European video games
The games industry is a rare example of a sector set for a good crisis. With billions of extra leisure hours available daily and quick adjustment to distributed working, many games developers and publishers are seeing strong revenue and margin growth. In this report, we compare business models across geographies and look at how different segments of the market may be affected by the COVID-19 pandemic. The general pre-crisis backdrop was a sector forecast to grow at c 8.4% (2019–22), reaching a total market size of $190bn by 2022. Mobile gaming offers a low double-digit revenue CAGR, while PC and console gaming offer single-digit growth as we move towards console transition this year. In the first few months of the year, business disruption was mainly confined to China and the Far East, with concerns over supply chains and stock levels to the fore in the West. Since then, the reality of a global COVID-19 pandemic has emerged, with more than a third of the global population in lockdown today. The transition from offices to remote working has caused significant business disruption, but for most games companies the disruption has been effectively managed with business continuity plans now largely implemented. Looking ahead, we expect consumers will be isolated from normal activities and other forms of entertainment for at least three to six months; while it lasts, this period will provide a substantial benefit for games companies. Although the virtual reality industry might suffer supply issues and console launches will be softer (initially), the net effect of the pandemic is set to be sector positive. The small-cap European games sector offers exposure to a number of well-run, innovative businesses, with recurring revenue models that will benefit from increased consumer demand fulfilled digitally. The following companies are featured in the research: 11 bit studios, Astralis, Bigben Interactive, CD Projekt, Codemasters, Digital Bros, Embracer, Focus Home, Frontier Developments, G5 Entertainment, Gfinity, MTG, Nacon, Paradox Interactive, PlayWay, Remedy Entertainment, Rovio Entertainment, Starbreeze, Stillfront Group, Sumo Group, Team17 and Ubisoft Entertainment.
08 Apr 20
Keywords Studios - COVID-19 update: FY results delayed
Keywords has complied with FCA and FRC guidance to delay its FY19 audited results announcement, previously scheduled for 31 March 2020. A new date will be confirmed shortly. On COVID-19, management reports the business impact was minimal in the first two months of the year, with some short-term disruption in China affecting Keywords’ five studios there, but these have now returned to near full production. This experience has been applied across the group. Keywords has seen an increase in demand for services, as existing and new clients re-appraise production, with management hoping to benefit from this pent-up demand once its operating environment normalises. The group has adequate liquidity but has taken steps to preserve cash, with net debt of €18m (0.4x net debt/adj EBITDA) and total undrawn facilities of €122m at 31 December 2019.
26 Mar 20
LIBERUM: Keywords - Major longer-term opportunities
Not surprisingly, Keywords has delayed FY19 results and highlighted the supply-side challenges as the industry moves to working from home. The likely disruption in delivering some services will impact short-term forecasts, but the client demand backdrop is strong and the challenges facing big publishers will increase their medium-term desire to outsource to large-scale, trusted partners.
25 Mar 20
LIBERUM: Computer Gaming Sector - Building to a billion
This report updates our views and recommendations of the UK Computer Games sector. The last year has seen major returns delivered to shareholders, with the sector up c.30%. Looking ahead, we expect more of the same to be driven by new consoles, streaming and the demographic growth in both number of players and time spent. We believe these trends will drive upgrades across the sector, and expect M&A to be a bigger feature this year. Short-term, the stock market is focused on the impact of coronavirus, with outside risks that the timeline of new console releases in Q4 could be affected by any disruption to the supply-chain or retail roll-out. However, there could be offsets for PC, console and particularly mobile games as consumers are forced to spend time at home or in hotels.
KWS CDM FDEV SUMO TM17
26 Feb 20
Keywords Studios - Reassuring CMD, residual concerns dispelled
Keywords Studios’ capital markets day (CMD) on 5 February 2020 was very well attended and reassuring. The company will continue to grow a balanced, diversified business. Organic growth remains strong over the short to medium term: for FY20 we forecast 15% y-o-y revenue growth, up 12% on the FY19 closing annual run rate (ARR), supported by the launch of next-gen consoles. Increasing scale helps to attract larger clients and raise barriers to entry. Keywords’ strategic approach to ‘buy and build’ delivers for both the company and the studios. We retain our view that Keywords is strongly positioned as the only games service provider at a global scale. The company’s P/E rating (29.2x FY20e) reflects its leading market position, track record and potential, but should fall further as Keywords continues to execute its buy-and-build strategy.
10 Feb 20
Sparkling growth, improving margins
Although we expected strong growth in H219, FY19 revenue of €326m, reflecting 30% overall growth and 15% organic growth, represents a sparkling performance. EBITDA and PBT were ahead of forecast at €49.5m and €41.0m, respectively. Given the higher revenue base, we are revising our FY20 revenue estimate up by 4%, but prudently holding operating profit and PBT at previous levels as margins normalise through FY20. We retain our view that Keywords remains strongly positioned as the only games service provider at a global scale. The company’s P/E rating (25.0x FY20e) reflects its leading market position, track record and potential, and should fall further as Keywords continues its buy-and-build strategy.
30 Jan 20
Keywords Studios - A trinity of acquisitions to round off the year
Keywords has rounded off the year with three small acquisitions, very much in line with its stated M&A strategy: Kantan, a Dublin-based machine translation technology company (€7m); Ichi, a London-based video games creative and marketing services agency (£3.2m); and Syllabes, a Montreal-based audio recording studio (C$0.5m). Together, they have reported revenues of c €4.8m and have been acquired on a trailing multiple of c 2.3x revenues. As we approach year-end, we retain our view that Keywords remains strongly positioned as the only public games service provider at a global scale. The company’s P/E rating (25.7x FY20e) reflects its leading market position, track record and potential, and should fall further as Keywords continues its buy-and-build strategy successfully.
19 Dec 19
Keywords Studios - Confidence in its sustainable model
At the capital markets day (CMD) on 14 November, management offered a comprehensive review of Keywords’ business and its drivers. This was the first event with Jon Hauck formally in place as CFO, who brings useful experience from his background at Rentokil Initial. Keywords appears to be well positioned to continue to perform robustly in FY20 despite the Q420 console transition (which may even be a net benefit to the group), balancing strong growth with a margin recovery back to more normalised levels (c 15%) with M&A, particularly in game development and marketing, very much front of mind. Keywords remains the only public games service provider at a global scale. We have updated our forecasts, but these are largely unchanged as the year end approaches.
