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G5 Entertainment: Estimates raised on lower costs - ABG

G5ENThird party research10.11.2026 klo 13.40

This is a third party research report and does not necessarily reflect our views or values

Download report (PDF)
* We raise '27e/'28e EBIT by 7%/5%, driven by cost savings
* Positioned to increase EBIT and FCF in 2027 despite lower sales
* Trading at 9-7x P/E and 5.8-2.3x EV/EBIT adj. on '26e-'27e

We raise earnings estimates on higher cost savings

The sales trend remained soft in Q3 as the company continued to try to stabilise its older titles. The 4% q-o-q decline was slightly higher than we expected. We reduce our '27e-'28e sales by ~6% on the lower trajectory. On the positive side, however, management declared higher-than-expected results from its cost savings programme, and now assesses ~USD 14m in run-rate savings compared to USD 11m in its previous forecast. This leads us to cut costs further than we did in our sales forecast, leading to positive EBIT revisions of 7%/5% on '27e/'28e. We think this is a prudent action from management, and follows the current trend among many of its mobile peers. While the weaker sales trend is partly to blame, we also believe that greater efficiency, enabled by the automation of repetitive content updates, has played a role.

Cost savings driving strong cash generation in 2027

We now forecast sales to decline 8% in 2027e, but see a higher gross margin and lower opex driving 67% EBIT growth y-o-y. Even if the sales trend remains negative, we still see potential for further savings to achieve a margin of around ~10% in the medium term. As such, we forecast USD 8m EBIT and USD 10m FCF in 2027e.

P/E of 9-7x '26e-'27e and a significant net cash position

The share reacted positively to the report, reflecting improved earnings ahead, supported by the cost savings. Based on our updated estimates, the share is trading at 9x P/E on 2026 and 7x on 2027. The net cash position was USD 24m after Q3, and we forecast USD 35m by the end of 2027. This translates into 5.8-2.3x EV/EBIT adj. 2026-2027. With the improved earnings and cash generation, we also see potential for raised dividends.