HS Vision|Market analysis
Rovio, which is in good shape, published profit figures that at least do not weaken its position in the negotiations on the merger, writes Elina Lappalainen, editor of HS Vision.
Rovio 2022 published on Thursday the result fell slightly short of analysts’ expectations but was perfectly fine.
“The company was very successful and continues to make strong results,” OP’s senior analyst Kimmo Stenvall evaluate.
In a normal situation, Rovio’s profit figures could push the company’s share price down slightly, but now the speculation about the completion of the acquisition is supporting the price.
On Monday, Rovio said that it had started a strategic investigation into the purchase offers for the company. The company said it had received contacts and preliminary proposals. As part of the investigation, Rovio said it would start preliminary discussions with “certain parties”.
At the same time, it is having non-binding discussions with the Israeli game company Playtika, which made a purchase offer for the company in January for a generous 680 million euros.
Although Playtika’s slightly unusual offer doesn’t seem likely to go through, at least it opened up the game.
Nordea analyst Felix Henriksson highlighted Electronic Arts, Take-Two, Netflix or Disney as potential buyers. In practice, however, it’s just a listing of the obvious big companies in the industry that may or may not be in the game.
Both Nordea and Inderes estimate that selling Rovio to Playtika is unlikely, as the Israeli company has a questionable reputation in Finland.
Playtika has previously bought Seriously in Finland in 2019 and Reworks in 2021. However, Seriously was discontinued last fall and its operations were moved to Israel and Poland. About 120 employees were laid off.
“Some other softer buyer [esimerkiksi Disney tai Netflix] made a higher offer than this could be difficult to ignore”, Inderes assesses.
Read more: The Israeli company seeking Rovio is a “militant organization” that has a bad reputation in Finland
Read more: Playtika’s purchase offer is not a surprise. The low valuation makes Rovio a desirable purchase.
Rovio since its listing on the stock exchange in 2017, it has not been the kind of success story that investors were promised. Started as managing director in January 2021 Alexandre Pelletier-Normand however, the company has started a new growth gear. Rovio has invested, among other things, in establishing new gaming teams in Canada and Barcelona, and has grown through acquisitions.
The gaming market is still fundamentally uncertain. Although there are still four new games on the test market, their hit potential cannot be predicted with certainty.
If Rovio’s board were to reject a higher buyout offer, it would have to have a strong case for growth as an independent company.
“One should believe that the management’s current plan will lead the company to growth, where the fair value of the share should be higher than the offered price. Then you could say that there will be no deals and we will be able to perform better independently”, says Stenvall.
December is the most important month in the world gaming market. Therefore, it is not a good sign that Rovio’s profit fell clearly in the last quarter of last year from a year ago. Net sales also decreased by 2.5 percent to 76.9 million euros.
The year 2022 was difficult for the entire industry, as the boom in the gaming industry during the corona pandemic has now evaporated. Last year, the mobile game market declined for the first time ever.
Rovio’s biggest games were released in the summer of 2015 Angry Birds 2 and the one published in January 2019 Angry Birds Dream Blast.
Along with them, there should be new breakthroughs, but it is difficult. An aging game portfolio focused on a few top games does not convince investors.
According to Pelletier-Normand Dream Blast the second half of the year “was wonderful”. The game’s gross sales increased in the quarter to a new record, 21.6 million euros.
It’s good news that a four-year-old game is still receiving new power.
There was a silver lining in the weakening of the result, as the background was, among other things, the increased costs of user acquisition. When the game takes off, it’s worth investing in its advertising.
Now the question is, how hard offers will the buyers put on the table. Information about it can be expected in the next few weeks.
Rovio Entertainment
October–December 2022
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Rovio’s turnover decreased by 2.5 percent in the quarter to 76.9 million euros from 78.9 million euros the previous year.
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The group’s adjusted operating profit fell to 5.9 million euros.
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Comparable gross sales of games decreased by 7.9 percent while the global mobile game market (excluding China) decreased by 7 percent.
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The gross sales of Rovio’s second biggest game, Angry Birds Dream Blast, increased by 33.4 percent to a new record of 21.6 million euros.
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User acquisition investments grew to 23.3 million euros and were almost a third of the games’ turnover.
January–December 2022
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Rovio’s net sales grew by 11.0 percent in the whole year to 317.7 million euros from 286.2 million euros the previous year. Comparable turnover, i.e. calculated at constant exchange rates, decreased by 1.2 percent.
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The group’s adjusted operating profit fell to 39.2 million euros.
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Gross sales of games increased by 9.8 percent to 298.0 million euros. Comparable gross sales decreased by 2.8 percent while the global mobile game market (excluding China) decreased by 10 percent.
Correction on February 9, 2023 at 9:08 p.m. The article originally misspelled Felix Henriksson’s name as Henderson.
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