in Mobile Gaming

#G5 Entertainment: Be there or be square

Time for this week’s ranking check for our top-pick G5 Entertainment. The fast growing app developer that will soon change its listing from Aktietorget to Nasdaq OMX continues to take market share at the beginning of 2013, indicated by an increasing number of games among the global top grossing charts, primarily for iOS. The development on Google Play, on the other hand, continues to be a mixed bag. Despite having released several new games for the platform during the last weeks, the number of games among the top grossing charts has remained rather unchanged.

Overall, the start of 2013 is promising indeed, as the overall app market is currently enjoying a sharp increase in download volumes, in-line with the typical seasonality (see our previous comments on market data from Flurry, Distimo, Apple etc.).

Number of G5 Entertainment games among the top grossing charts for iOS:

(We are screening the app markets of Australia, Brazil, Canada, China, France, Germany, Italy, Japan, Netherlands, Russia, South Korea, Spain, Sweden, UK and USA)

G5rankingcheckApple

Number of G5 Entertainment games among the top grossing charts for Google Play:

(For Google Play, we are screening the app markets of France, Germany, Netherlands, Sweden, and USA)

G5rankingcheckGooglePlay

In the meantime, we could experience another classic “Aktietorget”-effect on the share price last Friday. Almost exclusively dominated by private investors, misinterpretations of company statements are rather the norm on Aktietorget as impertinent comments on different forums can influence the sentiment of the uninformed. A typical example is the ridiculous issue of activating development costs. An issue that was discussed at Nordic Investor at length almost two years ago, it continues to pop-up every time the G5 share is down more than 2% and spreads short-term uncertainty among private individuals. Naturally, a listing at Nasdaq OMX will mitigate this effect and we can once and for all ignore these pathetic, amateur attempts to influence the share price.

G5 Entertainment appointed renowned Swedish investment bank Carnegie as advisors for the relisting and a typical part of such a process is that Carnegie will take up coverage of the company. Other investment banks are likely to follow. This will be a major boost, once that professional analysts are setting expectations ahead of results releases etc, rather than anonymous aliases. Finally, finally, we will also see institutional shareholding in G5 Entertainment which will take away much of the illogical share price volatility. And of course, we will see the long-awaited multiple expansion once G5 will be benchmarked with other international gaming companies (which all are valued substantially higher).

Hardly surprising to anyone that has followed G5 Entertainment for more than 1 week, the company announced on Friday that it will reach an EPS of SEK 2.70 for 2012, rather than the SEK 3.20 which it had aimed for since September 2011. Revenues of SEK 80m were also below the previous guidance of SEK 87m, which was admittedly more surprising. However, we are still talking about y-o-y growth of 74%, so to state that this is disappointing is a joke. Had management not made these targets 1.5 years ago, everybody would have cheered over revenue growth of >70%. G5 continues to grow aggressively in an aggressively growing market – suck it up!

Following Friday’s announcement, we have updated our sensitivity analysis for 2013, using revenues of SEK 80m as a starting point, rather than SEK 87m as before. The other assumptions remain unchanged. As you can see in the calculations below, a 2013 EPS of at least SEK 4.50 seems to be a reasonable base case:

G52013sensitivity

 

The G5 Entertainment share is cheap. We are looking forward to institutional ownership which is finally around the corner!

Nordic Investor

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One Comment

  1. Rickard January 13, 2013 Reply

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