in Mobile Gaming

#Gameloft: Q4 results and valuation implies huge upside for #G5 Entertainment

GameloftOn January 29th, French gaming company Gameloft reported record sales of €57.7 million ($77.8 million) in Q4 2012, up 23 percent year-over-year and up 4.2 percent since last quarter. Fiscal year 2012 revenues totaled €208.3 million ($280.9 million), up 27 percent from €164.4 million ($221.7 million) in 2011.

The company’s smartphone and tablet sales for Q4 grew by 66 percent year-over-year, accounting to 56 percent of the studio’s revenues, up from 41 percent in Q4 2011.

Gameloft attributed its Q4 2012 performance to recent game releases like Modern Combat 4: Zero Hour, World at Arms, My Little Pony and Playmobil Pirates as well as older titles such as Ice Age Village, Order & Chaos Online, The Amazing Spider-Man and Asphalt 7: Heat.

The North American region continued to be the most lucrative region, which attributed to 31 percent of sales in 2012. Europe and the Middle East accounted for 27 percent of sales, Asia pacific for 22 percent and Latin America for 20 percent.

Unlike previous quarterly earnings reports, Gameloft didn’t reveal any figures for its earning estimates in 2013. Instead, Gameloft “anticipates solid growth of sales and results in 2013.”

We note that the Gameloft share currently trades at a PE-ratio of 17 times expected 2013 earnings (25x 2012 earnings).  With 56% of its business related to mobile gaming, Gameloft significantly lags our top-pick G5 Entertainment in terms of mobile exposure, i.e. that part of the gaming industry that is actually growing. G5 Entertainment is almost exclusively focused on mobile devices .  Gameloft grows sales by 27% in 2012 versus 2011 which compares to more than 70% in G5 Entertainment case. Still G5 Entertainment trades at a substantial discount to Gameloft, at a PE-ratio of 11 times expected 2013 earnings (18x 2012 earnings).

Applying Gameloft multiples to G5 would imply a share price of SEK 68- 72.

Nordic Investor

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