Investment case
Fractal operates in the attractive and fast-growing global gaming market
The Company estimates that its addressable market is characterised by high growth, strong underlying growth drivers and multiple favourable consumer trends. Fractal believes that future growth will be driven by growth in the number of gamers globally, which will increase the size of the Company’s groups of end consumers. In addition, the share of competitive/committed gamers is increasing and the esports and streaming industry is growing rapidly, which the Company believes has a positive impact on the number of gaming products sold per gamer on a global basis). At the same time, the Company believes that esports and streaming have a positive impact on the sale of gaming products in the premium segment, as the viewers strive to imitate professional players and streamers.
The Company has a premium brand with distinctive characteristics and a leading position within relevant communities
According to the Company, Fractal has a well-established brand with distinctive characteristics and high quality products, which is something that it has worked towards since the Group was founded. The Company also believes that it has a strong position within the initiated and influential communities that exist, such as Reddit and Sweclockers. Fractal believes that its strong and district brand, combined with its special position amongst end consumers are some of the main reasons why the Company has succeeded in growing strongly over the years and has good opportunities for profitable future growth.
Fractal has a strong position in the value chain and an attractive end consumer base
Fractal acts as a product and brand owner in the value chain with outsourced production and distribution of its products. The Company believes that this is the most attractive position in the value chain and that this position adds the most value. The Company sees its end consumers as generally loyal, repetitive in their buying patterns and with strong purchasing power and therefore constitute an attractive end consumer base. Furthermore, the end consumers are generally seen as initiated, which means that end consumers’ clear preferences primarily determine which products distributors will sell, which strengthens the position of the product and brand owner in the value chain relative to the distribution chain. Since 2010, the Company has sold over five million products and believes that a satisfied Fractal end consumer is likely to become a repeat end consumer when replacing or upgrading their Fractal product.
The Company has a founder-led management team with a well-documented track record
Fractal was founded by the current CEO, Hannes Wallin who has led the Company since its inception. Jens Harnisch, VP Sales is also a co-founder of the Company. Furthermore, several members of the management team have relevant experience from other companies in the gaming and electronics industry. The management team has a history of achieving profitable growth, and has been a strong contributing factor to the Company having grown and being profitable from the start.
Fractal has a strong financial profile with a history of high growth and high margins
Fractal has a history of high and profitable growth and in 2020 had net sales of SEK 635.7 million. Since 2010, the growth experienced by the Company has been equivalent to a CAGR of 28 per cent, which has been achieved without acquisitions. The Company has succeeded in this through its consumer-focused strategy with a broad and diversified product portfolio consisting of designed, functional and qualitative gaming products.
The Company has successfully combined strong growth with good profitability, despite significant investments in product development, sales and marketing. In the last three fiscal years, the Company has achieved an operating margin (EBIT margin) of 15.2, 14.4 and 18.2 per cent, respectively, and an adjusted operating margin (adjusted EBIT margin) of 15.2, 14.4 and 20.2 per cent, respectively.
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