Keywords Studios Share Discussion Threads

[cfro] 26/10/2016 08:26

I agree, a very exciting acquisition and 'immediately earnings enhancing' too.

Only 8 people, but i would have thought that would be an ideal number that would fit into the group with no problems. (One could imagine the problem in taking over a larger company with, say, 100 employees for example with the added integration problems, lay-offs etc..).

[saucepan] 26/10/2016 07:57

Clearly a very strategic acquisition of typical KWS quality - should get us motoring again, I suspect.

[glaws2] 26/10/2016 07:46

Good as it is to see another acquisition let's keep this in context - it's 8 people - two PhDs & 4 MSc. See

[rivaldo] 26/10/2016 07:18

This may be a small acquisition, but it looks extremely exciting. In particular (as well as being earnings-enhancing):

"Player Research was founded in 2012 by Graham McAllister and employs a number of PhDs and MScs at its research laboratory in Brighton, with expertise in fields such as Human-Computer Interaction, Neuroscience, Computer Science, Experimental Psychology, Human Factors and Cognitive Psychology."

This could launch KWS into all sorts of new areas.

[bigbigdave] 26/10/2016 07:04

Excellent

Keywords Studios plc ("Keywords", "the Group")



Acquisition of Player Research Ltd

Service extension into player behavioural research



Keywords Studios, the international technical services provider to the global video games industry, today announces that it has acquired Player Research Ltd ("Player Research") for a total consideration of up to £1.3 million from its founder, Graham McAllister, and others (the "Sellers"). Based in Brighton, UK, Player Research provides consulting and user testing from its state of the art play testing laboratory to mobile, console and VR game developers throughout the world, helping them to attract, retain and monetise players.



The acquisition of Player Research is in line with Keywords' strategy to extend its services, with the objective of providing end to end services to its global client base covering all aspects of game production and live operations support. Player Research's technology, methodology and knowhow can be exported to Keywords secure production facilities in locations like Montreal, Dublin, Singapore, Tokyo and Beijing providing much increased capacity, whilst also expanding the services in a way that adapts them to the varied nationalities and cultures allowing clients to better tailor their games for their targeted audiences.



Player Research was founded in 2012 by Graham McAllister and employs a number of PhDs and MScs at its research laboratory in Brighton, with expertise in fields such as Human-Computer Interaction, Neuroscience, Computer Science, Experimental Psychology, Human Factors and Cognitive Psychology.



Under the terms of the acquisition, which is expected to be immediately earnings enhancing, Keywords is paying an initial consideration comprised of £700,000 in cash and the issue to the Sellers of 65,280 new ordinary shares in Keywords, which will be subject to a two-year lock in period. Further cash consideration of up to £300,000 may be payable subject to Player Research achieving certain targets within two years of the acquisition.



Application has been made to the London Stock Exchange for the admission of 65,280 new ordinary shares to trading on AIM. Admission of the new shares is expected to take place at 8.00am on 31 October 2016. The Company's total issued share capital following admission will consist of 54,404,001 ordinary shares of one pence each with one voting right per share. The above figure of 54,404,001 may be used by shareholders as the denominator for the calculations by which they can determine if they are required to notify their interest in, or a change to their interest in, the Company following admission.





Giacomo Duranti, Chief Operating Officer, commented:

"Keywords and Player Research have been exploring opportunities together over the past 3 years. As both companies have expanded their services to multiple points along the games lifecycle the fit between us has become increasingly apparent. We believe that by integrating Player Research within the Group, and rolling out its services into our existing studios to provide reach into all major gaming regions, we will be able to leverage the intellectual capital, talent pool and execution capability of both organisations to significantly enhance the value we are able to bring to our clients. We are delighted to be able to welcome Player Research's highly talented team to the Keywords family and we look forward to working closely together to build upon Player Research's excellent reputation and loyal client base."

[bamboo2] 25/10/2016 09:17

KWS chart could possibly be described as a cup and handle. Very similar target as before at approx 488. May be an attempt on 500. I have some quite juicy targets in the longer term. [excuse the poor cup drawing]

Pattern should resolve within the next five trading sessions. Cheers

[tattooed93] 18/10/2016 08:10

Frank

Patisserie Holdings (CAKE): Upgrade from Hold to Buy (BUY)
A positive site visit this week has given us comfort on FY16 (September) numbers and our focus now turns to FY17 forecasts, which bear upside risk, in our view. The share price remains 10% below pre-referendum levels and has been largely ignored in the post Brexit recovery. We reaffirm our 350p price target and upgrade from Hold to Buy.
Analyst: Roger Tejwani



Forecasts have upside. Lovely could see these blow 400p on results on 27 Nov

[alphabeta4] 17/10/2016 12:15

Brief mention in IC on page 28 - 'The market has also shown a willingness to pay for growth, especially for those stocks that have delivered upgrades to forecasts; Fevertree (FEVR), Boohoo.com (BOO) and Keywards Studios (KWS) spring to mind.'

I personally suspect however it may be due to the Playstation VR launch last week and resulting articles and coverage. I've also noticed a jump in advertising and Pepsi adverts announcing Playstation VR giveaways.

[cfro] 17/10/2016 09:45

I wonder if it had been mentioned somewhere over the weekend. Great breakout anyhow. :-)

[rivaldo] 17/10/2016 08:50

Cheers Alphabeta4, likewise.

New highs now - perhaps tipped somewhere? I know Momentum Investor came out this weekend.

[alphabeta4] 14/10/2016 19:18

Hi Rivaldo, good to see you here.

Just an observation - On your post 450 it mentioned the global video game market being worth $115bn. On the linked FT article ( there were two estimates on VR hardware sales, one by Juniper predicting $5bn 2016, $50bn 2021 and one by IHS which was much more cautious at $1.6bn 2016, $7.9bn 2020.

Interestingly the IHS also had software sales which based on the $8bn hardware sales came out at c$3.3bn.

So overall these can be used to get a guess on potential software sales of $20bn if the max $50bn of hardware is achieved with a lower end figure of the $3.3bn. So overall it would form 3-18% of the computer sales figure. Thought this might help us get a steer at the potential we're looking at.

[bigbigdave] 14/10/2016 16:37

Nice little close and nice chart bamboo2, agree about the bowl, bodes well for next week imo.

[cfro] 14/10/2016 12:52

Great looking consolidation pattern on the chart.

[bamboo2] 14/10/2016 11:03

Thanks rivaldo. Good to see where the larger trades are going.

Current chart pattern seems to be coiling in a Symmetrical Triangle. The bowl pattern is also in play. Average b/o at approx 75% of length. [orange]


e 11:07

[saucepan] 14/10/2016 11:01

All very orderly, it would seem.

With KWS's track record and stated intentions, I don't think it will be too long before we see the announcement of another earnings enhancing acquisition.

The consolidation pattern on the chart looks healthy, too.

[rivaldo] 14/10/2016 10:41

RNS - good to see Kabouter Management buying and going above 6% with 3.3m shares. They seem to be picking up stock top-sliced by Invesco (per yesterday's RNS):

[rivaldo] 11/10/2016 07:47

Excellent summary article not posted here before, including Finncap comment re their 475p target:

Http ://www.proactiveinvestors.com.au/companies/news/122213/global-game-plan-propels-keywords-studios-to-next-level-122213.html

"Global game plan propels Keywords Studios to next level
20:00 13 Sep 2016

Keywords Studios services are used by 21 of the top 25 games developers

As the computer gaming industry takes hold internationally, it has become both technically and financially inefficient for developers to provide every service of game development.

That has thrown up a big opportunity for companies such as Keywords Studios PLC (LON:KWS) to fill in the gaps.

The firm recently published a solid set of interims, which were helped by an “exceptional second quarter” posted by Synthesis, one of the company’s latest acquisitions.

"The group has delivered a first half performance comfortably ahead of our expectations, driven by good organic growth, but also substantially complemented by acquisitions,” said chief executive Andrew Day.

Adjusted profit before tax almost tripled to €6mln in the six months to the end of June, while total revenue nearly doubled to €42.4mln.

Net cash fell to €3.5mln from €6.1mln for the same period in 2015, although this was largely because of the acquisitions made by Keywords.

On the whole, the first half performance was solid, with Keywords upping its dividend by 10% to 4.4p as a result.

Big Business

Computer games are very big business. Global sales are expected to be around US$115bn by 2018.

Keywords Studios services are used by 21 of the top 25 games developers.

Established in 1998 and headquartered in Dublin, it operates across Europe and Asia, as well as from studios in Canada, US and Brazil.

There are 120 permanent staff members flexing to over 1,000 at peak times.

Most games are developed in English, but sales are global and that has created a business in translating games into local languages and cultures.

Keywords specialises in these localisation services –the translation and cultural adaptation of video games across different platforms for international distribution.

Its regional studios provide voice over recordings, script translation and actor selection in more than 15 countries and 30 languages.

