Frontier Developments Share Discussion Threads

[culford] 04/12/2016 15:38

I think it will be very difficult not to give an update in December as looks like sales up by c£10m in H1 (PC sales of c350k x £30 = £10.5m) - that is material and not in market consensus/brokers research. Encouragingly PC still top of Steam charts as I post and it has been top or near top since Beta launched on 9th November....that is pretty significant at peak trading time of year and reviews are still >90% positive....looks like this game has legs and could be repeat of RCT3 which sold >10m.....

[p1nkfish] 04/12/2016 01:17

They might just wait until January for the Trading Update to add comment on the Christmas period even though after the 6th month close.

[culford] 29/11/2016 10:00

p1nkfish you are right that this tends to be very illiquid. Interestingly there is stock about at present which is surprising. FDEV now firing on 2 cylinders and has transitioned from making games for others and making a few £m profit to being a self financed publisher of its own games. It has more than 30 years experience of making games successfully for others. In that time it developed a very strong technical platform, Cobra, and has a very well regarded team of people. It now has c£10m in the bank and two successful franchises generating >£20m of cash per annum. This will allow it to step up its growth rate by adding a new game each year. It should also be able to start paying dividends this year. Share price won't be at this level next year.

[p1nkfish] 28/11/2016 12:32

I've been adding very slowly. Price can move quickly and any large buy is not easy without shifting the price. Looks ready for a move.

[culford] 28/11/2016 12:12

PC has been top selling non discounted game during the Steam sale and in top 3 games through the Thanksgiving/BlackFriday sale period. The trading update for 6 months to end November last year was on 19th January, when they announced sales up 50% to £10.9m. I would now expect that the increase this year will be >50% and the overall business, with two self published games selling, will become very profitable. My estimate right now is sales of >£50m for year to May 2017 (the step change up they have been hinting at) and cash flows of >£20m even though 2nd game will have been around for only just over 6 months.

[culford] 24/11/2016 14:06

Makw61

The complaints seem to be game management (should be improvable over time), the large computing power required with some people experiencing crashes, and the lack of Chinese and other languages (also could be remedied in time). Sales have accelerated into the Thanksgiving sale on Steam and the reviews have become more favourable!! Could be on course to do c500k units by end November which would definitely require a trading update in December...Lets hope it continues to ripple out successfully....

[makw61] 23/11/2016 16:01

Hi culford,

Couldn't agree more. Based on the different scenarios I've modelled, the share price could be between 3 and 10 times what it is currently in the next few years. RCT3 sold 10m units so big numbers are definitely possible.

Not sure if the sub £100m market cap means some funds can't invest in this, or the fact it is on AIM, or indeed that David B owns such a large stake means it is difficult for institutional investors to acquire a meaningful stake? I guess I will just have to be patient and let the numbers do the talking!

Thanks for the point about the Steam reviews; I hadn't realised that my settings were defaulted to English so I had missed those.

The positive reviews have remained very high as you say, which is very encouraging. Some negative comments around the management aspects of the game but my view is that that aspect is unimportant for many, and is easily improved as DLC (paid for or otherwise). Also I'm sure additional rides will be offered as DLC / season passes.

ATB

[culford] 23/11/2016 14:16

hi makw61
At present sales c£20m from one game - 30% distribution costs to steam etc leaves net revenue of £14m which covers all cash costs - cash has been pretty stable at £8-10m over past two years.

1m extra sales of 2nd game PC at £30 is £30m gross and £21m net which should all flow to bank, although profits may be lower as non cash depreciation increases. But the new level of £20m of cash flow with only two games in sales with the company to add one more per year from now suggests a multiple of at least 10x cash flow or £210m or 3x current share price.

Looking at the Steam site, 1/3 of reviews are not in English, with many requests for a Chinese language version. The reviews are 90% positive, suggesting there is every chance that this game becomes a blockbuster with sales >10m over next few years, with paid upgrades in due course. The cash flow could thus be a lot higher than the base case above. I am also surprised that market has not woken up yet.

[makw61] 23/11/2016 13:14

The market has been very slow to wake up to the potential here. My base case is identical to that above i.e. 1m units of ED and of PC per year for revenue net of Steam fees etc of c.£40m against cash costs of £25m to £30m i.e. underlying operating profit of £10m to £15m (not sure how the amortisation of development costs will impact reported profits but those costs are already spent!). Incremental sales kick in £20 per unit bottom line so another 1m sales of PC would increase profit by £20m to up to £35m.
Current market value is under £70m and there is cash in the bank. I feel like I must be missing something?
Looking forward to the next trading statement so that I can reconcile my numbers - Steamspy will not include Xbox sales of ED but I'm not clear if it includes PC sales via Frontier's website where the customer activates their Steam key and PC then appears in their Steam account?
I thought the share price would be motoring by now, but maybe we will have to wait for the trading statement for the market to wake up.
Interested to hear also what the next franchise will be. Frontier have some history in platform games (Lost Winds) but those are not particularly fashionable currently. I would like to see something for PC, Xbox and PS4 to maximise sales. Still waiting to see the PS4 port for ED and I suspect PC is too demanding to port to current generation consoles (they have confirmed no VR for now for the same reason but the hardware will catch up in a couple of years I'm sure).
GLA

[culford] 23/11/2016 08:29

Yes Planet Coaster has been top of the best sellers list for more than a week now and SteamSpy estimate sales of c200k. If you add the sales by Frontier direct it is probably c300k games sold in total now, or £9m in revenues. That is a major step change up for Frontier and there should be a very positive trading update in December after their 1/2 year to end November - worth accumulating now.

