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Subsector price performance: In the fourth quarter to 29 December 2023 all but the AAA publishers and platform subsector saw share price declines. The UK PC and Console focused subsector was again the worst performing subsector (-26.2%) over the quarter and LTM (-70.1%).
Companies: TBLD FDEV DEVO
Zeus Capital
Subsector price performance: In the quarter to 30 September 2023, all four subsectors saw mean average share price declines. UK PC and Console focused subsector was again the worst performing (-20.6%).
Featuring STV UK, Galliford Try, Getech, Warpaint, Belvoir, tinyBuild, Dillistone, Eleco
Companies: TBLDELCOGTCDSGSTVGGFRDW7L
Mello Events
H1 revenue fell 19%, gross margin narrowed by 18 percentage points and Adj EBITDA fell to -$1.2m from $9.9m a year ago. The company impaired $27.2m of development costs and intangible assets.
Companies: tinyBuild Inc.
tinyBuild’s results for the six months ended 30 June demonstrated resilient performance during a challenging period, with a key takeaway being management’s focus on delivering successful games while maintaining financial stability. Revenue in H1 23 fell 19% to $23.3m (H1 22: $28.8m) and adjusted EBITDA turned negative at -$1.2m (H1 22: $9.9m). However, games sales remained stable, and the company is demonstrating tighter control of spending to steady the business in the short term. A strong game
Progressive Equity Research
In an attractive video games market, tinyBuild is investing to accelerate growth, including new technologies and larger-budget Games-as-a-Service (GaaS) titles, and has a strong pipeline of games under development. The company’s strategy retains an emphasis on expanding its own intellectual property (own-IP) portfolio and monetising its catalogue of AA and indie games using a franchise and multimedia model. Following recently reported challenges, the outlook for platform deals has stabilised. Di
In this edition of the video games quarterly we analyse the supply and demand factors in the quoted UK video games sector to provide an outlook on H2 2023. On average, due to the holiday season, the second half accounts for c. 60% of revenue and, with operational gearing, an even greater proportion of profits, making it a crucial period.
The company appears to be including the “kitchen sink” in this trading update –revenue and earnings downgrades, flat profit outlook, asset write-downs, reorganisations, strategic review of acquisitions and executive board changes.
This quarter’s key observations Top subsector price performance: Continental European PC and Console is the top performer, both over the last quarter and the last year, up 9.2% and 10.6%, respectively. This was driven by a strong last quarter performance from CI Games and Paradox Interactive, up 38% and 24%, respectively.
Companies: tinyBuild Inc. (TBLD:LON)Devolver Digital, Inc. (DEVO:LON)
Premium
2022 revenue was below our estimate. Whilst Adjusted EBITDA was broadly in line at $24m, FCFF was -$18m. Capitalised development costs were higher than we expected, reinforcing our view that amortisation expenses will ramp and flatten EBITDA in 2023 and 2024. However, the company extended its amortisation period, resulting in a deferral of expenses. The net effect of lower revenue, higher capitalisation of development costs and deferred amortisation costs is insignificant changes to our Adjusted
We lower our Adjusted EBITDA estimates after the unexpected rise in capitalised development cost in H2 2022 and after modelling amortisation expense scenarios. We lower Adjusted EBITDA significantly below consensus and believe rising amortisation expenses will lead to nearly flat Adjusted EBITDA ($25m-$26m) from 2022 to 2024. Despite our negative earnings outlook, tinyBuild's share price indicates significant earnings disappointments may already be priced in. Shares trade at only 4x 2023 EV/ EBI
The video games sector is unloved. Shares in the UK video games sector have fallen sharply and have significantly underperformed other small-cap sectors. Some stocks now appear to offer deep value, with mid-single digit ex-cash PEs that are well below pre-pandemic levels. In particular, Devolver, tinyBuild, and Frontier Developments multiples have fallen well below the sector average. We see upside to Frontier Developments’ earnings estimates and Devolver’s depressed multiples.
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