Tag Archives: nordic investor

#G5 Entertainment: #Mobile to drive video games to $100bn sales

Mobile gaming is growing so fast that it’s expanding the traditional video game industry far beyond its old borders.

Tim Merel, the managing director of game investment bank Digi-Capital, issued a report today that predicts mobile games could drive the whole game software industry’s revenues to $100 billion by 2017, making it one of the most lucrative sectors for entertainment and software. He said the mobile and online game sectors could grow at a compound annual growth rate of 23.6 percent to $60 billion by 2017.

Game IPOs

“Competition for growth is intensifying, as the new kids on the block harness the energy in the cycle to take them to the summit. However, this is an elite marathon not a sprint, so long-term engagement performance is just as important as short-term success,” Merel said in a statement.

Mobile games and Asian activity drove mergers and acquisitions to a record $5.6 billion in 2013 (and that’s excluding $2.3 billion from the management-led portion of the Activision Blizzard/Vivendi spinout), up 29 percent from 2012. The average deal grew 23 percent from 2012 to $63.8 million.

Mobile accounted for 67 percent of the M&A transaction value and 36 percent of the volume.

Mobile gaming could drive entire video game industry to $100B in revenue by 2017

“While many deals were focused on growth, there was considerable consolidation for pivot and turnaround strategies,” Merel said.

He noted that Asia is becoming the biggest driver of economic value in mobile and online games, with the best companies’ revenue growth and profit margins becoming the envy of foreign competitors. Merel predicted that Asia and Europe combined could take more than 80 percent of the global revenue share for mobile and online games. Nine of the top 10 game M&A deals of 2013 had Asian buyers, compared to eight out of 10 in 2012. Thirteen out of 15 game initial public offerings from 2011 to 2013 were by Chinese, Japanese, or South Korean companies.

Merel said that game businesses are now operating in multiple regions around the globe. A lot of this fits in with our theme of Total World Domination at our upcoming GamesBeat 2014 conference in San Francisco on Sept. 15-Sept. 16.

Game mergers and investments by category

Games investment from venture capitalists, corporate venture funds, angels, and Kickstarter/crowdfunding recovered slightly in 2013, returning to 2010 levels. Investment in game companies grew in value by 16 percent 2012 to $1 billion.

But Merel said that an early stage game-investment gap remains. Metrics and analytics have become increasingly significant in fundraising. Average game investment deal size grew 14.8 percent from 2012 to $6 million. Mobile games and tech/gamification deals dominated 2013.

Meanwhile, game playing is growing on mobile. Games accounted for 32 percent of mobile app use in 2013, and they were 67 percent of tablet use. They accounted for 72 percent of mobile app revenue and 40 percent of mobile app downloads in 2013.

Asian over-the-top messaging apps (like Kakao in South Korea) are disrupting the landscape, taking significant share of the top 100 app store rankings in various markets.

Meanwhile, the launch of the new game consoles is beginning to address the console decline of recent years, but Merel said questions remain about how many new machines the vendors will sell.

“Where 2013 was a year of transition, we anticipate 2014 to be a year of both growth and disruption for the games market,” Merel concluded.

Game sector and region revenue

One of the few listed pure mobile gaming companies is Sweden listed G5 Entertainment.

Nordic Investor

#G5 Entertainment: Q4 record quarter

newlogoG5 Entertainment released this morning its preliminary Q4 2013 revenue numbers which showed that the company is back on its growth track.

Based on the information available, for the period of January-December 2013, the management forecasts revenue of 100 MSEK, which corresponds to achieving 24% revenue growth compared to the same period of 2012, and means that it is likely that October-December 2013 became record quarter for G5, with y-o-y revenue growth of around 39%. Based on the information available, revenue from free-to-play games accounted for over 60% of the group’s revenue during October-December 2013.

Vlad Suglobov, CEO, comments: “Like in previous years, we have seen substantial increase in revenue during the holidays, which so far continued into 2014. During the fourth quarter of 2013, which was likely our record quarter to date, revenue from free-to-play games continued to grow, while revenue from unlockable games was mostly unchanged. Historically, January and February have been very strong months for the group due to holidays and the inflow of new users into smartphone and tablet ecosystem. So far, it looks like we are following this pattern again.”