02 Dec 19
We remain selective; Buy Consumer Tech
We continue to take a selective stance on stocks within the small cap Technology space. The sector’s equity performance was lacklustre over 2019, rising 4% and keeping pace with the All-Share index (relative to multi-year periods of outperformance) as investors took a cautious stance on geopolitical and macro risk. We believe cautious sentiment is likely to dominate trade during the first half of 2020 and maintain our preference for consumeroriented players, consistent with our Arden Thematic Technology framework. Our top picks for 2020 are CDM, EVRH*, SUMO and VNET.
KWS CALL CDM FDEV SUMO TM17
20 Nov 19
Nintendo doubles operating profit, Pinterest reports weak forecasts, Alphabet secures ‘smart-city’ in Toronto
Shares of Nintendo surged on Friday after the Japanese gaming company said Thursday that its second-quarter operating profit more than doubled amid strong sales for the recently launched Switch Lite device. By Friday's market close in Japan, Nintendo's stock skyrocketed 7.46%. Between the Switch Lite's launch on Sept. 20 and the end of the quarter, Nintendo said it sold 1.95 million units of its handheld-only device. Sales figures for the Switch Lite - a stripped down and lower-priced version of Nintendo's flagship Switch console - are being closely watched by the market.
KWS BIDS CDM FDEV GFIN SUMO TM17 UNG
01 Nov 19
Quarterly Research Outlook Autumn 2019
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
KWS ABBY AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CDM CSRT TIDE CYAN DTG DEMG ELM EMR FPO FDEV GTLY GENL GHH GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KAPE KEYS KCT KGH LAM LIT LOK MACF MANO MOD OXIG PCA PANR APP SRE PHC PMO RBW RMM RBGP REDD RSW RNO ROR SUS SCPA SEN SHG SOLG SOM SUMO TM17 INCE TWD TRAK TRI VNET VTC ZOO ZTF
21 Oct 19
Samsung Display to invest $11bn, ‘CoD: Mobile’ hits 100m downloads, TV companies unite for advertising
Apple supplier Samsung Display said on Thursday it will invest 13.1 trillion won ($11bn) on facilities and research to upgrade a production line, as it battles severe oversupply due to weak global demand for smartphones and TVs. The unit of Samsung Electronics said that by 2025 it will spend 10 trillion won on facilities and the rest on research and development to produce more advanced display screens.
KWS BIDS CDM FDEV GFIN MIRI MPM SUMO TM17 TRMR
10 Oct 19
ARM seeks car chip solution, PlayStation 5 announced for Dec 2020
Arm, the British chip technology firm owned by Japan's Softbank Group, is joining with automakers General Motors Co and Toyota Motor to establish common computing systems for self-driving cars, an effort the companies hope will speed development of the technology. Arm supplies the underlying technology for the processors found in today's smart phones but does not make chips itself. Its ties to the automotive industry go back to the late 1990s, when automakers began to add computer chips to vehicles for functions like engine control and diagnostics.
KWS ENET BIDS CML CDM FDEV GFIN IQE SUMO TM17 TCM XPP
09 Oct 19
Amazon expands cashier-less tech, Revolut adds 24 new markets, Tencent buys stake in Funcom
Amazon is in talks to bring the cashier-less technology that runs its Go stores to other retailers like airport shops and movie theatres, according to people familiar with the matter. The effort would help Amazon grow its retail presence, so the company can lower its reliance on online shopping, but at a faster pace and at lower cost than building its own stores
KWS BGO BIDS BOKU CDM EQLS FDEV GFIN SUMO TM17 TECH
01 Oct 19
US lawmakers propose $1bn fund, Alibaba unveils AI chip, Xbox gaming opens to Android
A U.S. House panel unveiled bipartisan legislation this week that would authorize $1 billion for small and rural wireless providers to replace network equipment from companies including Huawei and ZTE that lawmakers say pose a national security risk. The top Democrats and Republicans on the House Energy and Commerce Committee said in a joint statement the bill would protect the "Nation's communications networks from foreign adversaries by helping small and rural wireless providers rootout suspect network equipment and replace it with more secure equipment."
KWS ENET AMO BIDS CDM CML GFIN IQE FDEV SUMO TM17 TCM XPP
25 Sep 19
Keywords Studios - Pillars of growth standing firm
Keywords saw strong revenue growth in H119 (17.5% like-for-like, l-f-l) and although investment and some one-off factors compressed margins, the company looks well placed to sustain double-digit EPS growth in the future. We upgrade our FY19 revenue estimates by 5.2% and FY20 by 4.3% and although H1 investment, together with a revision to the adjusted tax calculation, compresses FY19 earnings by 15.8%. FY20 EPS reduces by 2.5% as margins normalise on a higher sales figure. The FY20 P/E of 22.2x is in line with peers, before factoring in the potential for organic upside and further accretive acquisitions.
19 Sep 19
Small Cap Feast
AMRYT PHARMA PLC— a biopharmaceutical company focused on developing and delivering innovative new treatments to help improve the lives of patients with rare or orphan diseases have raised $60m before expenses and will relist on the AIM Market on the 25/09/2019. VAALCO Energy, Inc. (NYSE: EGY), an independent energy com pany focused on developm ent and production assets in West Africa, today announces its formal intention to seek a Standard Listing on the Main Market of London Stock Exchange ("LSE"), to complement its existing Listing on the New York Stock Exchange. Kaspi.kz, the largest Paym ents, Marketplace and Fintech Ecosystem in Kazakhstan w ith a leading m arket share in each of its key products and services, announces today the expected publication of a registration document that has been submitted for approval to the FCA and its potential intention, subject to market conditions, to undertake an initial public offering .
KWS YGEN SIS SSTY ATQT OSI AFHP WHR HCM HAT
18 Sep 19
In-game spend laws mooted; Amazon hardware event 25 Sept, Crypto in Cuba
In-game spending should be regulated by gambling laws and so-called loot boxes banned entirely for children, MPs say. The industry's UK trade body responded it would "review these recommendations with utmost seriousness". Free video games often encourage players to buy virtual loot boxes, which contain an unspecified number of items to improve further game-play. This could have an impact on mobile game economics.
