Next Games: New co-development deal in the bag - Nordea

Yesterday (15 December), Next Games announced the signing of a five-year co-development agreement for a mobile game in a deal worth up to USD 16.5m. We raise our 2021E-23E revenue and earnings accordingly but note the uncertainty inherent in our estimates due to limited disclosure of the deal structure. In our view, Next Games' equity story remains subject to downside risks owing to its high reliance on individual games (Stranger Things: Puzzle Tales comprises ~50% of 2022E revenue), limited financial resources and the uncertainty related to the upcoming launch schedule. On the other hand, the commercial success of Stranger Things: Puzzle Tales could prove to be a positive swing factor for 2022. In addition, potential strategic partnerships or even a takeover could lead to upside for investors, although visibility of these factors remains weak. Our fair value range decreases to EUR 1.3-1.8 (1.3-1.9) due to lower peer multiples. Marketing material commissioned by Next Games.