Frontier Developments Share Discussion Threads

[astralvision] 19/4/2017 09:48

Great update, well done to FDEV.

[rivaldo] 19/4/2017 09:47

Finncap have left their target price and forecasts under review - however, they do have this to say today:

"Thanks to the business’ operating leverage, the benefit to profitability should be
more pronounced – the company has guided towards an operating profit
margin 15-20% i.e. £5.4-7.2m. This is materially higher than prior periods (6-
7% operating margin) and also ahead of previous guidance, with potential
outperformance in the range of 22-64%."

[bamboo2] 19/4/2017 08:24

ST Bowl tp hit today, new tp 385 on Measured Move. Great stuff.

[hastings] 19/4/2017 07:39

My brisk cycle ride into town this morning has just got a whole lot better.

[18bt] 19/4/2017 07:27

Wow is all I'd say!

[p1nkfish] 19/4/2017 07:24

"new franchises", plural.

[rivaldo] 19/4/2017 07:19

I always like to see the phrase "ahead of the Board's expectations" in a year end trading update :o))



Nice outlook too:

"The launch of Planet Coaster has driven a step up in our financial performance, and we now have two strong franchises in the market following our successful transition to self-publishing.

We anticipate further significant revenue growth steps will be driven by the release of new franchises - our third franchise, based on an enduring Hollywood movie IP of global renown, is now in development for release in calendar 2018."

[adamb1978] 16/4/2017 11:26

Thanks for the replies. Given the H1 turnover figure of £18m-ish, is there any reason to think that this won't do at £40m+ for the full year? I'm not a gamer, however from what I've read on here, and which I should probably verify, suggests that H2 should be even stronger from a top-line perspective than H1.

From a valuation perspective, there's probably a strong argument to value this on a EV/sales basis rather than focus on PEs at the moment given the strong top-line growth. On that basis, if you believe that the growth is sustainable and that they're in the early stages of developing a long-term brand and market position, then 2.5x ev/sales for the year ending soon looks cheap. The bear argument would be that they're reliant on a small number of revenue sources at the moment and therefore if the third franchise fails, they're overvalued already

[makw61] 16/4/2017 10:05

Great to see the BB in such good health; i enjoy reading everyone's comments and points of view.

Thanks, Hastings, for the feedback on Braben. I've watched a few interviews on youtube and he does indeed come across as a thoroughly decent guy who is passionate about what he does.

Those Capital IQ numbers are interesting - i would tend to agree that FDEV is a little under the radar, and for some the AIM listing and controlling shareholding are an issue (for me that speaks of potential valuation anomaly!).

Thanks also to GI for his reports, which are excellent. I think a range of values is the only sensible approach to this sort of company. i did a quick calculation ascribing 25% probability to the bear case, 50% to base, 25% to bull and got to £4.40 as an expected value, which is pretty close to my short to medium term target for the stock. Market cap of around £150m i guess which doesn't feel unreasonable.

Good to get some perspective on the European companies, which i still haven't got around to evaluating - maybe i should cut down on my HOI4 time...

Slightly off topic i guess, but i like to look at e.g. TTWO on an EV to FCF basis. The rules around revenue recognition mean that deferred income has risen from $61m at March 2014 to $798m at March 2016 which basically means that cash flow is consistently ahead of earnings. Not sure whether the market appreciates that fully given its PE focus?

ATB

[hastings] 16/4/2017 08:59

Hi Adam, I think FDEV is in general off the wider investor radar, whilst some who have looked don't really understand the company and its model.There are however some great and knowledgable posters here on the company and the sector, particularly I feel Gaminginvestor.I'm particularly excited about the forthcoming third self published title, which given an expected and globally known subject should, all being well, provide for great potential.On another line, the new HQ is now beginning to take shape and looks like completion of that could well time with news on the third game near the end of the year.

[adamb1978] 16/4/2017 08:43

Thanks for the link and FinnCap figures. I was looking at Capital IQ (S&P owned market data source which I have access to through work). That shows just £32.7m revenues this year and £0.3m PBT, which is obviously stupid given H1 however I wonder whether this is the sort of thing which means that FDEV is overlooked by investors

[hastings] 16/4/2017 07:27

FinnCap as of its February note was suggesting full year 2017 revenue of £38m and £12m EBITDA.

[thegaminginvestor] 15/4/2017 22:44

Adam, have a look here

[hastings] 15/4/2017 22:38

What market forecasts are you looking at Adam ?

[adamb1978] 15/4/2017 22:36

Hi makw61

Thanks for the comprehensive reply - you make a fair point about valuation of the business if sold.

Had a look at market forecasts however they're vastly behind the curve - I'd be interested to hear what others here expect for May-17 and May-18 years outturns in terms of both revenues and EPS.
Regards

Adam

[ck1111] 15/4/2017 22:28

interesting read...

hxxps://www.pastemagazine.com/articles/2016/04/why-a-fantastic-beasts-adaptation-could-be-the-bes.html

[p1nkfish] 15/4/2017 22:08

Yes, very apt observation makw61.

"Braben owns 50% of the company so he could equally well have paid a £3m dividend and trousered £1.5m so he clearly feels it was a sensible investment, and i wouldn't be invested here if i didn't back his judgement."

[hastings] 15/4/2017 09:01

Excellent and fair assessment makw61.For what's it worth, having met Braben a few times now he comes across as genuine and committed to building a real force in the gaming field.He's also extremely engaging and passionate about the sector knows it inside out and is well worth listening to if you get the chance.

[adamb1978] 14/4/2017 22:47

Hello

Only came across there in the last couple days and it looked (looks?) very interesting. One issue which I've stumbled across recently, and which I haven't come to a conclusion on, is the level of capitalised development costs which are running at just under £5m for 6 months compared to c.£2m amortised through the P&L every 6 months.

Adjusting for this, as well as the share based comp, craters the bottom line. Without this adjustment, I think this looks very attractive; adjusting for this, it looks expensive.

The bull argument would say that as long as the assets being developed are commercialised then this capitalisation isnt a problem. The bear argument is that these are cash costs of running the business and this capitalisation is simply an accounting rule.

I'd welcome any views from people who have thought this through and come to a conclusion either way.

Regards

Adam

[thegaminginvestor] 12/4/2017 19:43

Unfortunately there is not for console. One will have to wait for the company to release numbers for console sales.

[ck1111] 12/4/2017 19:32

Anyone know if there is anything at all like Steamspy which has an estimate of PS4 sales? PS4 ED will be on digital download.

[rivaldo] 11/4/2017 14:00

New Planet Coaster Spring Update released today....

[makw61] 09/4/2017 15:51

I'm sure there would be a number of willing buyers at the current valuation, so the fact it hasn't been sold means that Braben doesn't want to. He seems to very much enjoy what he does in any case.

The fact he has a controlling stake removes any bid premium from the share price and probably holds it back a little in the short term. however, i'm very happy to hold for the long term and see greater value creation that way. Presumably Braben has a significant proportion of his net worth tied up in this company which adds to my confidence that it will be tightly run, without excessive equity dilution or overpriced acquisitions.

GLA

[hastings] 09/4/2017 11:42

No not suggesting it would be a target and Braben isn't interested in selling from what I've learnt.It was more a case of highlighting the prospects/value etc.