Frontier Developments Share Discussion Threads

[hydrus] 21/7/2018 14:14

Pinkfish I'll conclude you can't share evidence of any risk off in small caps and therefore the statement was baseless. Nothing to be gained from continuing the debate so I'll leave it now.

[endion] 21/7/2018 13:46

An IP license is usually between 10 - 15%. Was the target revenue for yr 2018 or 2019?

[allstar4eva] 21/7/2018 13:39

The broker note seemed to suggest that increased sales = increased royalties. I guess only the company are aware of the exact licensing fees however if they are bullish as inferred from Hastings' feedback from the opening day then we should be too!

With the broker forecasting only 1.65m unit sales we appear on course to smash that.

[allstar4eva] 21/7/2018 13:18

Hi Endion thanks for the calcs. The problem we have though is the licence fee. Surely we are guessing? As mentioned one broker upped their revenue target by 30% but pre-tax by only 8% following a recent trading statement so why was profitability predicted to increase (proportionally) by less than revenue?

[endion] 21/7/2018 12:53

I have done some more calculations that are far more conservative than my previous ones. It may help re-assure those who do not like estimates too far beyond what the market have predicted.

Given the current speed of sales, JWE has sold at twice the speed of Planet Coaster. Planet Coaster achieved 500,000 in 5 weeks vs JWE's 1 million. Using the markets own basis of using Planet Coaster sales to predict JWE sales, then Planet Coaster sold 1.4 million in the first year. At double that rate, JWE would sell 2.8 million.

£45 basic cost of unit (average will higher due to deluxe versions but I am being purposefully conservative here).

45 x 2,800,000 = £126,000,000

Minus 20% VAT = £100,800,000

Minus 30% steam/digital store charge = £70,560,000

Minus Universal License fee 10% = £63,504,000

Minus Tax (after deductions) 15% = £53,978,400

Minus company operating costs, historically has been 30m, I will increase this to 35m = £18,978,400

Profit from JWE would, on this basis be £18,978,400.

Adding to this revenue from previous games and royalties on back catalogue. Previous year revenue has been 22m (2015), 21m (2016), 37m (2017), and now 34m for 2018. In 2019, a conservative estimate for other revenue aside from JWE would be 30m (assuming a slowing of sales of Elite and PC, which is speculation).

So,

Minus tax of 15% this gives = £25,500,000

Profit from JWE, £18,978,400.

Profit from back catalogue: £25,500,000.

Total profit: £43,978,400.

This does not include future dlc.

Earning per Share:

43,978,400 / 38,741,068 (outstanding shares) = £1.14

PE Ratio

This is contentious. The current PE ratio according to Morning Star is 68. This seems high so I shall provide lower example.

With PE of 40 share price = £45.60

PE of 25 share price = £28.5

All of these calculations were done with conservative estimates based in my own research, using JWE sales of 2.8 million. I anticipate that figure to be nearer to 4m.

[p1nkfish] 20/7/2018 22:00

Index value doesn't carry all the necessary information.
Be very careful thinking market cap weighting does.

Do you have details of index leadership in AIM?
In other words market breadth over time?
That is what I would look at to determine the Index health.

In my experience small cap UK is risk off currently.

[hydrus] 20/7/2018 21:23

Don't quite understand your answer. Sounds a bit like you're saying because your portfolio has been affected, you've extrapolated that to conclude that UK small caps are risk off. There is just no evidence for that at all. Sorry to be a nitpick but best to be factual I think rather than make sweeping statements that aren't true.

[p1nkfish] 20/7/2018 21:16

Hydrus, shows up in my AIM section, not entire index, I don't care about the index as I don't track where leadership is in there. For all I know AIM may be held up by a diminishing number of leaders with others rolling over.

Of the AIM section I hold 70% have been hit. That said all those hit are up substantially over recent years (might account for some profit taking) and I'm considering averaging up in some.

[hydrus] 20/7/2018 20:40

'There is a risk off move in UK small caps currently.'Evidence for that? I can't see any evidence for that looking at AIM index and FTSE small cap index.

[hastings] 20/7/2018 20:39

You need to stop panicking Mr Investor, if you are......?

[panic investor] 20/7/2018 20:33

Wait till Brexit really hits :-)

[p1nkfish] 20/7/2018 20:18

There is a risk off move in UK small caps currently. It feels scary as it hasn't quite been like this for a while and the move is exaggerated in FDEV.

