G5 Entertainment CEO Vlad Suglobov was in Stockholm today in connection with the company’s annual general meeting. Unfortunately, Nordic Investor could not attend today’s presentation but we flipped through the slides which are available on the company’s homepage. As expected, Mr Suglobov had no new message to convey today but rather reiterated the positive message given on recent occassions. The slides were similar to the ones presented a few weeks ago when 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
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 60 studios. 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.
In connection with the recent Q1 2012 report, G5 announced the target to reach revenues of SEK 300m in a couple of years and said it was optimistic to maintain similar growth rates as in 2010 and 2011 (i.e. around 100%). 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. We are eagerly awaiting the launch of “Jumpster” and are probably more bullish than ever on the G5 Entertainment share.