KWS CDM FDEV SUMO TM17 ARB BIDS GFIN MMX TECH TEK
13 Sep 19
Cloudflare prices above range; Virtual wall maker new unicorn; High speed 5G gaming
Cloudflare, a California-based digital content delivery and Internet security company, raised its IPO price range this morning from a prior $10 to $12 interval to $12 to $14 per share. At its new prices, Cloudflare would be valued between $3.5 billion and $4.1 billion. Cloudflare's maximum IPO fund raise is now $563.5 million. Investors’ appetite for cloud offerings appears to remain robust. Ex- Oculus founder, Palmer Luckey’s new business, Anduril Industries, is building a virtual wall on the southern border of the US. His new venture is being valued at more than $1 billion in a new fundraising round, according to sources. Anduril describes itself as a company that "Invents and builds technology to secure America and its interests.". Virtual border controls feel like a natural evolution of physical barriers for a digital era. The Tokyo Game Show, Japan’s video gaming mega-conference, opened on Thursday with enthusiasts testing how ultra-high-speed 5G mobile data networks will impact the gaming experience ahead of the technology's commercial rollout in Japan in 2020. Game makers, related network developers, and esports promoters cite expect to benefit from nextgeneration wireless networks that are expected to allow players of increasingly popular online games to utilize faster downloads and smoother connections. 5G’s influence is only beginning to rise as coverage is rolled out.
KWS CDM FDEV KAPE SUMO TM17 AVST BIDS CNS DFX ECSC FLX GFIN IGP NCC OSI SOPH
12 Sep 19
UK Video Gaming Initiations – Level Up
We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector (henceforth UK gaming). Our stock-picking bias is towards companies with strong growth, profitability and cash conversion, consistent with our Arden Technology Thematic Framework. Considering company-level fundamentals we believe exposure to varying growth themes will produce dispersion, creating opportunities to identify relative winners. On this basis, we believe Codemasters (CDM LN), Sumo Group (SUMO LN) and Team17 (TM17 LN) are best positioned, and we are initiating coverage with Buy ratings, with Frontier Developments (FDEV LN) and Keywords Studios (KWS LN) on Neutral ratings.
KWS CDM FDEV SUMO TM17
03 Sep 19
Apple card is now available in the US, Sony acquires Spider-man game developer, Intel Corp unveils first AI chip
The Apple Card is now available to all U.S. customers, the company said Tuesday. iPhone users can now apply for the card through the Wallet app "In minutes" and "Start using it right away with Apple Pay in stores, in apps and on websites" if they are approved, according to the blog posts. Apple, which is counting on recurring fees to boost revenue as iPhone sales slow, has been making a broader push to expand its services business via its 1.4 billion active devices.
KWS BIDS CDM GFIN FDEV SUMO TM17
21 Aug 19
Tencent drops after weak guidance, SoftBank makes energy investment, Security software leaks 1m fingerprints
Tencent shares slumped as much as 3.88% on Thursday after the Chinese technology giant missed analyst expectations, despite beating forecast on earnings. Revenue rose 21% year-on-year to 88.82 billion yuan. Profit attributable to shareholders beat analyst forecasts, rising 35% year-on-year to 24.14 billion yuan. The company's gaming division returned to growth, posting revenue of 27.3 billion yuan, up 8% year-on-year, with mobile games performing particularly well.
KWS KAPE AVST BIDS CDM CNS DFX ECSC FLX FDEV GFIN IGP NCC OSI SOPH SUMO TM17
15 Aug 19
LIBERUM: Morning Comment
GetBusy CEO Video, Capital Goods vs Semiconductors Video, L'Oreal, Infineon, Next, Umicore, Air France KLM, BBA Aviation, Ontex, Keywords, Mitie Group, 4imprint Group, Serco, Market Highlights
KWS OR IFX NXT UMI AF BBA ONTEX MTO FOUR SRP WKL STM TW/ JE/ AMS OSR MELE MAB INTU RCDO SLP DFCH TPK GETB
31 Jul 19
LIBERUM: Keywords Studios - Strong H1 trading, testing H2 ahead
Keywords published this morning a trading statement for its H1'19 period. Revenues are expected to be c.€153.1m in the first half (H1'18: €110m) and are up 17.3% yoy on a constant currency like-for-like basis.
31 Jul 19
Keywords Studios - Firing on all cylinders
Keywords’ trading update highlighted a stronger than anticipated first half, with expected H1 revenue growth of c 39% to €153.1m and adjusted PBT growth of c 15% to €18.4m, and growth seen across all seven service lines. Investment accelerated in H1 to manage the high level of demand, which means margins should benefit from this extra investment in H2. The group also agreed terms for a new RCF to replace the existing €105m facility. With strong underlying demand, the potential for margin leverage and an increased M&A capacity, Keywords looks set for a strong H2. Our forecasts are essentially unchanged for now, but we will review them later in the year.
31 Jul 19
Capital One confirms data breach, Qualcomm & Tencent partner for gaming phone, Microsoft acquires software start-up
Capital One announced on Monday that a data breach identified earlier this month exposed personal information of its customers, including social security details and bank account numbers. The Virginia-headquartered bank said in a news release that about 140,000 Social Security numbers of its credit card customers and around 80,000 linked bank account numbers were compromised. In total, Capital One said, "This event affected approximately 100 million individuals in the United States and approximately 6 million in Canada." Qualcomm and Tencent said on Monday they will cooperate on projects that could include making the Chinese company's videogames play better on devices with Qualcomm chips, and create a 5G version of a Tencent-backed gaming phone. Microsoft yesterday announced the acquisition of BlueTalon, a start-up whose software can prevent people from accessing certain high-value data that companies keep. Over time, the acquisition could help Microsoft's campaign to get companies feeling more comfortable with the idea of keeping sensitive data in its Azure public cloud, which competes with Amazon and other companies.
