Flexing its new titles and back-catalog muscles

Ubisoft released a net positive print for its H1 23/24 featuring a massive beat on Q2 expectations tempered by a more cautious-than-expected Q3 outlook. A yet-to-announce premium game release was postponed to the subsequent fiscal year without harming the FY23/24 targets. Also, the company issued a welcome update on its 2-year cost-cutting plan initiated in January 2023.

The gaming industry showed in anticyclical face

Ubisoft’s Q1 23/24 trading update was expected to be everything but a record quarter given the absence of game releases. Nevertheless, the revenues 100% generated with the back-catalogue confirmed EA’s strong results and exceeded the management’s and consensus’ expectations. The guidance for Q2 missed the consensus forecasts but UBI stuck with its FY23/24 outlook, a positive sign as investors do not currently see this guidance as attainable. We maintain our positive stance on the stock.

Ubisoft is rebooting… please wait

Although Ubisoft’s FY22/23 was guided to be a write-off year, it came in below expectations on the top line. The FY23/24 guidance was confirmed but the low net bookings target for Q1 23/24 calls for an empty release agenda despite the admittedly risky loaded pipeline for the year. The good news on the Free-to-Play side already looks discounted. The FCF again came in in the red zone in FY23/24. Any recovery in the share price will be a factor of “until when?”.

Profit warning and emergency measures to fix structural bugs

Ubisoft has slashed its FY22/23 outlook on the back of a disappointing 2022 holiday season, set cautious guidance for FY23/24 and announced crisis measures to fix its structural weaknesses. In doing so, the group acknowledged that its current offer – which has been behind its success of the past decade – is not aligned with customer demand. While this puts another dampener on the company’s credibility, the meagre remaining hopes that it might be an M&A target have also vanished.

Assassin’s Creed expands, Netflix teams up, ridiculously low price threatens founding brothers

Ubisoft’s Forward event on Saturday showcased a well-defined direction for the group’s flagship, the “_Assassin’s Creed_” franchise. The group also announced a partnership with Netflix to develop three exclusive mobile games for Netflix’s games platform, including an AC-based game, more likely to contribute to the influence of _AC_’s rather than to UBI’s financials, in our view. Governance-wise, we cannot rule out a hostile takeover bid below €80/share given the low share price and minorities’

Surface Transforms - New guidance – forecasts under review

Surface Transforms has issued new revenue guidance for FY24, with the company now expecting revenues in the range £17.5-22m. We are withdrawing our previous forecasts for FY24 and withdrawing our price target while we review the impact of the new guidance.

Surface Transforms plc (SCE LN) - Forecasts and valuation withdrawn

We note the regulatory announcement this morning from Surface Transforms and withdraw our estimates and valuation, pending conversations with management.

Morning Note – 16 April 2024

Robust margin and cash performance

Surface Transforms (SCE LN) - Obstacles removed for higher production

Surface has issued a brief Q1 update. Production will ramp-up this year as final new equipment is installed, and manufacturing teething problems recede.

Initial Equity Trading Comments - 19 February 2024

Hybridan Small Cap Feast - 16/04/2024

16th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radical Limited for

Dowlais Group - Motoring forward

Dowlais Group’s first set of results were ahead of our expectations, with positive cash generation a highlight despite restructuring and demerger costs. Softer automotive markets will limit margin progress in FY24 towards the double-digit target. Despite this, margins of c 6.5% are still ahead of automotive peers, although the shares trade at a significant discount to our implied generic peer-based valuation.

Morning Note – 9 April 2024

Zeus Top Picks for 2024 - 2023 review and outlook for 2024

On 9 January last year, we set out our ten top stock picks for 2023, for what turned out to be another relatively poor twelve months for UK equities due to two wars, stubbornly high inflation and further tightening of monetary policy. This was even as other major markets, such as the US, largely recovered in the year. In the 2023 calendar year, the AIM All-Share index fell 8.2% and is still 42% off its 2021 high. From the release of our 2023 top picks note, the average total return (assuming div

Morning Note – 4 April 2024

LIBERUM: New Energy Nuggets: Hydrogen - the future is green

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Nexteq - FY23 adj EBITDA +4% ahead, FY24E upgrades of +1-10%

Nexteq’s FY23 results show adjusted EBITDA +4% ahead of the +6% upgrade at the January trading update, record FY23 EFCF of $17.4m, and a confident outlook that leads us to reiterate our FY24E revenue and upgrade FY24E gross profit, adj EBITDA, and EFCF by +1-10%. The strategic focus on higher-margin products and customers reducing elevated inventory levels led FY23 group revenue -5% yoy to $114.3m, with Quixant 6% lower at $69.3m and Densitron 2% lower at $45.1m. Effective supply-chain managemen

Morning Note – 25 March 2024