Strong portfolio mix further drives profitability

In this equity report, analysts Abdiaziz Musse and Alexander Hammarvid take a deep-dive into Stillfront Group, a market leader in free-to-play online strategy games. To date, the company has acquired 14 gaming studios and their latest acquisitions Storm8 and Candywriter will further drive Stillfront’s EBIT-margin expansion at a CAGR of 61.7% (2019A-2022E). With a target EV/EBIT ratio of 20.0x in 2021, our analysts suggest a potential return of 50.2%.

Investment highlights:

  • Strong cash flow generated from the company’s portfolio mix will further drive the organic growth with a forecasted organic sales growth of 25.0%, outgrowing the market of 9.0%.
  • Proven track record of acquiring profitable gaming studios with strong expected organic growth and high EBIT margins, which is reflected upon its RONIC of 15.7% during 2019A and estimated to 19.6% by 2020E.
  • High operating cash flow, reflected in a cash conversion ratio of 1.2 in combination with its successfully issued subsequent bond of SEK 500m and an estimated Net Debt/EBITDA of 1.46x by 2020E, provides great opportunity for future acquisitions.

To get the full elaborate view on the case, please see the report below: