(Boursier.com) — Ubisoft rises by nearly 3% this Friday on the Paris stock exchange to 21 euros after its dizzying fall yesterday. By letter, the concert composed of the Guillemot family group and the Hong Kong company Tencent Mobility Limited declared to the AMF, by way of regularization, to have crossed upwards, on December 20, the threshold of 25% of the capital of the company to jointly hold 31,430,617 Ubisoft shares representing 40,079,149 voting rights, i.e. 25.04% of the capital and 29.38% of the voting rights. This crossing of thresholds results from an acquisition of Ubisoft shares on the market by Tencent Mobility Limited.
Tencent Mobility Limited has specified that it holds, pursuant to Article 223-14 III, 1o of the General Regulations, 235 bonds convertible or exchangeable into new or existing shares (Océanes) which may be exercised at any time since December 26, 2022. up to and including the 7th business day preceding November 15, 2028 or, where applicable, the date of early redemption and which may give right to 595,595 Ubisoft shares at a unit price of 39.4563 euros.
The concert specified holding, as of January 11, 31,848,449 Ubisoft shares representing 40,496,981 voting rights, or 25.37% of the capital and 29.68% of the voting rights of this company.
The members of the concert indicate that the declared threshold crossing results from the acquisition on the market of Ubisoft shares by Tencent Mobility Limited, financed by its own cash. Members of the expanded gig are “planning to continue shopping.” The concert specifies that it does not plan to cross the threshold of 29.9% of the capital and voting rights and does not intend to take control of Ubisoft. The concert supports the strategy currently being implemented by Ubisoft.
Among the latest opinions from brokers, in the wake of the warning issued by the group, the SG downgraded the value to ‘sell’ and reduced its target from 25 to 19.7 euros. TheDeutsche Bank has for its part cut its target from 40 to 30 euros while remaining in the ‘purchase’. Referring to a “more difficult” environment which resulted in particular in a performance below expectations for “Mario + Rabbids: Sparks of Hope” and “Just Dance 2023”, the group revised its financial objectives sharply downward this week. Ubisoft has also decided to postpone, for the sixth time, the launch of the game “Skull and Bones”, now expected at the start of the 2023-2024 financial year.
Loss-making year ahead
Management now anticipates, over the current financial year, net bookings down by more than 10% compared to the previous year, against a previous objective of growth of more than 10%, while operating profit not -IFRS, reflecting the drop in net bookings, the postponement of Skull and Bones and the accelerated depreciation of around 500 ME of capitalized R&D, is now expected to be in the red at -500 ME, against +400 ME previously targeted. ..
In this context, the video game publisher will adapt its organization with an expected net reduction of its non-variable cost base of more than 200 million euros over the next two years. This reduction will be achieved through targeted restructuring, disposal of certain non-essential assets and normal natural attrition. The group now intends to focus its development efforts on a reduced number of titles, especially its biggest franchises (Assassin’s Creed, Rainbow Six, Far Cry, The Division and Ghost Recon).
For the 2023-2024 financial year, Ubisoft is targeting non-IFRS operating income of around 400 ME, reflecting the necessary caution given the current difficult environment, while forecasting strong growth in net bookings thanks to a line-up significantly richer.
Analysts revise their accounts
Oddo BHF downgraded the file to ‘neutral’ and halved its target price to 21 euros. The analyst said he was “confused by the extent of the difficulties encountered by Ubisoft”. After the deflating of speculative appeal (following the September deal with Tencent), valuation was the last support for its positive recommendation. This is no longer the case after this mega “profit warning”…
Always on the ‘purchase’ on the value, Citi speaks of a “crushing profit warning” that confirms the difficult market trends indicated by the recent warning from Frontier Developments. The release of third quartermaster activity is “pretty disappointing”, but the delay of the Skull & Bones title means that 2023 “looks like an effective delisting” from a financial perspective… The company now faces the challenge of convincing investors that its 2024 targets are ‘reasonable’, even if some ‘bearish’ traders will see it as a compensating event…
The warnings are driven by a broader shift in consumer preferences, lower forecasts and the fact that there’s “virtually no chance” investors will ‘price’ a near-term M&A premium according to Morgan Stanley which cut its target from 52 to 33 euros while remaining ‘overweight’.
Other notable analyst notes include JP Morgan which downgraded the title to ‘neutral’ while cutting its target from 46 to 24 euros. The bank cites “macroeconomic weakness, a challenging industry environment and lack of visibility regarding the timing of exits and their potential success.”