Magix AG released their results for the fiscal year of 2013 on 28 February, and apparently the market required some time to digest this information (shares are up 13.5% today). I also failed to notice the new information until today, but luckily it was good news. Revenues increased by 12.8% from €28.8 million to €32.5 million while EBIT before other operating income went from minus €1,156,000 to positive €2,706,000 (this measure is more meaningful than unadjusted EBIT because the company had a large one-time gain in 2012).
Impressive is that this jump in growth was almost completely achieved in the second half of FY 2013, and most of the growth can be attributed to the German part of the world.
Also nice to see is that the mufin technology is finding it’s way to the market. I doubt that it’s generating a meaningful amount of revenues at this point in time, but with 27 thousand reviews on iTunes there are at least a decent number of people using the TV Smiles app.
With the company expecting future growth in FY 2014 I think it’s still a pretty good deal at current prices. The company has now a €34.1 million market cap (8,844,979 SO * €3.86/s) and €16.6 million of cash in the bank (after adjusting for the share repurchases completed after the end of the current period). That means that we are effectively paying €17.5 million for €1.9 million in earnings power (€2.7 million ‘core’ EBIT with a 30% tax rate) implying a 9.2x PE multiple. That’s not cheap if you don’t expect growth, but given how profitability increased this year with ‘just’ a 12.8% jump in revenues I think it’s clear that there is a lot of operating leverage. Higher revenues should flow almost straight to the bottom line, and a further 10% growth in revenues could more than double earnings if costs stay under control.
Also noteworthy is the fact that the company has decided to stop reporting using IFRS and has switched to German accounting standards instead. This makes it harder to compare current results with historical results, but it seems to me that the differences aren’t too big. The biggest change seems to be that goodwill is depreciated under the new standard, reducing book value and historical earnings.
Author is long Magix AG