G5 Entertainment: Neg. growth trend, but solid profitability and CF - ABG

Sales -4% vs. ABGSCe but adj. EBIT +1% in Q1
We cut sales by 5% and adj. EBIT by 12-17% on '24e-'26e
Trades at 9x P/E, 7-6x EBIT and 14-12% FCFy '24e-'26e


Disappointing sales but adj. EBIT in line

G5 delivered disappointing sales (-4% vs. ABGSCe, -5% vs. FactSet consensus) but better profitability (EBIT of SEK 42m, +34% vs. ABGSCe, +38% vs. FactSet consensus) in Q1. The lower sales was driven by a relatively broad miss among the different games segments, corresponding to an organic growth of -14%. The stronger profitability was mainly driven by a one-time positive currency effect of SEK 9m. Excluding the FX effect, EBIT was more in line with estimates (+1% vs. ABGSCe). The reason the adjusted EBIT held up despite weaker sales was lower user acquisition cost (-16% vs. ABGSCe), reflecting the current softness and lack of growth opportunity in the existing pipeline, but also a positive indication of the company's ability to adapt its cost base. The FCF was strong at SEK 85m, resulting in a LTM FCF of SEK 172m (+27% y-o-y) and a record cash position of SEK 256m.