Keywords Studios Share Discussion Threads

[rivaldo] 20/6/2016 12:25

Nice plug for KWS (and ACSO) as a Brexit hedge:



"Keywords Studios

Keywords Studios is a fast-growing supplier of localisation, testing and artwork services to the electronic games sector. It has made a number of acquisitions so it is difficult to keep up with the geographical distribution of its revenues.

The 2015 figures provide a guide, but they do not reflect the geography of the underlying customers. Even so, the UK accounted for €650,000 (£509,000) out of €58 million of revenues and the majority of revenues are outside of the EU.

Keywords reported an underlying 2015 pre-tax profit that was 57 per cent higher at €8 million. Edison forecasts a 2016 profit of €11.6 million, rising to €13.9 million in 2017, following the recent acquisition of Synthesis.

The founders have sold shares, but there is plenty of appetite from investors for them even though they are valued at more than 20 times prospective 2016 earnings.

This reflects the growing international games market, which is expected to be worth £113 billion globally in 2018, and Keywords' ability to make earnings enhancing acquisitions."

[rivaldo] 06/6/2016 15:30

A brief mention for KWS in this summary of the booming video game industry. KWS looks the best - and safest - investment option of all those mentioned imo:



Extract:

"Chart: Video game groups tap into surging demand
By Theron Mohamed , 03 June 2016

The enduring popularity of franchises such as Assassin's Creed and Call of Duty, the ability to download new games on consoles and widespread adoption of mobile devices have fuelled strong growth in the video game industry. Our chart shows the value of the sector has jumped a fifth in the space of two years, driven by sales growth of 47 per cent in mobile gaming and 37 per cent in digital console and PC content."

[wexboy] 03/6/2016 15:24

2016 – The Great Irish Share Valuation Project (Part II):

Company: Keywords Studios (KWS:LN)

Last TGISVP Post: Here

Market Cap: GBP 151 M

Price: GBP 280p

For a company that hasn’t put a foot wrong to date (what, no profit warning just months after its IPO?!), it’s amazing Keywords still appears to be almost entirely unknown to the average investor. In fact, it’s doubly surprising, as KWS is now enjoying a real sweet spot in the new XBox/Playstation console cycle – which has seen it deliver 20%+ pa underlying organic revenue growth over the last two years. The other kicker, of course, is its consolidation strategy in a fragmented outsourcing sector for the video game industry.

The acquisitions are piling up so quickly, the best way to approach valuation is to construct a current revenue run-rate. Let’s begin with FY-2015 results: Revenue was up 55% to €58 million, adjusted profit before tax was up 57% to €8.0 million, while adjusted basic EPS was up 49% to 12.71 cents (there’s been dilution in terms of placings & acquisition-related share issuance). We’ll ignore minor acquisitions, so first we’ll look at Liquid Development – cash outlay & share issuance are reflected in the FY results, but only a third of its $7.5 million annual revenue is captured, so that’s a $5.0 million revenue bump for FY-2016. Next, we have Mindwalk Studios – which was acquired in 2016, so that’s another $4.2 million in ongoing revenue. And the same for Synthesis – that’s another €16.9 million.

I calculate Keywords’ adjusted operating margin was 14.4% in FY-2015. Let’s assume the same for incremental acquisition revenues (which is conservative, their average adjusted PBT margin is actually around 17%) – I’ll continue to assign a generous 1.67 P/S multiple, noting the attractive growth trajectory here. Year-end cash was at €19.0 million – Mindwalk & Synthesis will reduce this balance by $3.4 million & €10.2 million respectively (at this point, we’ll ignore some minor future cash & shares consideration), and we’ll also include another €1.0 million being paid to acquire the remaining 50% of Kite Team. We can also add a debt adjustment (KWS just signed a new €15 million revolver) – I calculate another €29 million of debt would still limit interest expense to 15% of adjusted operating margin, but as usual we’ll haircut this figure by 50%:

((EUR 58 M Rev + 16.9 M Synthesis + (USD 9.2 M Liquid/Mindwalk / 1.1115 EUR/USD)) * 1.67 P/S + (19.0 M Cash – 11.2 M Synthesis/Kite Team – (USD 3.4 M Mindwalk / 1.1115 EUR/USD)) + 29 M Debt Adjustment * 50%) * 0.7601 EUR/GBP / 54 M Shares = GBP 223p

Keywords remains fairly-overvalued. Which doesn’t necessarily mean we’ll see a reversal – based on the underlying organic revenue growth we’ve seen here, KWS could well grow into its current market cap in the next year (or so) anyway. And one would obviously hope to see some cost savings & revenue synergies as the company consolidates its acquisitions to date. However, I also think my valuation’s a good reminder of the risk(s), for example, of a bad acquisition & the potential impact on what’s been a pretty high-flying stock…

Price Target: GBP 223p

Upside/(Downside): (20)%

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For related links/graphs/files, and more TGISVP analyses/price targets: Google the Wexboy investment blog.

