G5EN.ST — mttssn research

HOLD

Conviction: MEDIUM

A net-cash mobile-games developer (match-3/hidden-object) with a high free-cash yield (18%) but thin operating margins (~2% EBIT) in a mature, user-acquisition-heavy, competitive category. Cash-rich, thin economics. HOLD.

Adj. ROIC

7.1%

WACC 8% → spread -0.9pp

Economic Profit

SEK -2M

≈breakeven; thin margins

FCF Yield

18.1%

18% FCF yield; net cash

Price / Target

SEK 68 → SEK 65

-4% base; HOLD

Revenue (LTM)

SEK 872M

LTM; casual mobile games

EBIT Margin

2.3%

~2% EBIT — UA-heavy

EV / IC

1.27×

Enterprise value / invested capital

Net Debt

net cash SEK 251M

net cash

Thesis

G5 Entertainment develops and publishes casual mobile games (match-3, hidden-object, puzzle). It is net-cash with strong cash conversion (18% free-cash yield), but operating margins are thin (~2% EBIT) because user-acquisition spend consumes most of the gross profit in a mature, competitive mobile-gaming market.

The reverse-DCF brackets the price (−16% to −19%) on ~11% implied growth — demanding for a hits-driven, UA-dependent model. The net-cash balance sheet and buybacks are the support; new-game success and UA efficiency are the swing factors.

Valuation · reverse-DCF & scenarios

Bridging adjusted NOPAT, reverse-DCF fair value runs SEK 55–57 across scenarios — modestly below the SEK 68 price (~11% implied growth). The net cash and FCF support the equity; thin margins and hits dependence cap it.

Base SEK 65 (−4%); bull SEK 85 (new-game hits + UA efficiency lift margins); bear SEK 50 (live-game decline or rising UA costs).

Market-implied growth

≥6.8%

model ceiling — EV implies more than constant-ROIC sustains

No-growth value / share

SEK 57

84% of price; rest = priced-in growth

ROIC − WACC

-0.9 pp

ROIC 7.1% vs WACC 8.0% — positive = value creation

CAP (priced-in)

n/a

years of excess returns the price implies (fades to WACC)

At today’s enterprise value the constant-ROIC reverse-DCF maxes out: even at its sustainable-growth ceiling (~6.8%, limited by ROIC 7% ≈ WACC 8%) it cannot reach the current EV. No-growth value is SEK 57/share (84% of price); the market prices in growth and/or a higher ROIC than booked — richly valued on this lens. Read the sensitivity grid.

Scenario	24m target	Impl. g	Upside	Prob.	Driver
Bull	SEK 85	≥7%	+25%	30%	New-game hits + UA efficiency lift margins
Base	SEK 65	≥7%	-4%	40%	Net cash supports; thin margins cap
Bear	SEK 50	-38%	-26%	30%	Live-game decline or rising UA costs
Prob-weighted	SEK 66	—	-2%	100%	Scenario-weighted expected value

Sensitivity — fair value / share at WACC × growth

WACC \ g	0%	3%	5%	8%	10%	15%
6.50%	65	66	66	67	67	67
7.25%	60	60	60	60	60	59
8.00% (base)	57	57	56	55	55	52
8.75%	54	54	53	52	51	48
9.50%	52	51	51	49	48	44

Green = fair value above the current price of SEK 68.00. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.

Method & data. NOPAT SEK 16, invested capital and ROIC 7.1% are observed (adjustments.json); WACC 8.0% and terminal g 2.5% are assumptions. EV→equity uses net debt SEK -251. The model holds ROIC constant (no fade) over the explicit horizon; the CAP figure instead fades excess returns to WACC.

⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.

Key drivers

1. Net cash + 18% FCF yield

A net-cash balance sheet and strong cash conversion fund buybacks.

2. Live-games portfolio

A portfolio of long-lived live games provides a recurring revenue base.

3. UA-efficiency optionality

Improved user-acquisition efficiency would lift thin margins.

4. New-game pipeline

New title success is the principal growth lever.

5. Buybacks

NAV-accretive share repurchase supports per-share metrics.

Key risks

Thin margins / UA dependence~2% EBIT margins — user-acquisition spend dominates; the core economic risk.
Hits-driven modelMobile gaming depends on new-title success and live-game longevity.
Platform dependenceApple/Google store fees and policy changes affect economics.
CompetitionA mature, crowded casual-gaming market.
Full implied growthPrice embeds ~11% growth against thin margins.

Conclusion

G5 is a cash-rich but thin-margin mobile-games developer in a competitive, hits-driven category. HOLD, medium conviction; base target SEK 65 (−4%).

New-game hits and UA efficiency are the upside; thin margins and live-game decline are the risks.