. The company goes on saying that: “The dynamism of the smartphone and table market, driven by the success of Apple and Android, should continue sustaining Gameloft’s growth in the upcoming quarters. Therefore, , Gameloft is expecting solid top-line growth in 2012.”

Analysts expect Gameloft to earn an EPS of EUR 0.26 in 2012, which would be up some 37% from expected 2011 levels. The Gameloft share is currently trading at EUR 5.09, implying a 12-months forward PE-ratio of 20x.

In comparison, our top-pick G5 Entertainment is trading at SEK 42.50 with an expected 2012 EPS of 3.20. The implied PE-ratio is 13x, i.e. 34% below the level that Gameloft is trading at, despite the fact that G5 Entertainment is expected to grow its earnings by almost 70% in 2012 versus 2011, compared with “only” 37% in the case of Gameloft. Applying a PE-ratio in-line with Gameloft’s, the G5 share should trade at SEK 64. However, G5 Entertainment has close to 100% exposure to smartphones and tablets compared to Gameloft’s mere 40%. Remember, it is the smartphone and tablet segments that Gameloft highlights as the major sources of their growth. That means, if anything, G5 Entertainment should trade at a premium to Gameloft.

I am long G5 Entertainment and you should be too.

Nordic Investor


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