[m4ybe] 23/11/2016 05:31

Planet Coaster current in-game users on Steam was 15,000 near the daily peak yesterday, just at one moment in time. Even at the daily low point now while most people sleep it's 6400.

So I bought some FDEV yesterday. This looks like all profit to me if their costs are covered by Elite, which currently has a fraction of the users. The Minecraft style creative model could keep users attached and hopefully sharing content for a long time to come. This isn't Minecraft but I can see the lean towards that direction, and that sold for billions. And if anyone understands getting high performance 3D graphics right it's David Braben.

[p1nkfish] 22/11/2016 20:06

Yes, Catalysts kicking in and pleased they were early in VR. VR opens up many future opportunities. Shift to a new price level more than likely. Hold and buy on weakness.

Pleased to see this developing. Great British potential.

[culford] 22/11/2016 11:47

Further to the post above, Frontier's annual sales with their first game have been c£20m per annum or £400k per week. The 2nd game released last week (Planet Coaster) is selling at c£600k per day. This clearly won't last for ever but all the indications are that it will be a substantially bigger selling game and that sales will more than double off the current cost base. The third game will be announced in the next few months and we will get an update on early Planet Coaster sales.

[culford] 22/11/2016 08:15

Market will wake up to Planet Coaster success at some stage soon. Game launched on 17th November last week and has been top of Steam sales charts since. Initial sales are running at c20,000 games per day, or c£600,000 per day at £30. It looks as if it should hit at least the bottom end of the 1-3m per annum range which suggests that FDEV's sales have moved to a new level more than double previous levels.

[culford] 15/11/2016 12:46

Planet Coaster, the 2nd game to be published by Frontier is due to be released later this week. It has had good feedback in Alpha release and the beta release is top of the Steam charts!!



Steam has >10 million active games players and is a good barometer on game sales.

Elite Dangerous, the 1st Frontier self published game is selling c£20m per annum. This second game is in a much more popular genre and could sell 1m - 3m per annum, which at £30 per game is £30m to £90 per annum. Frontier has said there will be step changes in its revenues and that is clear, with revenue potentially rising from £20m per annum now to £50m-£110m after the release of this game. Incremental sales have a 70% margin and little other additional costs. Profits/cash flow should thus rise by 70% x £30m-£90m or £21m - £63m per annum. This company has been breaking even as it has only had one game self published covering all its costs. Its market cap. should rise from £70m to somewhere over £200m if this game sells as predicted, as profits will rise to £21m - £63m.

In future it will add another new game each year and has the ambition to become a significant publisher in the $100bn games market. Its quoted competitors in the US, EA and Activision, have market values in excess of $20bn. Frontier could well reach a market value near a £bn in a few years time if it succeeds with its strategy.

[p1nkfish] 29/10/2016 02:00

I hold fdev and have added a small amount on weakness, If I didn't I would look to open a position about now. It looks ready.

[p1nkfish] 28/10/2016 13:46

Early VR compatibility will help drive this too. Coaster should be interesting and beaten early adoption expectations. With care this could move quite nicely over the next 3 yrs or so. New CFO will be busy enough.

[mininozzle] 27/10/2016 22:33

And the latest update was out on Tuesday and it's freeking awesome...

Nozzle

[p1nkfish] 27/10/2016 20:50

Having spent some time looking into the product, development of the company and potential I think this is a buy and hold. Substantial upside potential in my opinion, just an opiion mind.

Spoke to some kids that have eLite and they were very positive on the experience.

[p1nkfish] 23/10/2016 23:03

It's possible the move of Amstrong to Operations might be related to the devleopment delays that have gone down badly. No idea if this is correct but there was some bad reception and Frontier woudn't give specifics of the reason for the delays.

The erecent appointment looks good but may have simply been to allow problems elsewhere to be addressed now Armstrong is freed up.

hxxp://www.idigitaltimes.com/elite-dangerous-cqc-tournament-canceled-developmental-delays-blamed-frontier-544839

[p1nkfish] 21/10/2016 22:48

I think he sees something interesting or similarities here.

[p1nkfish] 21/10/2016 22:47

Cfo, x-csr, x-xaar.

[p1nkfish] 27/5/2016 22:23

Not enough exposure of the new to the wider market or understanding of what it means to future prospects. Only followers get it and there's not enough of them.
One day the wider market will cotton on.

[18bt] 27/5/2016 07:45

Useful update this morning. Good expectation management.