KWS KAPE AVST CNS DFX ECSC FLX IGP NCC OSI SOPH BIDS CDM GFIN FDEV SUMO TM17 SWG
30 Jul 19
Nexon abandons $16bn sell, Google’s tests free Wi-Fi & music in car, Virgin Galactic plans IPO
Nexon Co-founder Jungju Kim has abandoned plans to sell a controlling stake in its parent NXC, two sources with direct knowledge of the matter said, scuppering a potentially $16 billion deal that would have been the gaming sector's biggest. Kim had been looking to sell the 98.6% stake he and his wife hold in NXC, which in turn owns 48% of Tokyo-listed Nexon. Waymo is rolling out amenities to entice riders to use its self-driving taxis, creating a potential route to profitability in a money-losing industry. The Alphabet subsidiary is testing complimentary Wi-Fi in its robo-taxis in greater Phoenix, where hundreds of the company’s identical, driverless minivans have been carrying paying riders since December. British billionaire Richard Branson's space tourism unit Virgin Galactic plans to go public, the Wall Street Journal reported on Tuesday. The firm will list its shares as part of a deal with Social Capital Hedosophia Holdings, a special-purpose acquisition company created by venture capitalist Chamath Palihapitiya, the newspaper reported, citing people familiar with the matter
KWS BIDS CDM GFIN FDEV SUMO TM17 TRAK CPX SEE TCM TRCS QTX
09 Jul 19
Small Cap Feast
Alumasc Group plc, the prem ium building products, system s and solutions group, has announced its intention to m ove from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019 Argentex a UK-based forex service provider founded in 2011 by its current management team which operates as a Riskless Principal for nonspeculative and forward foreign exchange as structured financial derivatives is looking to join AIM. Offer TBC, expected 25 June
KWS IRR PCIP ANA SLNG SOG ALS BST EMAN ASO
12 Jun 19
Keywords Studios - Structural strength
Keywords Studios looks structurally well placed to continue performing well in an industry where change and innovation are the norm. The company again showed the resilience of its model in FY18, delivering 10.1% l-f-l revenue growth and 53% adjusted EPS growth in the face of considerable industry turbulence. Looking ahead, we see sustained growth from the launch of streaming services by industry majors and the continued shift towards outsourcing. Keywords’ strategy, which has delivered a five-year EPS CAGR of 53%, appears sustainable. As such, we believe that the shares remain set for continued appreciation.
16 Apr 19
LIBERUM: Morning Comment
Healthcare Reform In-depth, Balfour Beatty, Computer Games update, Alpha FX, Aquis Exchange, Kier Group, ASOS, Science in Sport, Speedy Hire, Market Highlights
KWS BBY AFX AQX KIE ASC SIS SDY FDEV CDM TM17 SUMO AZN GSK NOVN NOVOB ROG SAN AAL RIO BATS AF AIXA TEG BHP
20 Mar 19
LIBERUM: Computer Games - Stadia: streaming becoming realityStadia: streaming inflection point
Yesterday Google announced Stadia, its highly anticipated video game platform and the first truly cloud-based system, able to run on PC, mobile, tablet and TV. The event marks Google's official entry into the higher spec end of the video game market and reiterates the attractiveness of the sector.
KWS FDEV CDM TM17 SUMO
20 Mar 19
LIBERUM: Morning Comment
Computer Games In-Depth, RPS Group, Mining: Restocking Indicator Update, IAG, Land Securities, National Express, Aixtron, Volution, Vertu Motors, Market Highlights
KWS FDEV CDM TM17 SUMO RPS AAL GLEN RIO S32 IAG NEX AIXA FAN VTU REN REL WPP IMI SPT RWA WIN AFHP BHP RMV LAND
01 Mar 19
LIBERUM: Computer Games - Ready. Set. Grow.
Through 2019, we expect increasing news flow around new consoles, streaming platforms, higher revenue shares for IP owners, innovation in free-to-play games, and growth in China. This all points to a widening audience for leading games and better economics for developers.
KWS CDM SUMO FDEV TM17
01 Mar 19
Keywords Studios - Opportunities in industry turbulence
Keywords’ recent trading update indicated that the company continues to perform robustly despite industry turbulence. The acquisition of GetSocial, a cloud marketing services platform, for an undisclosed sum highlights the potential for Keywords’ M&A strategy to benefit from the weaker funding environment. We adjust our estimates to reflect slightly greater investment of profit back into the business in FY19 (EPS -3%), while adjusting working capital and deferred consideration payments upwards. We retain our view that Keywords remains strongly positioned, with an undemanding rating given the company’s leading market position, track record and potential.
26 Feb 19
Small Cap Feast
United Oil & Gas (UOG.L) an oil and gas exploration and development company brought to the Official List (Standard Segment) in July 2017 by way of a reverse takeover of Senterra Energy plc. No capital to be raised, expected market cap of £17m and expected 1 March Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Polemos, to be renamed Digitalbox plc, has agreed to acquire Digitalbox Publishing Holdings Limited for c.£10m through a share for share exchange. The acquisition constitutes a RTO. Polemos has also agreed to acquire the entire issued share capital of Mashed Productions Limited, a digital media business which owns the online satirical news website "The Daily Mash", for a maximum total consideration of up to £1.2m. Market cap on admission £12.4m, expected 28 February
KWS PYC SRES ARBB TYM PTSG PCIP RPS RPT MLVN
21 Feb 19
Keywords Studios - Affected by industry flux but still performing well
Trading in H2 was affected in some areas by flux in the games industry, so although the overall picture remains relatively healthy (we est 8% l-f-l revenue growth, 49% EPS growth for FY18) FY18 revenues and PBT are expected to be 2% and 6% below our respective forecasts. Looking through this disruption, we still believe Keywords remains attractively positioned in a games industry that should continue to deliver robust growth. There remains plenty of scope for Keywords to continue accretive M&A, as demonstrated by the acquisition of games marketing services specialist, Sunny Side Up for C$5.9m (c €3.8m) for c 4.9x trailing EBITDA.
21 Dec 18
Keywords Studios - Strengthening position in an attractive market
Keywords has built an enviable position of strength, servicing a global games market expected to sustain 10% growth. Pockets of volatility, possibly related to the dramatic success of Fortnite create some near-term uncertainty, but we believe company’s strength of model and customer diversity will continue to enable the group to outgrow the games market in the medium to long term. At 36x FY19e earnings, strong growth is priced in, but continued execution should drive positive shareholder returns.
26 Sep 18
Keywords Studios - Gobo strengthens engineering operations
Keywords’ acquisition of Studio Gobo and Electric Square for up to £26m meaningfully strengthens the company’s engineering service line, while enhancing our FY19 earnings by 6% based on conservative assumptions. In paying a maximum of 7.6x historic EBITDA for the business, the company looks to be buying a good asset in a high value-add service line at a very reasonable multiple.
