Keywords Studios Share Discussion Threads

[aimingupward2] 02/1/2020 19:38

Thanks for that,rivaldo. Any idea what the other four are?

My own thought is that KWS might well be back to around the £2 high point by the end of the year for a satisfactory 25% plus gain.

[rivaldo] 02/1/2020 15:02

KWS have been tipped by Hargreaves Lansdown to their subscriber base as one of their five "Shares to Watch" in 2020.

[rivaldo] 23/12/2019 10:19

RNS : Liontrust have been buying and now have 5% of KWS with 3.26m shares:

[rivaldo] 19/12/2019 11:06

Brief analyst comment on the latest acquisitions:



"Analysts at Liberum said the acquisitions will “help Keywords in its goal to becoming the ‘go to’ technical and creative services platform for the global video games industry” by building out its technology, machine learning capabilities, branding expertise and asset base, although they added that they will want to see “further evidence of key contract opportunities for streaming [and] free-to-play” segments."

[scooper72] 17/12/2019 10:29

So Kansan looks useful for their game translating work but also maybe a sign that through all of this technology they are buying in KWS turns slowly into a different beast with its reach stretching eventually far beyond just the gaming industry

[rivaldo] 17/12/2019 07:18

News - three acquisitions announced for a total of EUR11.2m cash and shares (including a large deferred portion based on performance).

These were bringing in EUR4.8m and around £730,000 of historic PBT to March'19 and June'19 (assuming break-even for the smallest business), which has hopefully increased nicely since then.

Kantan in particular sounds terrific:

"Kantan is a leading developer of automated translation technology with its own Neural Network Machine translation engines, KantanMT, and a global crowdsourcing translation platform, KantanSkynet. It licenses the technology and delivers development services to end user organisations such as eBay, VistaPrint and the European Commission as well as to language service providers.

Kantan was founded by Tony O'Dowd, a pioneer in the development of Machine Translation and Translation Memory solutions. Leveraging a combination of academic research interests and latest technology developments, he has a proven track record of delivering successful commercial applications."

[rivaldo] 09/12/2019 07:33

Looks like more and larger acquisitions to come:



Extracts:

"Keywords Studios forecast to increase acquisition spend
Wed, Dec 4, 2019"

"Dublin-headquartered gaming company Keywords Studios is likely to ramp up spending on acquisitions again in 2020 after a relatively quiet year, according to brokers.

A note to investors from Numis Securities suggests a pick-up in pace to an average of spending between €30 million and €80 million next year on acquisitions."

"According to the investor note, recent concerns from investors over slower revenue growth seem to be misplaced.

“We continue to view Keywords as an excellent long-term investment, with value creation from both further acquisitions and organic progress,” said Numis analyst Will Wallis.

“We believe that Keywords remains a very attractive way to play the long-term growth of the video game market,” he added."

"“Keywords holds itself out to be a business with simple revenue recognition and very high underlying cash return on operating assets. Our analysis fully supports the view,” Mr Wallis said.

Keywords was named company of the year at the annual Technology Ireland awards in Dublin in late November. It also took home the “outstanding achievement in international growth” award in recognition of its phenomenal growth in recent years."

[global nomad] 06/12/2019 07:23

thanks Rivaldo, have cross posted link on Bidstack bb

[robow] 05/12/2019 08:35

thanks Rivaldo

[scooper72] 04/12/2019 12:17

Cut my holding a little as larger than most others and wary of it slipping back to recent lows. But will always keep a core holding for the long term.

[rivaldo] 04/12/2019 10:36

Numis say today that KWS remain "very attractive":

"Keywords Studios has slowed down acquisition activity this year and in 2018, but a pick-up in pace to an average of spending between EUR30 million and EUR80 million a year is likely, Numis says. Recent investor concerns on the Ireland-based, U.K.-listed provider of services to the videogame industry seem misplaced, as demand continues to grow rapidly and Keywords is a go-to provider with a strong acquisition track record, the brokerage says. "We believe that Keywords remains a very attractive way to play the long-term growth of the videogame market," Numis says."

[global nomad] 04/12/2019 07:54

watching and reading for an entry point into KWS, will see how this pull back behaves over the next days..

[washbear] 25/11/2019 12:05

Green Richard...Thanks for this posting. All makes sense.I bought 18 months ago when they were 1700 bought at 1200 too.BUT not buying more . What are those shorters up to ?I will add that I held other stock that was shorted . My observation is it brought out the worse in bulletin posters.Some long holders take the view that Any discussion should be retorted with rude remarks. I just need facts or very informed opinion....

[greenrichard] 25/11/2019 11:05

This their commentary for the Q2 2019 newsletter referred to above.

Keywords Studios Plc (“KWS”)

Video game publishers have always been notoriously difficult work environments. Companies scale up hiring as they ramp production on a new game. These new hires are subject to a very demanding and high-pressure work environment as there is a tight game deadline. Once the game is released, a large percentage of those hired workers are terminated because they are no longer needed once the game is complete. This boom and bust hiring cycle is inefficient and leads to poor morale.

Increasing game complexity in recent years has exacerbated this issue. Game creators now need a small army of highly specialized developers, artists, and project managers to create and distribute a high-profile video game worldwide. It is challenging and inefficient for studios to manage this entirely in-house due to the difficulty of identifying, hiring, and utilizing this small army of talent
efficiently.

Enter Keyword Studios (“KWS”). This European-based company (headquartered in Ireland, trades on the London stock exchange) is the largest outsourcer of video game production in the world. They have rolled up the industry by buying small studios all over the world that offer various aspects of video game development including art creation, engineering, customer support, audio licensing and development, localization translation, and functional testing. The company now has the in-house capabilities to develop an entire game for their clients if needed (though this has not happened yet).

