Keywords Studios Share Discussion Threads

[luckymouse] 19/7/2016 18:30

small holding since jan - height of pennant I guess

[bamboo2] 19/7/2016 17:43

LM, I've got a Bulkowski inspired target of min 311

did you buy recently?

[luckymouse] 19/7/2016 16:53

Looks promising

[bamboo2] 19/7/2016 16:39

cheers LM. Looks quite conclusive this afternoon. :-)

[bamboo2] 19/7/2016 09:20

which way will this break?

[whymps2] 18/7/2016 09:06

Tomps2 thanks for the link

[cormask] 18/7/2016 07:33

Wondered what all the buying was a few days ago

[rivaldo] 18/7/2016 07:28

RNS this morning : good to see BlackRock increasing above 5% with 2.95m shares:

[tomps2] 15/7/2016 12:44

VIDEO: presentation by Andrew Day, CEO at ShareSoc Richmond July 16



An overview of what he covers:

Their services are: art creation, audio services, localisation services, localisation testing, functional testing and customer support services to the top games companies, and mobile games developers.

It’s a highly fragmented market, and KWS provide a one-stop shop for the games providers. Their business is sticky, the larger companies publish games regularly and will go back to the same suppliers, including KWS, to reduce risk; this provides a barrier to entry. Out of KWS’s 400 clients, 50 buy 3+ services.

KWS have offices throughout the world, to supply a global market. Their largest revenue is in US$: 43%, EU 38%, Canadian $ 8%, Japanese Yen 6% RoW 5%.

There have been 7 acquisitions over the last 18 months. A key criteria for selection is the cultural fit with the whole organisation. Often acquisitions have been made to expand services. With the highly fragmented market, acquisition consolidates. KWS never over pay.

Revenue growth of 55% was achieved in the last FY, with organic growth making up 20%. KWS have a long-term objective of 13-15% return on sales, it’s currently 13-14%. The gross margin has increased to 37.6% due to the increase in Art, which is the highest margin service. CAPEX is relatively low, just test consoles, mobile devices and PCs.

Recently a Eu15m debt facility was put in place with Barclays Bank.
Debtor days 45. Clients are good at paying, most pay in 30 days. KWS invoice everything in the month they work.

KWS pay a dividend.

Major shareholders include: PEQ Holdings, Schroders, Hargreave Hale, Invesco. Day owns 7.2%. KWS have been back to the market twice to raise new funds, both times there was good demand. Recently Day and the founder sold down some of their holdings, with good demand.

With Q&A from the ShareSoc audience.

[rivaldo] 08/7/2016 11:29

New interview with the CEO:



Extracts:

"Develop Awards 2016 Partner Spotlight: Keywords Studios
July 4th 2016 at 11:05AM"

"Keywords Studios is dedicated to providing essential services to the video games industry from concept to live operations support. We do this on a global basis through our 22 studios in 16 countries."

"What differentiates you from similar outfits?

We are a publicly quoted company, providing transparency to our clients while enabling us to access a pool of funding from outside of the game industry. This allows Keywords Studios to build its geographic footprint and expand its range of services organically and through acquisition, thereby increasing choice for our clients.

Today we have the largest range of services and most comprehensive studio network in the industry."

[rivaldo] 30/6/2016 11:14

Finncap have today increased their target price to 324p (from 276p)....

[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)%

—

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.''