28 Aug 18
Small Cap Breakfast
Path Investments (PATH) -RTO of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Offer TBA. Due late Aug. Kropz PLC-Intention to float by the emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa and exploration assets in West Africa.
KWS AUTG ADT RED MUL KMK GKP LID CAS ADL
20 Aug 18
Keywords Studios - Currency headwinds, outlook maintained
Keywords’s trading update indicated continued robust performance with y-o-y revenue and PBT growth of 72% and 66% respectively, despite the currency headwind from a weaker dollar. With the integration of acquisitions going well, a robust demand environment and a stronger dollar, the company looks set for a strong H2 and is well placed to meet our (unchanged) FY estimates.
06 Aug 18
Keywords Studios - Investing in higher value-added services
Keywords has taken a step into the games analytics market with the acquisition of Yokozuna Data (YD) for $1.5m. This follows the recent engineering acquisition of Snowed In (for C$4.5m) and the establishment of Keywords Ventures. We do not expect these developments to have a material effect on our forecasts in the near term, but they do highlight the company’s investment in building higher value-added, IP-based business lines. Given Keyword’s strong coverage of the gaming supply chain, we believe the business is well placed to gain leverage from these investments.
24 Jul 18
Keywords goes to Hollywood
Keywords’ acquisition of Blindlight for up to $10m gives the group the ability to apply Hollywood movie production resources to the games industry. Factoring in Blindlight and the May acquisition of Fire without Smoke, EPS is enhanced by 2% and 4% for FY18 and FY19 respectively. With the €75m revolving credit now secured, with scope to extend to €105m, the company has plenty of headroom to continue its consolidation strategy while enhancing earnings.
11 Jun 18
Unlocking marketing budgets
Keywords (KWS) has acquired Fire Without Smoke (FWS) for up to £5.2m. FWS is a creative and marketing services provider to the video games industry. This is an incremental opportunity for KWS to work with games producers on marketing projects (eg trailers). At 7.4x trailing adjusted PBT, this was at the lower end of KWS’s recent acquisition range, and further upside via cross-selling synergies with pre-existing studios is likely.
31 May 18
Small Cap Breakfast
Stratmin Global Resources RTO of Signature Gold a specialist Australian gold exploration company focused on the exploration and development of large-scale Intrusion Related Gold System. Offer TBA. Due 4 June. Will leave AIM under rule 41.
KWS DERR FISH TMT LND EUSP TMO HNG CER KRS
30 May 18
Deeper, wider, higher
FY17 was a transformative year for Keywords with revenues growing by 57% and EPS by 52%. Like-for-like revenue growth accelerated to 15.1% (we estimate 18% stripping out recent acquisitions) highlighting the company’s strengthened position in the supply chain. With an expanded debt facility, we believe the company potentially has the acquisition firepower to more than double its EPS run rate exiting FY18, and see no obvious reason why the cycle should not repeat in FY19. The shares price in further strong progress, but nothing is new there, and sustained execution should continue to drive strong returns.
20 Apr 18
FY17 was a transformational year for Keywords, both operationally and financially. Acquisitions have bolstered the company’s capability set and geographical reach, while driving strong double-digit earnings growth. Organic growth remains strong and we see potential for market share gains to accelerate, driven by a strengthened platform for cross-selling. It is not unreasonable to expect a similar scenario into FY18/19. Execution of this should drive further share price upside, despite the premium rating.
01 Feb 18
Iofina* (IOF): H2 production set to exceed guidance & IO#7 update (CORP) | Omega Diagnostics* (ODX): Short-term headwinds (CORP) | Byotrol* (BYOT): Interims – H2 weighted with deal flow (CORP) | Synairgen* (SNG): £5m payment from Pharmaxis (CORP) | Keywords Studios (KWS): Doubling up (BUY) | Altitude Group* (ALT): Taking AiM (CORP) | CityFibre* (CITY): Further demonstration of the model – Aberdeen (CORP)
KWS IOF ODX BYOT SNG ALT CITY
14 Dec 17
The Joy of Techs
This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2.
KWS 7DIG ALT AMO ARTA BOTB BLTG CTP CITY D4T4 DTC DOTD ELCO FDEV GBG IDEA IDOX IGP IOM KBT KCOM LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SEE SIM SPE SRT STR TRMR TAX TEP TPOP TRAK UNG VIP ZOO CYAN ONEV SSY ABAL WJA
09 Nov 17
Small Cap Breakfast
Novacyt S.A.—Sch1 from the international diagnostics group, generating revenues from the sale of clinical products used in oncology, microbiology, haematology and serology testing. Offer to raise £8.8m at 59.38p with a value of £22.4m. Expected 01 Nov | Footasylum Ltd—UK-based fashion retailer focusing on the branded footwear and apparel markets announced its intention to seek admission to AIM. Expected value between £130m and £150m. Due Nov 2017. | Totally (TLY) - Sch 1 for £11m RTO of Vocare, a provider of integrated urgent care services to the NHS throughout the UK. £76.8 million rev in the year ended 31 March 2017. Totally to address Care Quality Commission concerns. Due 24 Oct. | Central Asia Metals (CAML) -RTO of Lynx Resources. Anticipated market capitalisation at Admission: £404.8m. Raising £113m at 230p. Acquiring the SASA zinc-lead mine in Macedonia from Solway Industries. Due 15 Dec. | OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. | Orogen plc, to be renamed Sosandar plc on Admission. Sosander is an online womenswear brand specifically targeted at a generation of women who have graduated from younger online and high street brands, and are looking for affordable clothing with a premium, trend-led aesthetic. Offer to raise £5.3m with market cap| of £16.1m, expected 2 November 2017 | OG Graphite, brownfield development-stage graphite company focused on the reactivation of its wholly-owned Kearney natural flake graphite mine and mill located 280 km north of Toronto, Canada. Offer TBA, epected late October | ContourGlobal LP— contracted wholesale power generation businesses, with 69 thermal and renewable power generation assets in Europe, Latin America and Africa. In the year ended 31 December 2016 it generated $905.2 million of combined revenue and $440.4 million of Adjusted EBITDA. Raising c.$400m. Expected November | TI Fluid Systems—Maybe second time lucky? Pulled last October. global manufacturer of automotive fluid storage, carrying and delivery systems seeking to raise €425m to reduce financial leverage (to approximately 2.0x net debt to Adjusted EBITDA by the end of FY 2017). Possible partial sale by Bain. Revenue for FY 2016 was €3.3 billion and Adjusted EBIT was €362.1 million | M7 Multi-Let REIT—Intends to raise up to £300m at 100p. Aims to acquire and hold a portfolio of UK regional light industrial and regional office assets diversified by geography, asset type and tenants that is expected to generate stable income returns and, where appropriate, offer the potential to leverage and enhance returns through active asset management initiatives. Due 13 Nov | Bakkavor Group - Provider of fresh prepared food intends to float in November. FY 16 Revenue: £1,763.6 million FY 16 Adjusted EBITDA: £146.4 million (13.7% CAGR FY 14-FY 16). Part vendor sale and primary raise of c. £100m. Price TBA | Russia’s En+, owned by Russian aluminium tycoon Oleg Deripaska, has assets in metals and energy, including hydropower. reported to be seeking dual London and Moscow listing raising $1.5bn | TMF Group , which provides tax, admin and legal support services, reported to be seeking London IPO to raise c. £200m. | People’s Investment Trust—Objective of sustainable wealth creation. Also to list on the Social Stock Exchange. Targeting £125m raise on 17 Oct. No performance fees or executive bonuses in order to focus on long term rather than short term performance
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19 Oct 17
Ticking every box (except valuation)
Interims are in line with July’s trading update, with sales up 17% LFL and adj PBT margins robust at 15.0%, +90bps vs. 1H16. Despite this strong performance and our long-term confidence in the business, we move from Buy to Hold in view of the stock’s exceptionally strong run.