FDEV re in a good place, massive market, good sales prices, low distribution costs and solid support in Tencent.

Also suspect they are in a good place when it comes to future melding of movie/game/vr that will take entertainment to places we can currently only imagine. Totally immersive.

[discodave4] 20/7/2018 19:18

Apologies if this has already been posted up:hTtp://www.thisismoney.co.uk/money/markets/article-5971751/Dinosaur-video-game-proves-roaring-success-British-tech-firm-Frontier-Developments.htmlDD

[endion] 20/7/2018 18:43

@rar100 the movie was released in China, only later than in the West I believe. It was the reason that the Fallen Kingdom DLC only came out about a week or two after the game release, so that there were no spoilers for people who hadn't seen the movie yet. (spoilers in the sense that it included dinos from the movie, even though they had been seen in trailers so kind of reduntant).

I would imagine Frontier and Tencent will collaborate for a formal Chinese release of JWE, many Chinese players will likely play it regardless though I'm not sure of the legality of that.

[travellingtrader] 20/7/2018 18:41

FDEV officially opened their new premises today. Hastings must've gone along to the opening and spoken with management.

Anyway I share the view that there is no placing on the way and it is a few large holders exiting/lowering their position in a very hasty manner which has trigger other holders to follow suit. It's not the first major drop we've seen here and won't be the last. FDEV moves up just as swiftly as it moves down.

Recent big drops:
32% Sep - Oct 2017
30% Jan - Mar 2018

So the current 40% drop is not completely out of character.
We are still above where we were in March.

An example was RMMC who had a 4% weighting at the end of Q1 but sold out over Q2. Just takes a few to exit at the same time for these oversized drops to occur in a fairly illiquid stock.

[makw61] 20/7/2018 18:23

Thanks, Hastings, good to hear. I've every confidence in DB and the team but always good to get some reassurance when the share price has moved as sharply as it has. I've been investing over 30 years and i can't remember such a sharp pullback on what seems to me to be good progress/news.

Will there be a write-up in due course? ATB

[rar100] 20/7/2018 17:33

Absolutely great catch up at FDEV today, well done Mr Braben and the whole team. Time to chill!!


Hastings, What is the great catch up? 5p on the SP?

NOT time to chill...imho

[hastings] 20/7/2018 17:02

Absolutely great catch up at FDEV today, well done Mr Braben and the whole team. Time to chill!!

[rar100] 20/7/2018 16:47

I've placated myself somewhat by studying the chart from July 17 to now and drawing a line from the peaks - up about 30 degrees north (haven't got a protractor)which is pretty ok.
Also a line from the troughs, still going up maybe 25 degrees, so the trend is up whatever way you look at it.
Also the drops from the 3 peaks to trough are consistent, the more it goes up (as in last peak)the more is the drop.
It's a very small cap share with very small daily volumes, so more volatile. It also means that most investors have never heard of it and gaming stocks are niche in the general market. FDEV could do more to promote their existence, as most people know of Jurassic Park the movies.
Does anyone know if the new movie is still to be released in other parts of the world? Has it been released in China yet?
There was a big article in Saga mag. for over 50's saying how the older generation are embracing gaming in a big way - that's a big market, maybe as big as the youngster market - and they like more cerebral games which JWE is.
Whatever is happening with the SP, I hope FDEV are actively pushing their presence in the media - tech mags - investing mags - entertainment mags and websites.

[p1nkfish] 20/7/2018 16:41

You can ask, just don't expect a response.
This thto will pass.
FDEV are doing all the right things.

[panic investor] 20/7/2018 12:52

You can't ask the company to talk about shareprice when you didn't request it when we were flying up - basically everything was priced in.I still hold

[p1nkfish] 20/7/2018 12:49

Sentiment is a fickle mistress. Summer, previous big run-up, UK out of favour, relatively small cap, relatively small float etc.

[endion] 20/7/2018 11:45

Rivaldo, it fell almost 50% from its 18.80 high to 11.85. Im still in good profit having bought in at 6.50 but others are not. A 40 - 50% drop isnt something I consider little. I agree with you that a lot of the speculation is generally just that, but i undetstand why investors could be frustrated and seek to explain this market reaction.

Lets hope this will now rise onward.

[my retirement fund] 20/7/2018 11:29

This is going to £6 imo. Anyone fancy a game of quads in battle royal mode ?