It also provides localisation testing to ensure the adapted content fits the context of the game as well as functionality testing for in-game defects and console specifications compliance.

Its current model involves native language testers playing through localised versions of the games, covering cultural, linguistic and functionality aspects simultaneously.

Following a number of strategic acquisitions, Keywords has also branched out into artwork creation for video games, such as concept art and character animation.

The group has identified an increasing trend for games developers to outsource at these stages.

Next Generation Consoles

Thus far, the market for games has been heavily reliant on the console product cycle and the release schedule of the console makers, Sony, Microsoft’s Xbox and Nintendo.

Traditionally game development has slowed in the run up to the release of the next generation consoles as software soon becomes irrelevant and outdated, but that may be changing with the advent of the cloud.

Plugging China Gap

Gaming is a fragmented market and Keywords has started to expand its range by bolt-on acquisitions.

From three service lines when it listed in 2014, it now has six.

These newer service lines (such as customer support and art creation) have made good contributions to overall revenue.

Further regional acquisition is one Keywords’ routes to future growth.

"We are not forgetting our core business of translation and localisation testing. You should expect to see from us some acquisition activity fairly widely spread across the board," said Andrew Day, chief executive.

The acquisitions of Reverb and Kite Team, for example, have given Keywords a presence in South America.

Asia-Pacific, though, accounts for three of the top four video games markets in the world.

PwC projects that it will be the fastest growing region increasing to $40bln in 2016 compared to $24bln in 2011.

The group was looking in particular to plug a geographic gap in China, with existing customers already requesting support.

And its $5.5mln deal to buy Beijing-based Mindwalk will do just that.

The acquisition will add 150 artists to the group's existing operation.

Biggest deal to date

The group's acquisition of Synthesis was its largest deal to date and also took out its main rival.

Keywords paid €18mln for Synthesis, split €10m in cash now, €1mln in cash in 2017 based on 2016 revenues, and €7mln in equity over one and two years.

The studio's primary operations are in audio and localisation, alongside modest-sized localisation testing.

It has a strong customer base and an impressive list of games to its name, including Call of Duty, Grand Theft Auto, World of Warcraft and Assassins Creed.

In 2015 it reported pro forma revenue of €16.9m and profit before tax of €2.0mln.

The acquisition was seen by analysts as a significant consolidation move, as Synthesis was the group's closest competitor.

It gives the group a 15% of the global outsourced localisation market.

Swimming upstream

In July 2016, the company broadened its reach and paid C$5.25mln (£3mln) for Canadian concept art group Volta.

The concept art stage of a game is at the beginning rather than late in the production cycle, when localisation normally is applied.

It sets the look and feel of a game, which may become increasingly important as the next evolution takes hold.

Boss Day is playing down any imminent benefit from augmented reality and virtual reality games, but most experts say they will be next big things off the gaming block.

The potential for augmented reality (images imposed on a real life background) has already been highlighted by Pokémon Go, while virtual reality headsets are improving all of the time.

What the brokers expect

A trading update in early August indicated trading at Synthesis had been very strong since its acquisition, which has obviously been verified by the release of the half year results.

Consensus revenue forecasts in 2016 are €82mln (€53mln) with adjusted profit of €11.6mln.

Keywords has said it doesn’t expect this year to be characterised by the typical weighting towards the second half.

Assuming the second half numbers come close to those achieved in the first six months, Keywords is well on target to meet those expectations.

Broker finnCap was very impressed with the interim results for the first six months of the year.

“Results are considerably ahead of our H1 expectations, with outperformance both in terms of revenue and earnings,” said the broker’s Harold Evans.

“Given the significant investment in the senior management team made over the past 12 months, it is very positive to see such a quick recovery in margins – to a level not seen in recent years (at interims),” Evans added.

What is it worth?

Shares are currently trading at an all-time high of around 410p, which values the company at £258mln, or nearly four times expected sales.

finnCap thinks Keywords still has some headroom for price growth though, and has upped its price target for the stock to 475p."

[larva] 11/10/2016 07:30

Too high PE and chart falling over on spike

[bigbigdave] 11/10/2016 07:25

More big buys after the bell yesterday

[panic investor] 10/10/2016 18:15

Very technical !

[larva] 10/10/2016 18:04

this one is finished

[cfro] 10/10/2016 18:01

Yeah it wouldnt surprise me to see some investors picking up more shares at these levels...

[bigbigdave] 10/10/2016 15:29

Good buying on the dip, 2 x 45k shs in there.

[panic investor] 10/10/2016 12:17

I joined you in G4M this morning - not sold here tho