19 Sep 17
Keywords Studios (KWS): Ticking every box (except valuation) (HOLD) | OptiBiotix* (OPTI): SlimBiome commercial update (CORP) | Surface Transforms* (SCE): Steady progress (CORP) | Gem Diamonds (GEMD): Recovery of high quality 115 carat diamond (BUY) | ClearStar* (CLSU): Record H1 driven by direct sales and medical business (CORP)
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19 Sep 17
French audio and localisation consolidation
The acquisition of four French companies gives Keywords Studios strong capabilities across all major European languages for localisation and voice-over recording. The transactions boost our FY18 EPS by 5%, although some investment in integrating the entities will be required. The expanded offering should also support organic growth, through helping secure more centrally procured, multi-language contacts.
09 Aug 17
Small Cap Lunch
Wilmcote Holdings plc—Sch1 from the Company established with the objective of creating value for its investors through the acquisition and subsequent development of target businesses in the downstream and specialty chemicals sector. Offer raising £15m at 120p with market cap of £25m. Expected 17 August 2017 Andes Energia PLC—Sch1 on admission the Company will change its name to Phoenix Global Resources plc will be an Argentinian independent oil & gas exploration and production company, offer TBC but market cap to be £844m and admission date 10 August 2017 Verditek PLC—Sch1 update from holding company in the clean technology sector with subsidiaries operating within what it considers are emergent and fast growing sectors (industrial treatment of solids, air purification, water de-odourisation, zero emission, low cost energy), offer raising £2.75m at 9p with market cap of £16.9m. Admission 10 August 2017 Strix Group PLC—Sch1 from the Company involved with the design, manufacture and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management and water filtration. Offer raising £190m at 100p with market cap of £190m admission date 8 August 2017. Xpediator Plc—Sch 1 from the holding Company for an integrated freight management business operating in the supply chain logistics and fulfilment sector across the UK and Europe with a strong presence in Central and Eastern Europe. Offer details TBC, expected Admission early August 2017. Altus Strategies—African focused natural resource Company. Offer raising £1.1m at 10p with market cap of £10.7m. Expected 10 August 2017 Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 September 2017
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04 Aug 17
Firing on all cylinders
Strong trading nearly across the board reaffirms the strength of Keywords Studios’ model and prompts a further 8% upgrade to FY17 EPS. We believe there should be more to come, both organically and through acquisitions. Despite the premium rating, continued execution should drive further upside.
28 Jul 17
Melrose Industries could be set to be the second former AIM company to make it into the FTSE 100 index after it was placed on the reserve list in the recently announced index changes. Baltimore Technologies had a short stint in the index at the turn of the century.
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06 Jun 17
Beefing out in China
Keywords has acquired Strongbox Ltd for $6m, a fast-growing provider of Art services in China and Indonesia. 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. We increase FY17E and FY18E EPS by 2.3% and 4.6%, respectively.
22 May 17
Red Hot art acquisition
Keywords Studios’ $6m acquisition of Red Hot CG further strengthens the company’s position in the art service line, in China and with Activision. Management estimates that the deal will make Keywords the number one supplier of art production services to the games industry globally and increase art production capacity by 25%. The deal further enhances our estimated FY18 earnings by 6%, with the three acquisitions made so far in May enhancing earnings by 11% versus our April forecasts.
22 May 17
A new string to the bow
Keyword’s acquisition of GameSim for $4.76m marks the company’s long planned entry into engineering. We expect follow-on acquisitions as it replicates its strategy of building a service line through consolidating the fragmented games outsourcer market. As with the company’s Art service line, GameSim’s teams work closely with the core engineering teams of its games developer customers, creating cross-selling opportunities and deeper relationships with customers. Incorporating GameSim, together with the earlier $0.9m acquisition of XLOC, we upgrade FY17e EPS by 3%.
