Flexion reported Q1 sales of GBP 10.6m (+61% y-o-y), 5% above ABGSCe. Gross profit increased to GBP 1.5m (+78% y-o-y) and EBIT was GBP 0.25m (-0.14m) – we had expected EBIT to be negative. The company has guided for FY sales growth between 40% and 60% for its core business, so the Q1 growth trend was above the given range for the full year. With several large games currently in ramp-up mode and the promising game signings in 2022, we think Flexion will be closer to the high end of its guidance. Furthermore, we think the recent deals lend credence to the business model as both ONEMT and Funplus are recurring game developers. Flexion has now also completed the acquisition of Audiencly and it will be consolidated from April. It grew revenues 132% y-o-y in Q1 and will be margin-accretive to the group.
’22e-’23e sales up 18-21%, EPS up 64-22%
We raise our estimates substantially on the back of the Q1 report driven by higher expectations for the core business and the inclusion of Audiencly in our numbers. The Q1 deviation and the promising game signings (especially King of Avalon) make us more positive about the ‘22 guidance and we raise our FY sales growth assumption for the core business to 51% (up from 45%). As regards Audiencly, we forecast it will add GBP 8.8m in sales and GBP 1.1m in EBIT. The deal will be paid partly in cash and partly in shares with an earn-out structure over the coming three years. In total, we raise our sales and EPS estimates by 18-21% and 64-22% for ‘22e-’23e.
New fair value range of SEK 23-40 (20-34)
We have updated our DCF-based fair value range to SEK 23-40 (20-34). The share is currently trading at a P/E of 10.4x and an EV/EBIT of 7.4x for ‘23e.
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