So why is this an interesting business? Well for starters, KWS has the backdrop of an industry growing high-single digits per year for the foreseeable future. I strongly believe the tailwinds for gaming will continue as the technology keeps improving and it is a relatively cheap form of entertainment. Second, while the industry is growing high-single digits, the money spent on outsourcing is growing at an even faster rate as the industry continues to achieve better service and affordability with outsourced providers. Only ~40% of videogame services spend is spent on outsourcers today. Over time, the gaming industry is likely to develop similar to the film industry, which used to have most expenses in-house, but now outsources ~90% of production costs. Third, KWS is the only player with scale in the industry. They work with 23 of the top 25 gaming companies (measured by revenue) and can offer any service with multiple price points and geographies. Lastly, KWS’ strategy is working. In the last five years (2014-2018), the company expanded revenue from 37.3M EUR to 250.8M EUR (572% increase), EBITDA from 5.9M to 40.2M (581%), and earnings per share from 0.07 to 0.29 (314%). As a result, the company’s stock price has increased over 850% over that timeframe. Despite this tremendous historical and likely future growth, KWS is trading for only ~30x forward earnings. I think this is very cheap given the long runway for 20%+ EPS growth.

KWS is riding a very powerful trend (outsourcing) within a rapidly growing industry. As the leader in video game outsourcing, KWS is poised to benefit from more cross-selling of services and deeper relationships with their clients over time. Mark Twain famously wrote that “During the gold rush, it’s a good time to be in the pick and shovel business.” KWS is effectively a pick and shovel seller to the videogame industry. They benefit from the industry’s growth, but they have minimal direct exposure to the successes or failures of individual game titles. I believe KWS’ strategy will continue to be a winning formula for shareholders. The company was a material positive contributor to Alta Fox’s Q2 results, but there is still a long runway for KWS to outperform the market.

[greenrichard] 25/11/2019 10:58

Found this from an Alta Fox Capital newsletter from October 2019.

Keywords Studios PLC (KWS)

KWS was the biggest loser in the portfolio in Q3. I will spare the full thesis rehash since I discussed it in the last letter, but the stock declined because of Q3 results, which were deemed disappointing by the market. The company grew revenue 17% organically, but margins declined as the company had to invest heavily in temporary space, pay overtime for employees, and boost recruiting efforts to keep pace with demand. The disappointing margins increased conviction for bears who believe that this company is no more than an outsourced labor company.

I too was surprised by the magnitude of the margin decline, but believe the share price has overreacted. While the company does have elements of an outsourced IT player, they also have very valuable relationships with 23 of the top 25 gaming companies in the world and serve an important and growing function for them. KWS also has a history of value creation by rolling up smaller independent studios that benefit from KWS’ centralized sales and support functions. We remain long as I think the company is well positioned for secular video game growth, has a long history of creating value through both organic and inorganic growth, and is selling close to a 3-year trough multiple on forward earnings.

[greenrichard] 25/11/2019 08:20

SFM have now increased their short to 1.6%. Total shorts up to 6.07%.

[scooper72] 22/11/2019 13:15

The net debt listed on Stockopedia is about 29m. But then if you look at the fixed assets of 41m and the cash on their balance sheet of 37.8m then how does this look like they are seriously over leveraged?

[simonshare] 22/11/2019 12:53

The reason 6 hedge funds have built a very large short position is KWS is over leveraged on a huge amount of debt. If this was any company other than 'exciting tech gaming' its share price would be half of this.

[rivaldo] 22/11/2019 08:13

Tipped here:



"With that in mind, here’s a look at a smaller growth company I’m backing myself right now.

Under-the-radar video gaming stock

Keywords Studios (LSE: KWS) is an under-the-radar company that specialises in video game support services including game development, functional testing, localisation, art creation, and audio and player support. It’s AIM-listed and currently has a market capitalisation of £836m.

The reason I like Keywords? Video gaming is absolutely huge right now. Believe it or not, the video game industry now brings in more revenue than the film and music industries combined. According to market researcher NewZoo, by 2021, the industry could be worth a staggering $180bn, up from $135bn last year.

Given that KWS serves 23 of the 25 most prominent games companies, including Activision Blizzard (Call of Duty), Electronic Arts (FIFA), and Epic Games (Fortnite), I think it’s the perfect way to get exposure to the video gaming boom. No matter the success of individual games, Keywords should still do well.
Prolific growth

It is certainly growing at a rapid speed. For example, over the last three years, revenue has climbed from $58m to $251m, which represents a compound annual growth rate (CAGR) of a stunning 63%. And recent half-year results, issued on 18 September, showed revenue of $153m (up 39% on 2018), which suggests that full-year revenue this year should be well up on last year. Meanwhile, net profit has climbed from $3.4m to $14.9m over the last three years.

Over the last five years, Keywords shares have risen from 143p to around 1,300p, meaning the stock has been an excellent long-term investment. Yet looking at the exciting growth story here and the stock’s reasonable valuation (P/E of 27 using FY2020 earnings forecasts), I believe that it has the potential to keep rising.

With the video gaming industry set to continue growing rapidly in the years ahead, driven by advanced technologies such as 5G and virtual reality, the future for Keywords looks very exciting in my view."

[mr euro] 21/11/2019 12:35

Can you also post how many £m's they have lost on these trades so far

[greenrichard] 21/11/2019 10:48

TIMF LP increased their short by 0.23%. Total shorts positions are now 5.72%.

Would be interesting to know why 6 funds have a short position?

Doesn't seem to be affecting the share price at the moment.

[the white house] 18/11/2019 11:43

Systematica reduces their short expose last week...bizarre industry to short in when expanding in Brighton and now Lemington Spa