Keywords Studios Share Discussion Threads

[tomps2] 19/9/2019 07:30

KWS H1 19 analyst presentation from 18.9.19

Great overview of the business, and the opportunities. The opening trailer is fun!

[melody9999] 18/9/2019 23:29

What surprises me is that today's numbers were well signalled in the TU on 310719. At that time the share price was 1650p+.

I was expecting the share price to continue to recover back towards 1650p so to be honest this has caught me out today.

I don't see anything in the news today that explains a further 25%+ reduction from 1650p down to 1220p - but maybe someone can enlighten me?

[rivaldo] 18/9/2019 23:01

Both Numis and Citi are positive - it's ironic that short-term investment in growth to meet increasing demand and raise margins going forward should be met with a reaction like today's:

"1226 GMT - Keywords Studios will benefit from its expanded capacity in the second half after investing to satisfy strong demand in the first half, Citi says. The Dublin-based, London-listed provider of services to the videogame industry says it has started the second half well and expects continued organic growth, although at a lower rate than in the first half, and stronger margins. In light of increased demand across all its service lines, the company pulled forward its capacity expansion plans and invested in recruitment, training, IT and human resources, Citi says."

"1326 GMT - Keywords Studios was hit by lower margins in the first half, but the issues behind that are expected to be temporary, Numis says. These margins headwinds should start to abate in the second half and be gone next year, as they are the result of costs associated with an unexpectedly rapid increase in staffing, higher operating expenditure and an inherited underperforming contract, Numis says. The Dublin-based, London-listed provider of services to the videogame industry should benefit from structural industry growth, further outsourcing and value-creating acquisitions, the brokerage says."

[steeplejack] 18/9/2019 16:10

Hope you're right....but I'd already bought on the last dip around 1280 so I'm holding off for now.Other fish in the sea.

[robow] 18/9/2019 16:08

I joined you

[scooper72] 18/9/2019 16:06

Well. The drop was big enough for me to pick up a few. Decided not to wait, will find out over next week if I have been a bit impatient

[robow] 18/9/2019 16:01

fall seems overdone to me

[steeplejack] 18/9/2019 15:59

Falling on high volume,around the highest for a year.The company seem hellbent on acquisitions but Peel Hunt seem mindful of possible hiccups.Its not always easy to integrate acquisitions easily or avoid potential pitfalls.Been treated churlishly today but the shares had bounced by 10% over the last week.£11 looks probable.

[scooper72] 18/9/2019 13:18

Tempted to pick up some more. ...but will probably wait a day or two and be cautious

[steeplejack] 18/9/2019 09:55

Thanks that's useful.

[1670127] 18/9/2019 09:49

@steeplejack. I look at Nasdaq ratios as they have a mix or companies at various growth rates. They are currently at 12 times earnings as a whole, that is assuming you look at KWS as a technology company. I agree on looking at PEG as well. As companies grow it is often challenging to maintain the same growth rates, we are seeing that slow down over the past few earning reports. It's still healthy but the question is can they maintain that level. Margins will be better next half, it is the norm in games services as this is peak season and facilities and equipment gets used across multiple shifts, so the loaded rate per hour is reduced. Need to compare with previous year same period to understand the real situation.

[steeplejack] 18/9/2019 09:42

Interesting.So what's a more "normal" PE ratio.Is that a market PE ratio or an industry PE ratio.Growth companies like this normally require keeping a sharp eye on cash generation.Its also worth observing the PEG ratio.

[rivaldo] 18/9/2019 09:37

Liberum retain their 1700p target.

The results were solid, and the outlook for H2 is decent, with revenues at the top end of expectations and profitability essentially unchanged.

Another small-ish acquisition today too.

KWS have the capacity to make much larger acquisitions. If I'm not mistaken VMC was the last large acquisition? It's about time for another one, which would make all the difference to expectations.

All the investment and new facilities being put in place this year will lead to greater expansion and bigger margins from next year. I'm happy to continue to hold and play the long game in a market leader in a sector which will only grow and grow.

[1670127] 18/9/2019 09:32

Results generally in line with expectations. Not as upbeat an annual report as previous ones highlighting reduced growth rates and lower peak season demand for some services. It is interesting that the seeds of the next console release are being mentioned. Everyone involved in the industry knows that there is a big dip in games services for 12-18 months before the new console is released (this is the time to develop new games for the platform, they typically stop developing for the old one). There is also the need to purchase test boxes which is a significant investment. This could put short term pressures on revenues and margins. It almost took one company I worked for under. Conversely 12-18 months post launch there is a big pick up. The question is whether most investors recognize this so are happy to buy at high growth ratios. My gut is this will continue to trend downwards toward more normal PE ratios.

[steeplejack] 18/9/2019 09:17

Very true.The dilemma is whether to play it long or be tempted to trade the oscillations.Most ultimately decide to ignore the machinations of prop book traders etc and adopt a Warren Buffet approach.The concern,however,is that the level of knowledge,exposure,pedigree of AIM stocks falls short of what you get from fully listed companies.I'm more than happy to play it long and only keep a casual eye on the likes of an Astra Zeneca.I'm not so cavalier with AIM stocks and with good cause.

[scooper72] 18/9/2019 09:07

I'm not much of an expert on these things, but in a funny way if one regards the results as generally positive in terms of future outlook and the markets or the share price don't respond accordingly then as a holder who is investing over a 3-5 year term I have more time to either build a larger holding or just consider I am holding stock in a company that people haven't yet come to fully appreciate.

[steeplejack] 18/9/2019 08:56

Or alternatively,we could highlight this comment.The figures are pretty much as expected and there are no great surprises.The real mystery,as generally with lightly traded AIM stocks,is where the share price will head on the day. "Stronger margins in the second half as we incrementally benefit from first half investments in capacity expansion partially offset by an underperforming contract and continued commissioning of new facilities."

[phowdo] 18/9/2019 08:45

Margins under pressure.
Work for Googles Stadia helping to keep rates up but console transition starting to drag as expected.

[bulltradept] 18/9/2019 08:34

Revenue growth slowing, this is what happened.

"Trading in the second half has started well. The Board expects:

o Strong organic revenue growth, at slightly slower growth rates than the first half, with particularly strong growth in Functional Testing, Game Development and Art Creation whilst Audio and Localisation Testing are not expected to see their typical seasonal peak in activity in the second half due to certain clients' shift to focus on new consoles expected in 2020."

[ted1066] 18/9/2019 08:25

What happened there??
Hope you all piled in and bought more.

[steeplejack] 18/9/2019 08:04

"Trading in the second half has started well, with continued strong performances from our Game Development, Functional Testing and Art Creation service lines in particular. Overall, this leaves us well placed to deliver revenues for the full year at the upper end of current market expectatons with our profit expectations broadly unchanged."

[steeplejack] 16/9/2019 10:06

https://shorttracker.co.uk/company/GB00BBQ38507/Small close in short position.

[eentweedrie] 12/9/2019 12:03

if we close above 1300p then reverse is on the way imo