G5 Entertainment: Finally, better growth momentum - ABG

* We raise our long-term EBIT estimates on better growth* Short-term margins sacrificed, but LT growth is more important* 8-7x adj. P/E '26e-'27e, 9% div. yield, 40% of MCAP in net cashEncouraging signs of growth accelerationAlthough organic growth was in line with our expectations in Q3 (-7% y-o-y), it was accompanied by a significant increase in user acquisition cost (21% of sales vs ABGSCe 18%) which led to a weaker margin (6% vs ABGSCe 9%). Management says this is a result of better momentum for Sherlock, the biggest game in the portfolio, and that it expects to continue increasing the user acquisition cost to drive further growth acceleration. After years of more stagnant performance, Sherlock grew 8% y-o-y. Since this game accounts for close to 30% of group sales, we think the development is encouraging for G5's organic growth. As a result, we now predict that organic growth will improve to 0% in Q4e, and we raise our organic growth forecast for 2026 from 1% to 3%. We also think that the return to organic growth is now less contingent on new games.Implementing similar changes to Hidden CityManagement says that changes made to Sherlock in H1 are the result of the better performance and that it is working on implementing similar changes to Hidden City in Q4, which is its second-biggest game (~25% of sales). Because of this, management guided for a further increase in user acquisition cost in Q4 (up to 25% of sales). If this initiative is successful, we think there could be more upside to our organic growth forecast for 2026.Short-term margin pressure trumped by better growthWe cut 2025e EBIT by 25% on the back of the user acquisition push, but only cut 2026e by 4% and raise 2027e by 1% as a result of the better growth, which at the end of the day is much more important than short-term margin pressure. Based on our updated estimates, the share trades at 8-7x adj. P/E and 4x EV/EBIT on 2026e-2027e with a dividend yield of 9%.