On February 5th, app developer Glu Mobile is scheduled to report its FY 2012 result. Ever since its disappointing Q3 results release, Glu Mobile’s share price has been sluggish and the share is currently trading around USD 2.30, down from its 2012 highs of >5.50. That means that a lot of the negative newsflow has been priced in at expectations have been adjusted downwards. Nevertheless, an updated ranking check for Glu Mobile’s games shows that the FY 2012 result release is unlikely to be a positive trigger short-term. Management had guided for a poor Q4 and judging from the rankings, that is what investors will have to face on February 5th. What Glu Mobile needs are new blockbuster games that excite the players and make them pay more money.
We believe that Glu Mobile is well positioned to benefit from the app market growth story. However, Q4 and early 2013 have not been strong periods for their gaming line-up which makes us believe that there will be better entry opportunities around the corner.
(We are screening the app markets of Australia, Brazil, Canada, China, France, Germany, Italy, Japan, Netherlands, Russia, South Korea, Spain, Sweden, UK and USA)
Number of Glu Mobile games among the top grossing charts for iOS (Mac, iPhone and iPad aggregated):
Number of Glu Mobile games among the top grossing charts for iPhone:
Number of Glu Mobile games among top grossing charts for iPad:
A more attractive investment opportunity within the mobile gaming space is Sweden listed G5 Entertainment. As recently announced, G5 will change its listing from niche list “Aktietorget” to NASDAQ Omx during 2013 which will finally enable also non-Swedish investors to participate in this success story. With average revenue growth of around 90% in recent years, G5 Entertainment has an EBIT margin of >30% and is sitting on a net cash position. Its listing on “Aktietorget” has caused its valuation to be deeply discounted and the share is currently trading at a 12m forward PE-ratio of around 11x (17x on a 12m trailing basis). In comparison, consensus expectations for Glu Mobile are USD 0.00 f0r 2013 (i.e. 12m forward) and the most optimistic analyst is currently expecting a 2013 EPS of USD 0.08 (http://finance.yahoo.com/q/ae?s=GLUU+Analyst+Estimates). This most optimistic EPS estimate would imply a current valuation of 29x foward looking earnings for Glu Mobile. Using such a multiple for G5 Entertainment would imply a share price of around SEK 120. The G5 share is currently trading at SEK 48.