[rivaldo] 03/6/2016 08:36

Thx davidosh, great to hear that so many people were there at the AGM to see the presentation etc.

[davidosh] 01/6/2016 17:53

Keywords mentioned on the radio

[cfro] 01/6/2016 13:30

Thanks riv.

[rivaldo] 01/6/2016 09:49

Interview with the CEO about the new Chinese acquisition. Highlights....

- 21 of the top 25 games developers are KWS clients, and KWS are in discussions with some of the other four
- new Nintendo console to be launched next year (me - should boost work flows going forward)
- this latest acquisition gves a foothold in China, the world's largest game art market
- more acquisitions are likely, perhaps in China, in art, translation and testing

hxxp:// www.proactiveinvestors.co.uk/companies/stocktube/5092/mindwalk-gives-keywords-a-foothold-in-china-says-chief-5092.html?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=7163-352493-proactivity+-+31%2F05%2F2016

"Mindwalk gives Keywords a “foothold̶1; in China, says chief
14:09 31 May 2016

Andrew Day, chief executive of Keywords Studios PLC (LON:KWS) says the acquisition of Beijing based game art firm Mindwalk gives the company a “foothold̶1; in China.

He says the country is “the world’s largest single game art market in terms of resources,” adding that it is “where the majority of outsource companies are based.”

The company completed the acquisition of Mindwalk, which was founded in 2004 and provides outsourced art creation services to the video games industry, on Tuesday, and Day says Keywords is looking at further add-on acquisitions in China “both in the art space but also if we can find the right acquisitions in some of our other service areas like translation and testing”."

[rivaldo] 22/5/2016 07:44

A date for your diary - Equity Development have arranged a presention by KWS (and by BLTG, which I also own) on 28th June:

[tromso1] 20/5/2016 09:50

"IC VIEW:
Stripping out cash, Keywords' shares are valued at 17 times forecast 2017 earnings and Numis expects compounded annual EPS growth of over 30 per cent between 2014 and 2017. Given the ongoing expansion of its range of services and territories, we don't feel the rating reflects the rich potential. Buy."

[nurdin] 20/5/2016 09:28

Seems to me the IC write up is quite bullish, judging by the abstract(thanks from me too tromso)


''Strong demand, supplemented by acquisitions that have broadened the group's service range and global footprint, has resulted in rapid earnings growth. Given the group's widening margins and potential for further acquisitions, we think Keywords' shares undervalue its outsized prospects.''

[rivaldo] 20/5/2016 09:23

Good to see KWS getting more exposure (cheers tromso).

Like Saucepan I'm surprised SCSW hasn't picked up on KWS yet as it's just their sort of company. Maybe next month!

[saucepan] 20/5/2016 08:14

Thanks tromso1 - probably more to come in the short term, with weekend readership.

300p to be broken?

[interceptor2] 20/5/2016 08:12

Thank you tromso1, was about to ask if they had been tipped.

[tromso1] 20/5/2016 08:08

Tipped in the IC as a tip of the week -

[saucepan] 20/5/2016 08:05

I was wondering the same (and amazed SCSW has not picked this up yet).

[nurdin] 20/5/2016 08:02

Tipped somewhere?

[ramridge] 18/5/2016 09:12

Including today, last 3 days share price rise is 11%. Something is brewing me thinks. An acquisition?

[horneblower] 18/5/2016 08:57

Imo the chart now looks good for 320p.

[battyliveson] 18/5/2016 08:54

I sold out immediately last week on seeing the founders selling down as I didn't trust the old tale of providing greater liquidity etc. I had a target price of 275 so would have sold today anyway. Still made a profit so must not grumble. However, looks as if it is on the radar now so good luck to holders, I suspect there is more life in this yet.

B

[luckymouse] 17/5/2016 12:22

Lovely accommodating chart

[interceptor2] 17/5/2016 11:20

You beat me to it Saucepan. :o)

Buying interest pushing these up, hopefully it will hold over breakout level into the close.

[saucepan] 17/5/2016 11:18

Breaking to all time high?