G5 Entertainment: Stabilisation expected from H2’26 - ABG
* Weaker sales and maintained opex behind estimate cuts * We see relatively unchanged FCF '26e (SEK 46m vs 48m in '25) * Half of market cap in net cash; 5x EV/EBIT & 4x EV/FCF '26e
ANNONS
We cut '26e-'27e EPS by 51-27%
Q4 was below our estimates, partly driven by FX movements since our last update, but also weaker organic sales. Part of the organic decline was due to Sherlock, which slowed after encouraging signs in Q3 and early Q4, leading to -9% sales in USD terms y-o-y vs -7% in Q3. This in combination with higher opex y-o-y, partly from higher market investments to drive a growth stabilisation, caused the adj. EBIT miss (SEK 2m vs FactSet cons 12m). Management said that the investments to stabilise sales will continue in H1'26. The lack of new games right now, FX, and the slightly weaker trend for Sherlock make us cut 2026e–2027e sales by 14%. With opex held relatively unchanged, to invest in both the current portfolio and the pipeline, the lower sales fall through to the bottom line, leading to 2026e-2027e EPS cuts of 51-27%.
Organic growth to remain negative in H1'26, but improve in H2
We expect the organic growth (in USD terms) to improve slightly but remain negative in H1'26, improve in H2'26, and turn positive in 2027, supported by new games (management said it has one promising title in the final scaling test phase) and third-party games being released on G5 Store. As sales stabilise, we think G5 has the potential to get back to 8-9% margins in 2027-2028 (SEK 69-73m EBIT).
New fair value range SEK 50-120 (90-180)
The FCF remained positive in 2025, at SEK 48m, significantly higher than the reported EBIT of SEK 28m. We forecast FCF of SEK 46m in 2026, and that the net cash position including long-term investments will reach SEK 270m compared to the current market cap of SEK 460m. The share is therefore trading at 5x EV/EBIT and 4x EV/FCF on our new 2026 estimates. Our fair value range is cut to SEK 50-120 (90-180) on our lower estimates.
