London, UK, 5 October 2021

CI Games (CIG): Initiation - An emerging European games publisher

CI Games is a global video games developer and publisher that focuses on premium AA+/AAA multi-platform games, with two main franchises: a first-person shooter, Sniper: Ghost Warrior (SGW); and a soulslike fantasy action role-playing game, Lords of the Fallen (LotF). With SGWC2 launched in H121, no major new games are expected in FY22, before LotF2 and the next iteration of the SGW franchise launch in 2023, as CI Games' revenue base builds. Following a similar strategy to Remedy Entertainment and Frontier Developments, the company then expects to launch one major title every 12-18 months, incrementally broadening its portfolio. CI Games also owns a third-party publishing arm, United Label, expected to launch two to four smaller titles per year. CI Games' current valuation takes no account of the potential for success in FY23, which could justify a c 5x increase in the share price. In August, CI Games announced a review of its strategic options, to include identification of a potential strategic investor.

As a domestically held stock, with a mixed history of execution, CI Games trades on 4.0x FY21e EV/EBITDA and a P/E of 8.9x and 1.9x FY23e EV/EBITDA and an FY23e P/E of 3.1x. This compares to the peer group on an FY23e EV/EBITDA of 13.1x and a P/E of 23.4x. If CI Games can successfully launch the next SGW game and LotF2 in FY23 (selling 1.5m and 2.5m digital units) to establish a broad-based portfolio, then both our DCF analysis and peer multiples indicate that there is the potential for almost 5x upside as a reward for early investors in this growth story.

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