Mail.ru Group - On its Game
Mail.ru Group hosted an event on games today that proved quite insightful. The company targets to make 80% of its revenues in international markets (up from 63% currently) and, given a recent regulatory change in China, is interested in expanding into Asian markets. Mail.ru Group disclosed that in 2018 mobile games were responsible for 59% of total revenues (up 114% y-o-y), while the segment's EBITDA margin (excluding corporate allocations) was 23%. PC games garnered 38% of the total, down 8% y-o-y, although the EBITDA margin remained high at 59%; console games were just 3% of revenues with a 0% EBITDA margin. Mail.ru expects the EBITDA margin to decline for PC games (to 51% in 2019) and to grow for mobile (to 26%) and consoles (to 24%). However, given the structural shift, Mail.ru expects the EBITDA margin (ex. corporate allocations) to decline from 28% in 2018 to 22-25% by 2022, while in absolute terms EBITDA may more than double over that period. We estimate the EV of the gaming division at $1.25 bln, which is around 20% of our target EV. We reiterate our BUY on Mail.ru Group with a target price of $29.70 per GDR.Mail.Ru Group is an Internet company based in the Russian Federation. Co. operates the email service [email protected] and two IM networks in Russia - Mail.Ru Agent and ICQ. Co. operates two Russian-language online social networking sites: Moi [email protected] and Odnoklassniki.ru, and owns a strategic minority equity stake in the social network Vkontakte. Co. is also engaged in developing projects in E-commerce and operating more than 40 thematic vertical sites, targeting various user categories. Co. is also Russia's predominant online games company. Co. maintains a portfolio of online games which includes 34 MMO games and over 30 games for social networking sites.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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