Following a period of transition away from unlockable more towards free-to-play games, Q2 and Q3 2013 were weaker periods for G5 but the 39% y-o-y growth in Q4 shows how successful the company is with its blockbuster hit Secret Society. We are optimistic that at least one of its recently released or to-be-released F2P titles can match the success of Secret Society which will keep growth rates at high levels.

With the stock being completely out of favour and the upcoming relisting to Nasdaq OMX, we believe there should be a lot of room for a relief rally over the coming weeks.

Nordic Investor

#G5 Entertainment: New record for mobile app downloads this Christmas

Flurry (www.flurry.com) is just out stating that its data showed another record-breaking level of app downloads this Christmas. It also provides further evidence that, in the early mobile markets at least, devices are evolving from being our new shiny toys to our everyday companions.

For its latest report, Flurry looked across more than 400,000 apps that Flurry tracks globally to see what happened around the Christmas tree. We found that Christmas downloads were up by 91% compared to an average day in the first three weeks of December. That is a large increase, but as shown below, the size of the Christmas download spike is diminishing over time as the app market matures and globalizes.

Slide3 new resized 600

2013 was the biggest Christmas yet for mobile app downloads. As the chart below shows, overall app downloads increased by 11% on Christmas 2013 compared to Christmas 2012.  Over the same one year time span, there was a 25% increase in app downloads on an average December day. As the data illustrates, both the overall rate of year-on-year growth and the year-on-year Christmas growth have slowed considerably in the past year (from 97% and 90% respectively between 2011 and 2012).

Overall Growth resized 600

The slowing growth rates and smaller Christmas Day app download spike signal market maturation. Many consumers in Western Europe and English-speaking countries — large mobile markets where Christmas is a big holiday — already have a smartphone and / or a tablet. Fewer people are coming online with mobile for the very first time. Consumers who are on second, third or fourth devices have apps that they like and trust, and while they still download new apps, there isn’t much more impetus to do so on Christmas than any other day when they have a little downtime. New device activations do still spike on Christmas, but that spike is waning compared to years past, and it comes on top of a much larger installed base. That means that when new devices are loaded with apps, the overall impact on app download volume is not as big.

The biggest growth in mobile now is coming in countries where Christmas is a less significant holiday or not celebrated at all, so new device activations and app downloads come at different times of the year in those places. And because those high-growth areas are joining an already large global market, overall growth rates are less striking than when the mobile market was new.

Leisure-Oriented Apps Experience the Biggest Christmas Lift

To look at the types of apps that see the greatest increase in downloads at Christmas, we indexed the numbers by comparing Christmas to an average day in the first three weeks of December to eliminate inflation due to the continued growth of the overall connected device installed base.

After doing that, we see a similar phenomenon to what happened on Thanksgiving. Because our devices have become so intertwined with our lives, on a day like Christmas when most of us are relaxing, the apps we download reflect that. Games and social apps were downloaded on Christmas at twice the rate they were on a typical December day. The other categories that experienced the largest surge in Christmas downloads were media (photo, video, music) and lifestyle (sports, books, magazines, entertainment).

describe the image

Are Prospects Changing For App Developers?

Maturation of the app market means that changes are in store for app developers. The gold rush days of huge jumps in the overall size of the connected device installed base on Christmas, followed by a dizzying rush of app downloads are fading. Of course, there will still be apps that tap into some vein of consumer interest or amusement and developers who strike it rich as a consequence. But overall, the successful developers in 2014 and beyond will be those who put in the hard work of identifying a target group of users, creating apps that work well for them, and continually refining and reinventing mobile experiences to profitably retain those users.

Nordic Investor

#G5 Entertainment: Rankings point towards sequential increase in Q4

newlogo G5 Entertainment will soon release its preliminary Q4 revenue numbers. Usually, G5 reports  preliminary numbers 3-4 working days after the end of the quarter, which this time most likely means on January 3rd 2014.

With two new F2P games released in recent weeks and several Christmas-updates for its most successful games such as Secret Society, G5 Entertainment has done its utmost to be well positioned going into the prime time of app sales.