18 May 17
Keywords Studios (KWS): First engineering acquisition (BUY) | Shanta Gold (SHG): Completion of €2.1 million underground equipment financing (BUY) | Staffline (STAF): Excellent progress continues (BUY) | Blancco Technology Group (BLTG): Plugging the hole (SELL)
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18 May 17
Small Cap Breakfast
I3 Energy –Schedule 1. Independent oil and gas company with assets and operations in the UK. Offer TBC, 26 May admission. | Opera Investments – Reverse Takeover of Kibo Mining’s subsidiary Kibo Gold. Raising £1.5m. Expected mkt Cap £6.5m. 23 May. | Eve Sleep— Schedule 1 from the e-commerce focused, direct to consumer European sleep brand. Offer details TBC. Expected Mid May | Velocity Composites—Schedule 1. Manufactures advanced carbon fibre and ancillary material kits (predominantly carbon fibre) for use in the production of aircraft. Mid May admission expected. Offer details TBC.Verditek— Schedule 1 update. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission in May. | Alfa Financial Software –Intention to float. Mission-critical software platform purpose-built for asset finance enterprises. Vendor sale of 25% plus. FYDec16 rev £73.3m (CAGR of 24% from 2012). Adjusted EBIT £32.8m. | Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe | ADES International— Provider of offshore and onshore oil and gas drilling and production services in the Middle East and Africa, seeking raise up to $170m plus vendor sale under a Standard Listing of the Main Market. Admission due May 2017. Global Ports Holding—Intention to float on Standard List of the Main Market. International cruise ports operator. Seeking $200m+ raise including $75m primary offer. Expected price range 735p to 875p. Mkt cap up to £539m.| Tufton Oceanic Assets– Offer extended to 9 May on specialist funds segment of Main Market to enable investors to complete further due diligence. | PRS REIT—Private rental sector REIT raising up to £250m. Admission due 31 May
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10 May 17
TMT Update 10.04.17 (BOOM.L, ADT.L, BBSN.L, KWS.L, MPAY.L)
Audioboom (BOOM.L, 2.375p/£17.7m) Additional subscription | AdEPT Telecom (ADT.L, 350p/£78.8m) Positive pre-close | Brave Bison plc (BBSN.L, 1.125p/£6.4m) Meeting with management: Strategy emerging | Keywords Studios plc (KWS.L, 723p/£393.3m) Prelims: Increased cross-selling | Keywords Studios plc (KWS.L, 723p/£393.3m) Prelims: Increased cross-selling |
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10 Apr 17
Compelling game plan, executed well
FY16 was a strong year for Keywords Studios both financially and operationally, with EPS growing by 61% and acquisitions strengthening the business across a number of service lines and geographies. It has also invested into key staff and core systems to support continued growth and we fully expect the growth trajectory to continue from here. We see scope for further upgrades through organic performance, further acquisitions and potentially larger outsourcing deals. Given the recent run, we feel the valuation prices in strong progress this year but believe that sustained execution of the strategy will continue to create shareholder value.
07 Apr 17
Utilitywise* (UTW): Laying the foundations for the next phase of growth (CORP) | Flowtech Fluidpower* (FLO): Prelim results in line with expectations (CORP) | Universe Group* (UNG) Readying the ship (CORP) | Motif Bio (MTFB): Hypochondriacs need not apply (BUY) | Central Asia Metals (CAML): 2016 annual results (BUY) | Europa Oil & Gas* (EOG): Interim results (CORP) | Keyword Studios (KWS): Moving up a gear (BUY) | Tax Systems* (TAX): Small acquisition; board changes (CORP)
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04 Apr 17
The Joy of Techs
Enterprise-focused niche applications of tech illustrate how, while trends appear to be fluctuating away from the current poster children of fintech and the Internet of Things, in fact these developments are refining appropriate application of existing technologies.
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27 Mar 17
Another beat and raise
Full-year revenues and PBT are both expected to come in 3% above our forecasts, which were upgraded in November, suggesting like-for-like growth in the region of 20%. We upgrade our FY17 revenue and EPS estimates by 2% and 4% respectively, but with the company attractively positioned within a generally buoyant gaming technical services sector, we see clear scope for the organic upgrade trajectory to continue through both organic performance and acquisitions.
08 Feb 17
Small Cap Breakfast
Arix Bioscience — Intention to float on the main market from the global healthcare and life science Company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management Ramsdens Holdings –Schedule One from the financial services provider and retailer, operating in the core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling and retailing of second hand and new jewellery. Expected admission to AIM 15 Feb raising circa £15.6m. Expected mkt cap £26.5m.
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08 Feb 17
Joy of Techs
ICT evolution is driven by technological development as advances are made which both meet and shape customer requirements. Our 2011 note No such thing as a telco described the modern reality in that former ‘telcos’ now deliver varying elements of a range of managed services. We built on this theme last year, exploring in further detail their evolutionary paths, operating fundamentals, and cashflow yield similarities. In the consumer environment, demand for bundles of technology is complemented by demand for content. Across the pond, the mooted combination of AT&T and Time Warner typifies the bundled need of ‘pipe’ and content, since unbundled alternatives such as FaceTime and WhatsApp can be easier and clearer to chat over, and Amazon and Netflix are easier to watch anywhere. In the UK, BT’s defensive actions cover delivery, content and capabilities, acquiring EE yet also buying football rights. While TV was long ago added to triple play to become quad play, voice is now merely an app, and fixed and mobile seen as just dumb pipes: it's the content that will influence consumer choices. Growth of TV and film as well as music and gaming over IP leads to UK small cap opportunities. In context of the drive to maximise value from pipes and access by offering content and data, we look at some amongst the potential tech small cap beneficiaries: Amino*, Keyword Studios, ZOO Digital*, 7digital*, KCOM* and CityFibre*.
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21 Nov 16
Enzyme the catalyst for a 6% EPS upgrade
Keywords’ acquisition of Enzyme strengthens the company’s position in French-speaking Canada, and in localisation and functional testing. Enzyme’s expertise in focus group testing should be a good complement to the recent Player Research acquisition and may support the company’s drive to develop more comprehensive, strategic outsourcing relationships with developers and publishers. The company is paying a mere 4.2x FY15 EBIT for the business and synergies should reduce this multiple in FY17. The deal adds a further 6% to our FY17 EPS.
18 Nov 16
Conroy Gold & Natural Resources* (CGNR.L) | Crossword Cybersecurity * (ISDX:CCS) | Karelian Diamond Resources (KDR.L) | SCICYS (SSY.L) | Keywords Studios (KWS.L) | Redstone Connect (REDS.L) | ZOO Digital Group (ZOO.L) | Genedrive (GDR.L) | Shanta Gold (SHG.L) | Dart Group (DTG.L)
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17 Nov 16
Exceptional trading continues
Keywords has announced that the strong trading in localisation and audio services has continued into H216. In particular, the Synthesis business acquired in April continues to benefit from exceptionally strong trading. Full-year results are now expected to be materially ahead of consensus and we upgrade our FY16e EPS by 13%. Erring on the side of caution, we have not changed our FY17 estimates significantly. Nevertheless, we believe the company does have a platform to sustain double-digit earnings growth, and hence medium-/long-term prospects for further share appreciation remain good.
