2. GENERAL SUMMARY: GLUU
i. Based in California
ii. Market Cap: $547M
iii. Current price: $4.90
iv. Average Volume: 2.6M
v. Traded on Nasdaq
vi. 2014 Revenue: $223.15 M
vii. 2015 Revenue (expected): $260 M
4. INDUSTRY - Continue
Monetization Ranking
Revenue:
1. Asia Pacific – $12.2B
2. USA – $4.9B
3. Western Europe – $3.2B
Average Spend/month:
1. USA - $6.21
2. Western Europe - $4.59
3. Asia Pacific - $4.17
7. GLUU – 5 YEAR Free Cash Flow
Used % average to forecast future cash flow
% of revenue
8. GLUU Game performance
Most popular game performance over releases Hardest part? Estimating Decay rate for games
9. GLUU – Game performance, Celebrity
2015 Celebrity games
Katy Perry
Kendall and Kylie Jenner
2016 Celebrity game
Fill 106.3M social reach gap
Most likely sports star
10. GLUU Present Value using DCF
1. Calculate Beta
2. Market risk premium
3. Calculate WACC
4. Forecast 5-YEAR celebrity games’ revenue
◦ Based on past performance
◦ Based on social reach ratio
◦ Based on decay ratio
5. Forecast future FCF
◦ Based on %sales ratios
6. Compute Present value
11. GLUU - Beta
Regression line:
Beta=2.37 (B_Historical)
Beta tends to return to mean (B=1):
Beta (B) = B_Historical*0.65+0.35= 1.89
13. GLUU - WACC
Rf = risk free rate, 2.53% based on 10 year T-Bond average yield for 2014
Rd = 0
Re = Rf + Beta*(Rm-Rf)
WACC = 7.7%
14. GLUU – 5 YEAR celebrity games’ sales
1. KP AND KKJ same Rev/Social reach ratio as KKw
◦ For 1st (0.56) and 2nd (0.4) quarter after release
◦ After 2nd quarter apply 27.5% decay ratio
2. 400M social reach by 2016
3. Bold numbers and highlighted cells
◦ Estimated release quarter for big upgrade or new version
4. Each game is growing at 10% over prior release
15. NOTE:
1. sales numbers used for future FCF is from celebrity games only
2. GLUU will be releasing sports, racing, shooter games along with celebrity games
◦ Deer Hunter
◦ Tap Sports Football and baseball
◦ Eternity Warriors 4
◦ Car town
◦ 007
3. Non celebrity games could add anything between 70M-140M to 2015 revenue
GLUU - Present Value
16. GLUU - Present Value
NO DEBT
97M Shares
2% Rev growth after 2019
WACC = 7.7%
10% celebrity game growth
17. NO DEBT
97M Shares
2% Rev growth after 2019
WACC = 7.7%
0% celebrity game growth
GLUU - Present Value
18. NO DEBT
97M Shares
2% Rev growth after 2019
WACC = 7.7%
-25% celebrity game growth
Growth was calculated based on today’s share price
GLUU - Present Value
20. GLUU – Price Target
$6.3 to be on par with industry
$12.9 based on celebrity games’ sales ONLY, and 10% growth
$9.8 based on celebrity games’ sales ONLY, and 0% growth
My price target $11.3
0% growth for celebrity games
Estimating an annual revenue of $70M from other games
130% upside
21. GLUU - Risk
1. KP and KKJ games don’t do as well as KKw
2. GLUU doesn’t not reach 400M social reach by 2016
3. Mobile games market slows down
4. Celebrity games saturation
If above assumptions occur
1. Price target changed to $6.3 to be on par with P/S industry average
1. 29% upside potential