As you can see in the graph below, the improvement in Q4 compared with Q3 2013 is pretty obvious. In Q3 2013, G5 recorded revenues of SEK 21,9m and looking at the trend in Q4 we think it is reasonable to expect a higher number than that in Q4. In Q4 2012, G5 recorded revenues of SEK 20,7m, so the company seems back on track to deliver significant year-over-year growth.

Elsewhere, we note that a member of the Board has continued to buy shares throughout December, with the latest transaction made on December 27th (http://www.aktietorget.se/InstrumentInsider.aspx?Language=2&InstrumentID=SE0001824004). Insider buying is always a good sign and might in this case be an additional indicator that Q4 numbers will look good indeed.

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

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


Nordic Investor

#Opus Group: A star in the making


Short name: OPUS
ISIN code: SE000169668

Sweden listed Opus Group is one of the great success stories on the Swedish stock market over recent years. Almost exactly two years ago, the Opus share was trading at SEK 0.68, today we are at SEK 11.75. The reason for this impressive journey is a combination of organic and structural growth. The most recent example is the acquisition of US company Envirotest, which was announced last week.

Opus’ business is to develop, produce and sell products and services within the vehicle emission and safety testing sector for the global market. Following the acquisition of Envirotest, Opus has around 44% of the US vehicle inspection market. The combined annualised revenue of Opus and Envirotest amounts to around SEK 1.5bn but according to Opus CEO Magnus Greko, there is way that this is the end of the road for Opus. In an interview from last week he stated that double that size would be desirable (i.e. SEK 3bn) since size matters when it comes to securing long-term contracts with governments and states. Says Greko: “In order to get the contracts and to build up and actually execute a vehicle inspection programme in a country for 10-20 years, you have to have a certain size. You have to be able to show that you have the technologies and test many million cars in different segments.”

Internationally, Opus competes with some 10 companies of which many have sales of SEK 3- 10bn within vehicle inspection.

Greko continues: “We are still somewhat small. The Envirotest acquisition is a step into the right direction but if we want to become really global, we have to become bigger. You have to come up to sales of around SEK 3bn to be a global player. We will continue to grow organically and we will look at acquisitions once we have consolidated Envirotest. Our target is to have net debt of below 3x EBITDA, but we have strong cash flow which we will use to pay down the debt. Net debt / EBITDA is a bit below 3 after the Envirotest acquisition.”

Another interesting aspect of the Envirotest acquisition is its profitability. Envirotest’s EBIT margin is close to 25%, which compares to Opus’ 15% (due to Opus equipment business which has lower margins than vehicle inspection). Margins within the Swedish vehicle inspection business are around 16%, something that CEO Greko is certain to improve in the future.
Once we introduce our new IT-system we’ll get cost savings. Also, the importance of the lower margin equipment business (5-10%) will become less and less (ca. 10% following the Envirotest deal).

We believe the recent acquisition increased the likelihood of Opus winning further contracts in the US, where the upcoming call for tenders in California is one of the highlights. California has 10 million inspections p.a. Furthermore, Opus should have good chances to grow in South America (e.g. Chile), but also Asia (e.g. India). In Sweden, Opus is likely to sooner rather than later to increase the outdated prices for its vehicle inspection services which could give an upside of 10-20% versus current levels. All in all, it should not be impossible for Opus to reach 2014 sales of SEK 1.8bn which in combination with an assumed EBIT margin of 16.8%, a financial net of SEK -36m, a tax rate of 27% and an applied number of shares of 245.7m (guesstimate), would give us a 2014 EPS of SEK 0.80. At current share price levels, this implies a PE-ratio of <15x expected 2014 earnings. We believe this is far too little for a fast growing company like Opus with a strong track record and clear growth ambitions.

In order to highlight the potential of the Opus share, we crunch some numbers and try to assess what the company could earn under the SEK 3bn revenue scenario that CEO Greko is targeting:

We believe that growth will primarily come from the vehicle inspection business, which has margins above current group average. Not the least the Envirotest example shows that margins of >20% are not impossible in that business. However, for the sake of being conservative we apply an EBIT margin of 17% on the SEK 3bn revenue scenario, leaving us with an EBIT of SEK 510m. Obviously, we have to make many assumptions as to how the growth to SEK 3bn sales is financed etc. We decided to apply an increase in net debt to SEK 1bn under the scenario. Envirotest was acquired at EV/Sales around 1x, but we do not believe that Opus will have to acquire the whole SEK 1.5bn in order to come to the SEK 3bn, but it will also continue to grow organically and its cash flow will counteract the debt increase somewhat. Using an interest rate of 5.5%, a tax rate of 27% we derive at an EPS of SEK 1.35. Applying a PE-ratio of 15 on this EPS number, we get a fair share price of SEK 20.25.

