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Next Games - Ingredients for growth in place

Next Games H2 results were overall rather neutral, with the highlight being the continued good publishing operations profitability. The new games appear to be well on the way but larger scale ramp-up will likely have to wait until H2/2021. We retain our SELL-rating with a target price of EUR 1.8 (1.6).

Rather neutral H2, good publishing operations profitability
Next Games H2 revenue was EUR 12.8m (Evli 13.6m) and adj. EBIT EUR -0.2m (Evli 0.5m). Apart from an overly optimistic view on the contribution of the new projects on our part the H2 figures were quite as expected, with the gross bookings of the NML and Our World games in line with our expectations. NML continued on a rather steady trajectory while Our World metrics continued on a declining trend. Publishing operations EBITDA was at a good level of EUR 3.0m (Evli EUR 3.4m) and FY2020 publishing operations EBITDA-% was at a commendable 24%.

New games key factor in 2021
Next Games expects revenue in 2021 to amount to over EUR 40m and for EBITDA to remain positive. Based on the comments for the plans to scale the new games (Blade Runner Rogue, Stranger Things: Puzzle Tales) we see that in our former estimates our scaling assumptions may have been too optimistic. The Blade Runner Rogue game is set for launch in its main market the US in Q1. The Stanger Things game was launched in certain markets in December 2020 and is set for certain feature updates before larger scale up. We have adjusted our 2021 revenue estimate to EUR 44.2m (prev. 50.5m) and EBITDA estimate to EUR 2.1m (1.7m). We expect larger ramp-up in scaling of games during H2.

SELL with a target price of EUR 1.8 (1.6)
Next Games remains a growth company, with yet little proof of growth on group level in previous years. Success of new games is crucial, both for growth and improvements in cash flows, with the proportionately high share of R&D affecting profitability and cash position. On our new estimates and with increases in peer multiples we raise our TP to EUR 1.8 (1.6), SELL-rating intact.

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