Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Bottom-Up

<ul>
<li>This is our first report on mobile game developer, Playtika Holding Corp's fourth-quarter 2023 earnings showcased a resilient execution of its strategy amidst revenue headwinds and market challenges.</li>
<li>It successfully managed to surpass its guidance for both revenue and credit adjusted EBITDA. The company marked 2023 as an efficiency-driven year, with a transformation strategy focusing on speed and decision-making.</li>
<li>Despite several challenges on the revenue front, Playtika identified some bright spots such as growth in the casual games segment, which expanded 5.5% YoY, driven by growth in June's Journey.</li>
</ul>


This is our first report on mobile game developer, Playtika Holding Corp's fourth-quarter 2023 earnings showcased a resilient execution of its strategy amidst revenue headwinds and market challenges.
It successfully managed to surpass its guidance for both revenue and credit adjusted EBITDA. The company marked 2023 as an efficiency-driven year, with a transformation strategy focusing on speed and decision-making.
Despite several challenges on the revenue front, Playtika identified some bright spots such as growth in the casual games segment, which expanded 5.5% YoY, driven by growth in June's Journey.


Playtika Holding Corp: Will The Direct-To-Consumer Platform Expansion Be A Game Changer?

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Sega with better reputation and deeper pockets than Playtika, announces a €9.25/share recommended cash offer; 63% premium to Playtika's announcement; it represents 2.1x EV/Fwd Revenue, 12.3x EV/Fwd EBITDA, 21.6x Fwd P/E.</li>
<li>Acceptance condition is over 90%, and irrevocables are 49.1%, so 80.4% of the float is needed, which is high. I value Rovio using DCF (9% WACC, 1.5% perpetuity growth rate).</li>
<li>My fair value base case estimate is €8.80/share (€9.45/bull case). I thus update my TP to €9.25. Spread is 0.59%/1.22% (gross/annualised), which is not massive. </li>
</ul>


Sega with better reputation and deeper pockets than Playtika, announces a €9.25/share recommended cash offer; 63% premium to Playtika's announcement; it represents 2.1x EV/Fwd Revenue, 12.3x EV/Fwd EBITDA, 21.6x Fwd P/E.
Acceptance condition is over 90%, and irrevocables are 49.1%, so 80.4% of the float is needed, which is high. I value Rovio using DCF (9% WACC, 1.5% perpetuity growth rate).
My fair value base case estimate is €8.80/share (€9.45/bull case). I thus update my TP to €9.25. Spread is 0.59%/1.22% (gross/annualised), which is not massive. 


Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

<ul>
<li>On 22 March, Playtika said those preliminary discussions had ended. The shares had nevertheless traded at a wide spread to the offer because of doubts an offer would finally materialise.</li>
<li>The offer was pitched below the IPO price and at lower multiples than other recent deals. My DCF-based valuation is €8.80 (16% upside without considering any offer premium).</li>
<li>Due to the strategic importance of Angry Birds, one of the best and most enduring names in mobile gaming, Rovio remains a target. I'd be long at current share price.</li>
</ul>


On 22 March, Playtika said those preliminary discussions had ended. The shares had nevertheless traded at a wide spread to the offer because of doubts an offer would finally materialise.
The offer was pitched below the IPO price and at lower multiples than other recent deals. My DCF-based valuation is €8.80 (16% upside without considering any offer premium).
Due to the strategic importance of Angry Birds, one of the best and most enduring names in mobile gaming, Rovio remains a target. I'd be long at current share price.


Value in Rovio Beyond Playtika's Failed Offer

<ul>
<li>Highly leveraged mobile-games developer Playtika goes mildly hostile in its pursuit for Angry Brids creator Rovio, albeit with a generous possible offer at €9.05/share (11.1x EV/Fwd EBITDA).</li>
<li>The stakes controlled by the Heds total c.32% (source: Rovio), making a hostile offer prone to failure. The shares aren't succeeding though, and trade 36% below its 2017 IPO price.</li>
<li>The shares are trading at a 19.3% discount to the possible offer (and 14.6% discount to my DCF-based fair-value estimate). At this level, they do not seem expensive.</li>
</ul>


Highly leveraged mobile-games developer Playtika goes mildly hostile in its pursuit for Angry Brids creator Rovio, albeit with a generous possible offer at €9.05/share (11.1x EV/Fwd EBITDA).
The stakes controlled by the Heds total c.32% (source: Rovio), making a hostile offer prone to failure. The shares aren't succeeding though, and trade 36% below its 2017 IPO price.
The shares are trading at a 19.3% discount to the possible offer (and 14.6% discount to my DCF-based fair-value estimate). At this level, they do not seem expensive.


Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Lionheart Studio  / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lionheart-studio-corporation" target="_blank" data-smartkarma-citation="entities:36417:1" rel="noopener">Lionheart Studio (426630 KS)</a>, a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.</li>
<li>The company is majority owned by <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a>, which after having recently hiked its stake, owned 54.94% of the company prior to listing.  </li>
<li>We spoke about the company’s past performance and undertook a peer comparison in our previous note. In this note, we’ll talk about our earnings estimates and valuation.</li>
</ul>



Lionheart Studio (426630 KS), a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.
The company is majority owned by Kakao Games Corp (293490 KS), which after having recently hiked its stake, owned 54.94% of the company prior to listing.  
We spoke about the company’s past performance and undertook a peer comparison in our previous note. In this note, we’ll talk about our earnings estimates and valuation.


Israel

Playtika Holding Corp. operates as a digital entertainment company. The Company specializes in the development and publication of free to play mobile games. Playtika Holding serves customers worldwide.

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Playtika Holding Corp (PLTK US)

Playtika Holding Corp: Will The Direct-To-Consumer Platform Expansion Be A Game Changer?

This is our first report on mobile game developer, Playtika Holding Corp's fourth-quarter 2023 earnings showcased a resilient execution of its...

Baptista Research

Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

Sega with better reputation and deeper pockets than Playtika, announces a €9.25/share recommended cash offer (€1.48/option); 63% premium to...

Jesus Rodriguez Aguilar

Value in Rovio Beyond Playtika's Failed Offer

The Board of Rovio confirmed that preliminary discussions with Playtika had ended and that it continued its strategic review, including preliminary...

Jesus Rodriguez Aguilar

Playtika/Rovio: Fortunate Birds

Playtika announced a non-binding proposal to acquire Rovio Entertainment Oyj at €9.05/share, a 59.6% premium. The proposal is not conditional on...

Jesus Rodriguez Aguilar

Lionheart IPO - Thoughts on Valuation

Lionheart Studio (426630 KS), a game development studio based in South Korea, aims to raise around US$420m via its South Korean IPO. In this note,...

Sumeet Singh

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