We think the Opus success story is far from over.

Nordic Investor

#G5 Entertainment: Read across from #Glu Mobile Q3 presentation

Glu Mobile, the only listed US mobile gaming company, reported its Q3 2013 results on October 30th. Glu Mobile currently has tremendous success with its Deer Hunter 2014 game, which is among the top 10 grossing iPhone games in the US, which according to several sources could mean as much as USD 250,000 per day.

At this point we do not want to go into the details of the actual results but rather highlight a few slides Glu Mobile presented in connection with its quarterly release as they bear interesting read across to our top-pick G5 Entertainment.



GluGlobalGamingWe believe mobile gaming will enjoy high investor interest in the coming weeks and months with the upcoming IPO of king.com. Already listed mobile gaming companies should highly benefit from this. The “problem” is that there are almost no listed pure mobile gaming companies. Glu Mobile and G5 Entertainment are among the few exceptions.

Nordic Investor

#G5 Entertainment: More M&A – this time involving #Supercell

iphoneappsM&A action within Mobile Gaming is heating up significantly with Asian players being the driving forces. Only a few days after we could report about renewed acquisitions by Gamevil (http://nordicinvestor.net/2013/10/09/g5-entertainment-ma-action-mobile-gaming/), today a really big deal becomes public, involving one of the biggest players in the sector, Finnish Supercell.

The deal marks a remarkable and big move for Softbank into the gaming world, and a massive investment for Finnish gaming juggernaut Supercell. The company is selling a 51% stake for $1.53 billion to Japan’s SoftBank and GungHo OnLine Entertainment, a games developer. This strategic investment, which will be used to fuel Supercell’s global expansion, effectively represents a quadrupled valuation for Supercell to over $3 billion in the last seven months.

GungHo and Supercell have a pre-existing relationship announced earlier this year for in-game collaboration. Softbank, meanwhile, has been a major investor not just in mobile carrier networks, but also as an investor in services to run across those networks. Its a major player both in Japan as well as in the U.S. with Sprint and has long held big ambitions to grow its business in mobile overall. In this deal, GungHo is investing 20% of the amount, and SoftBank the remaining 31%.

The 51% stake and value of it was first reported by a reporter at WSJ before getting confirmed by Supercell.

Since opening for business in 2010 the maker of Clash of Clans has been on a growth tear. On a relatively small portfolio, essentially just Clash of Clans and Hay Day, the company has managed to hold on to the number-one games publisher position between February 2013 AND August 2013. The two games, meanwhile, have been the top grossing games respectively in some 137 and 96 Apple App Store countries. That resulted in the company raising a $130 million round at a $770 million valuation in April of this year. The company has clearly continued to grow, nearly quadrupling that valuation in the last seven months.

The investment comes at a key moment in the world of social and mobile gaming. King.com is reportedly gearing up for an IPO, and all eyes are on troubled Zynga and its upcoming quarterly earnings as an indication of whether the public markets are really the best home for fast-growing gaming companies.

In that context, Supercell so far has chosen to take a different route, backing away from turning to the public markets, with all their scrutiny, and instead giving employees and shareholders liquidity through secondary sales and going to VCs for further investments. That seems to be the motivation with taking this investment, too. Writes Ilkka Paananen, CEO of Supercell in a blog post:

This new partnership will accelerate Supercell towards our goal of being the first truly global games company, and gives us enough time to get there. Let me try to explain why.  The combination of tablets, mobile and the free-to-play business model has created a new market for games, one that will be accessible to billions of consumers, more people than ever before in the history of games. This truly is a new era of gaming and has opened up exciting opportunities for new kinds of companies. 