08 Nov 16
The Joy of Techs
Mobile money has been slow to deliver but investors need to stay engaged as there are plenty of reasons as there are plenty of reasons for success. Mobile penetration and network coverage are growing inexorably and where communication leads, transactions follow, as e-commerce has proven. Banking and payments lead the way but it will embrace other financial services too, from insurance to cross-border remittance. Slowly but surely, mobile money is coming of age.
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15 Aug 16
M&A strategy delivering value
Keywords’ trading update adds further evidence to support our view that it continues to create value from its ongoing buy-and-build strategy. The most recent of its acquisitions was Volta Creation at the end of July, a deal that takes Keywords into the concept art market. Previous acquisitions are reported to be performing well, with Synthesis (its largest to date) singled out as being particularly successful. We believe that the trading update supports our existing revenue and profit forecasts. However, we have slightly upgraded our estimates to reflect the impact of the Volta acquisition, which is expected to be accretive from year one.
04 Aug 16
Aggregated Micro Power*: Full-year results (CORP) | Independent Oil & Gas*: Skipper drill confirmation (CORP) | BATM*: Adaltis given $58m valuation by partner (CORP) | Lombard Risk Management*: COLLINE gains traction in N America (CORP) | Keywords Studios: Balanced and poised to strike again (BUY)
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30 Jun 16
The Joy of Techs
This quarter's topic: Feasting on Red Tape. 2016 harbours every chance of being a stultifying year, given the imminent local and London mayoral elections, the looming hurdle of Brexit, the summer doldrums, the bizarre potential outcome of the US presidential election and then the home strait to Christmas. Excuses for inactivity abound with regard to spending IT capex budgets.
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04 May 16
Synthesis acquisition ticks all the boxes
The acquisition of Synthesis for up to €18m is Keywords Studios’ largest to date and significantly strengthens the company’s leadership position in both localisation and audio. It also enhances earnings by an estimated 12% and 16% for FY16 and FY17 respectively. We see ample scope for continued upside as the company continues to strengthen its position in this fragmented market with earnings enhancing acquisitions.
15 Apr 16
An unrivalled video game outsourcing offering
Keywords Studios has released its 2015 results, revealing a company transformed by a blend of strong organic growth, supplemented by strategic M&A with revenues up 55% to €58.0m (c 20% organic growth). These results closely follow its most recent deal announcement, which will see it acquire China-based art production company Mindwalk. Keywords’ capabilities now span six service offerings and four continents, allowing it to service its stable of blue-chip clients, in all major video game development hubs. The outsourcing market remains highly fragmented and Keywords intends to continue to lead industry consolidation. We believe that further deals consistent with those completed to date have the potential to create additional value.
07 Apr 16
The Joy of Techs
This quarter’s topic: Automotive Technology. With the Mobile World Congress approaching at the end of this month and likely to feature so many automotive applications to the extent it should perhaps be renamed the Mobile World of Cars, we examine the growing impact of technology in the automotive industry, from telematics to connected cars and autonomous vehicles.
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03 Feb 16
Strong 2015 trading; expect further acquisitions
Keywords has stated that it expects its full-year revenue and adjusted PBT numbers to come in “comfortably ahead” of consensus estimates. Having raised funds in November, the company also re-iterated its commitment to a buy-and-build strategy to complement its already solid organic growth. It is in advanced discussions to complete one or more deals and we expect an announcement could be made before the company delivers its full-year financials in April.
02 Feb 16
The stars align
Keywords Studios (‘Keywords’) is a global company which provides outsourced technical services to international video game publishers and development studios. The company has a strong position within its industry, resulting from its track record of profitable growth, and evidenced now by its blue-chip customer base. In a growing but fragmented outsourcing industry, Keywords' high quality, inter-national and multi-service strategy is aligned with customer demand, making Keywords well positioned for strong growth within a buoyant gaming market.
22 Oct 15
Keywords Studios: The stars align – initiation of coverage (BUY) | Shoe Zone: Analyst interview (BUY) | Castleton Technology*: Comfortably in line (CORP) | Servoca*: Year-end trading update (CORP) | Elecosoft*: Sale of legacy architects practice (CORP) | Europa Oil & Gas*: Wressle development (CORP)| Photo-Me*: AGM statement (CORP) |Sound Energy: Sidi Moktar acquisition update (BUY)
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22 Oct 15
Acquisitions paying off
Keywords Studios reported strong H115 results. The company delivered strong y-o-y revenue growth of 74%, supported by its recent acquisitions. Underlying organic growth was also strong, up 23% y-o-y (on a pro forma basis), demonstrating the strength of both the existing and acquired business. H2 trading is in line with company expectations, increasing confidence in our FY15 forecasts. We believe that the company’s shares remain attractive given the strong underlying growth and the likelihood of further earnings-accretive acquisitions.
07 Oct 15
Northland Capital Morning Report
Arian Silver Corporation (AGQ.L) – CORP: Company update | Clontarf Energy (CLON.L) – CORP: Interims | Premier African Minerals (PREM.L) – SPECULATIVE BUY*: Issue of equity | Rockwell Diamonds (RDI.TSX) – CORP: Q116 sales and production results | Amino Technologies (AMO.L) – BUY*: Contract win | Keywords Studios (KWS.L) – Interims | Savannah Resources (SAV.L): Oman update
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22 Sep 15
Art services acquisition - getting the picture
Keywords Studios’ recently announced purchase of outsourced art service provider Liquid Development marks another milestone in the company’s aim to become the primary provider of outsourced video game services. Art services is Keywords’ highest-margin service vertical and the deal will almost double its exposure to this area from 14% of group revenues to 22%. We believe that the purchase price of 6x PBT is attractive for an already profitable, growing business that will be accretive to earnings in its first full financial year.v
02 Sep 15
Expanding the geographic footprint
Keywords Studios continues to make progress in its aim to become a one-stop outsourced technical service provider to the video games industry. The announced purchase of a 50% stake (with an option to buy the remaining 50%) in Spanish language audio production and localisation provider Kite Team fills in another piece of the jigsaw. The acquisition expands Keywords’ geographic footprint and its ability to meet the fast-growing demand for Iberian and Latin American Spanish audio services. The acquisition is expected to be earnings accretive in its first full financial year (FY16).
23 Jul 15
Hybridan - Small Cap Wrap
The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.
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21 Apr 15