finnCap increases FY17E and FY18E EPS after AIM-listed firm secured Chinese Group for $6m
Companies: Keywords Studios plc
AIM-listed gaming tech firm Keyword Studios has completed its third acquisition in two weeks, as it continues to pick-up smaller players in the fragmented global gaming industry.
The technical services provider to the global video game industry told investors on Monday that it had bought China-based Strongbox Ltd for $6m, a firm whose primary brand Red hot specialises in the production of graphical art assets for games.
finnCap increased its FY17E and FY18E EPS by 2.3% and 4.6% following the deal, reiterating its BUY rating with a target price of 923p:
"This is another acquisition that we view positively, seeing that Strongbox has both a quality client and resources base in what is a high growth market and furthermore has been bought for a valuation (1.1x sales) in line with previous acquisitions."
Red Hot is the latest in a series of acquisitions the company has made in May, continuing its strategy of organic and acquisitive growth. The business is will increase the capacity of Keywords' growing and higher margin Art Service Line, and brings further new clients to the art business at Keywords.
In the past two weeks, KWS has also bought engineering services provider GameSim Inc for $4.6m and content management system XLOC for $0.9m. Speaking about the company, KWS said:
"Red Hot has a strong client base, including many of the game development studios of Activision as well as Sony, Bethesda, Tencent and Capcom, which will complement Keywords' existing Art Service Line client base."
CEO Andrew Day said the move would strengthen the firm's fast growing and higher margin art services business:
"Following the acquisition, we believe the Keywords Art Service Line is the leading player in the outsourced market in terms of capacity and breadth of service. We warmly welcome Red Hot's highly talented teams to the growing Keywords family and we look forward to continuing to build upon its excellent reputation and loyal client base as part of the Group."
Shares in KWS opened down slightly before jumping before 9 am. The small-cap has seen a 187% rise in the past year.