At Supercell, one of our greatest aspirations is to become the first truly global games company, one that has a strong foothold in both the West and the East, including Japan, Korea and China. We want to build a company that people all over the globe will look back in 30 years and talk about all the great games that we developed and the impact they had on people’s lives. The same way I personally feel about Nintendo, for example.

 This is a lofty goal and getting there takes persistence, passion, and luck – but just as importantly, it takes time, and requires a lot of patience. Even if we have had a pretty good start on our journey, it is still very early days. Creating history takes time.

This new partnership also takes our collaboration with our good friends at GungHo to the next level. We are super excited to have them participate in this investment by putting in 20% of the total amount. We’ve had a great collaboration between Puzzle & Dragons and Clash of Clans. They’re an amazing bunch of people, and they have a terrific culture. Through them we’ve come to learn that the Japanese and Finnish cultures are pretty similar on many levels. Not only when it comes to taking your shoes off before you enter someone’s home, but also and more importantly, when it comes to partying, if you know what I mean.

It may sound like a detail, but I should also mention that the company that will end up owning 51% of Supercell is incorporated in Finland. This is both exciting and important for me personally. Although our aspirations are global, our roots and future are very much in Finland. Our operations remain in Finland, our management team remains in Finland and in San Francisco, and we continue to pay taxes in Finland. I think more and more people in this country are realizing that there is life after Nokia!

Naturally, this transaction is great for us from an economic perspective. As many of you know, a big part of Supercell’s culture is the idea of “we are all in this together”. In line with this thinking, everyone at the company will participate in the upside and receive a portion of the proceeds from the investment. None of us work here just for of money, but when the company succeeds, everyone should get their fair share of it and this transaction is no exception….

…Now, let’s go make history together! Kippis! Kampai!

What a buzz around mobile gaming these days! Acquistions, IPOs and in the middle of it G5 Entertainment that will soon relist to Nasdaq OMX.

Nordic Investor

#G5 Entertainment: Ranking check

newlogoOur first ranking check for G5 Entertainment in Q4 does not show any meaningful change in recent trends, i.e. a sideward movement for the portfolio as a whole. While we continue to see it positive that Secret Society is the star performer, the recent Q3 preliminary numbers served as a reminder that it is not enough if G5 wants to return to the growth rates seen since 2009. New quality F2P games have been promised for quite some time now and we really need to see them soon. G5 is most likely planning a strategic launch into the all-important holiday season. That said, F2P games usually need some time to build a large user base and then turn into paying customers after some weeks of playing. So launching the games sometime during October would seem suitable, we believe.

Last week’s share price reaction was once again a sign of how desperately needed a change of listing is. Trading in Aktietorget-listed companies is dominated by private individuals that make unsophisticated and emotional decisions, usually exaggerating any share price movement. At current levels, the G5 share appears to be extremely oversold and with the relisting to Nasdaq OMX around the corner, it seems foolish to not be long G5 Entertainment at this point. The IPO of Candy Crush maker King.com should also contribute to renewed buzz around mobile gaming and there are really not that many 100% plays on mobile gaming out there. G5 stands out as extremely undervalued compared with peers.

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)


Nordic Investor

#G5 Entertainment: Comparison with Gameloft reveals potential

The Q2 reporting season is over for the main listed players in the mobile gaming space and we thought it was time to have a look on how our top-pick G5 Entertainment fares compared with one of the segment bellwethers, the French company Gameloft.

In its recently announced report Gameloft stated that it achieved consolidated sales of EUR 55.2 million during the second quarter of 2013, up by 10% from the previous year. On a constant-exchange-rate basis, the second-quarter growth was 12%. EMEA represented 33% of second-quarter sales; North America, 25%; LATAM, 22%; and APAC, 20%.  Over the first half of 2013, Gameloft achieved consolidated sales of €109.4 million, up 15% year on year. On a constant-exchange-rate basis, growth for the first half was 17%. EMEA represented 32% of first half sales; North America, 25%; LATAM, 23%; and APAC, 20%.


