in Mobile Gaming

#G5 Entertainment: CEO presentation highlights

G5 Entertainment CEO Vlad Suglobov is back in Stockholm on a marketing roadshow. The company has stepped up its game in terms of public and investor relations and after its roadshow at the beginning of the year, this is the second time they are meeting local investors.

The message Mr Suglobov has in his baggage is not a new one but a very ensuring one indeed. Following the recent upgrade of its Q1 2012 guidance, Mr Suglobov seemed very confident to be able to reach the FY 2012 target as well. That would imply a revenue growth of 89% and an EPS growth of 96% for 2012. These are impressive numbers and the CEO highlighted the fact that G5 is growing faster than bigger peers such as Zynga, Gameloft and Glu Mobile, while maintaining a higher profitability. All that in an app market that is set to grow to USD 25bn by 2015 from an estimated USD 7bn in 2010.

In today’s presentation CEO Suglobov highlighted 5 major growth drivers for 2012:

  • Continued growth of the smartphone and tablet market
  • Up to 50 new games to be released in 2012 for the various platforms (summing up to close to 300 new apps)
  • Increasing quality of games
  • New platforms (although an entrance of the Windows platform seems more distant given the unfavourable circumstances for developers)
  • Better monetization with more Playground games. Without being specific, CEO Suglobov hinted at an upcoming freemium game in the near future

One success factor is the 50-50 split between own IPs and games published for other developers which allows for a good balance and favourable risk profile. G5 has today contracts with over 45 studios and is in contact with over 100. Oftentimes, G5 helps these studios to gain independence from the stagnating PC market by helping to start developing for mobile devices. The established sales channels and user base is a major selling point for G5 as independent studios would not be able to reach a sufficient audience on their own.

From talking to Mr Suglobov we got the impression that everything seems in place to continue to grow by 90-100% p.a. going forward, given the rather low base G5 is coming from. While competition is naturally increasing, the addressable market is so huge (and growing) that G5 should be able to establish its own niche without having to think about market shares etc. Playing with the numbers, a 90% p.a. growth in 2012-2014 would lead to revenues of more than SEK 300m by 2014. With margins comparable to today’s, this implies an EPS north of SEK 10 per share.

Everything seems to be in place for a continued pleasant ride.

Nordic Investor

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