Sales (€ million)




1st Quarter




2nd Quarter




1st Half




Gameloft states that sales continue to be driven by the worldwide success of Gameloft games on smartphones and tablets. Gameloft’s first-half sales on smartphones and tablets grew by 45% year on year. They represented 61% of total Group sales compared with 48% in the first half of 2012.  Gameloft’s rapid growth is also driven by the success of virtual goods and advertising which currently account for 80% of the company’s smartphone revenues. The free-to-play model enables Gameloft to reach much larger audiences as well. In the last 30 days, no less than 125 million people have played a Gameloft game on their smartphone or tablet.

Gameloft is optimistic in its outlook comments saying that  the recent and upcoming launches of several potential blockbusters should allow company sales to continue to grow in the coming quarters. Gameloft’s latest release, Despicable Me: Minion Rush, is a major success worldwide. With more than 65 million downloads since its launch last June, Despicable Me: Minion Rush is currently ranked in the Top 10 Grossing of 41 countries on iOS, including the US and the UK.  Gameloft targets between EUR 235 million and EUR 240 million in sales for the full year of 2013 (implying a y-o-y growth of 14%), as well as an increase of profitability and net cash.

The Gameloft share has had a nice run over the last 3 months and is up some 14% over that period, currently trading at around EUR 6,3. Year-to-date the share is up by almost 20%. Gameloft’s current share price implies a PE-ratio of 22x expected 2013 earnings (using consensus estimates from the analysts covering Gameloft).

Gameloft share price

As we have reported before, G5 Entertainment reported consolidated revenue for Q2 2013 is of SEK 21,8m, up 17% compared to the same period last year. Over the first half of 2013, consolidated revenue reached SEK 49,4m, up 37% compared to the same period last year.
Since G5 released its Q2 2013 report, the company has even increased its success of its blockbuster F2P title Secret Society. Last week, the game was ranked as high as #15 top grossing game in the USA on iPad. On Google Play, the game is making real money with top grossing rankings among the top 30 in e.g. France. Furthermore, G5 launched today its next F2P title, Brave Tribe. This is the first of many more to come, as CEO Vlad Suglobov has stated in the past.

Surprisingly, G5 Entertainment’s share price has had a different journey compared with Gameloft in 2013. Over the last 3 months the G5 share is down some 13%, currently trading at SEK 42,8. Year-to-date the share is down closer to 15%. The current share price implies  a PE-ratio of around 12x expected 2013 earnings (Nordic Investor estimates).

As you can see from the table above, G5 is beating Gameloft operationally. Nevertheless, its share has dramatically underperformed Gameloft and is trading at a substantial discount. Applying the same PE-ratio that Gameloft is trading at to G5, implies a fair share price of around SEK 75 for G5 Entertainment, i.e. an upside of more than 75% versus today’s levels.

Such a mispricing is naturally not sustainable in the long-run. Be sure that international investors will jump on the G5 train as soon as the relisting to Nasdaq OMX is done. It’s good to be ahead of the crowd…

Nordic Investor

#G5 Entertainment: Finally earning money on Google Play

newlogoG5 Entertainment’s top title Secret Society continues to increase its importance for the company’s revenue. Last week has shown an impressive journey on the top grossing iPad charts around the world, with the highlight being a #16 spot in the USA. While it is hard to quantify just exactly how much such a position is worth, industry reports suggest that around USD 30,000-40,000 a day might not be impossible. Admittedly, Secret Society’s iPad rankings have sort of normalized again and the game is today ranked #46 in the USA, not too shabby either.

What’s equally noteworthy is the increasing success the game has on Google Play. As of today, Secret Society is ranked #88 in the USA, #61 in the UK, #77 in Germany and even #34 in France and #50 in Russia’s top grossing charts. For the first time ever, G5 Entertainment is earning some serious money on Google Play, where it has had a lackluster performance in the past. This should be kept in mind when projecting Q3 2013 y-o-y growth. Q3 2012 had a stellar performance of Virtual City Playground in iOS, however, VCP was not as successful as Secret Society nor was it  particularly successful on Google Play/Android.

The following tables and graphs are taken from www.g5info.se:


G5 continues on its profitable growth track and we see the recent sluggish share price performance as a great entry point ahead of the upcoming relisting to Nasdaq OMX. Foreign investors and bigger investment funds will want to jump onboard this great growth case and we are convinced that G5’s management has many more aces up its sleeves.

Nordic Investor