Keywords Studios Share Discussion Threads

[grabster] 25/10/2017 14:14

double../alpha../saucepan,

Yes, I think a US listing is summat they might consider next year perhaps, alongside an application to join the UK main market. But both moves are quite expensive to obtain and maintain. I would rather they waited until they are well clear of whatever threshold they have set themselves for doing so (if they have - which I imagine they will have). The admin requirements (and associated costs) of being on the main market are the same whether in the FTSE-250 or among the sub-250 players - so it would be foolish to go for it while only just above FTSE-250 size - in case they subsequently experience a dip that forces them to demote, which is embarrassing. Better to time it so they are comfortably into the middle of the 250 or above when they join.

[rivaldo] 25/10/2017 14:08

Just back from hols and thrilled by this latest acquisition - "transformational" is sometimes overused, but this is genuinely so.

KWS is now an 11-bagger for me from my initial purchase, but I see every reason to continue to hold for more.

Good coverage of Numis' upgrade to an 1865p target price in this article:

http ://www.proactiveinvestors.co.uk/companies/news/186181/keywords-studios-tipped-to-work-its-magic-on-slumbering-vmc-186181.html

"Keywords Studios tipped to work its magic on slumbering VMC
10:49 25 Oct 2017

Keywords announced a big acquisition yesterday and it may have added "a sleeping giant" to its portfolio

Numis Securities has given the thumbs-up to the acquisition of VMC by Keywords Studios PLC (LON:KWS) and upgraded the stock to 'buy' from 'hold'.

The technical services provider to the video games industry has a history of shrewd acquisitions and Numis said the latest one is “at a typically attractive valuation” albeit, at 11.5 times annual earnings, a tad higher than usual, reflecting the scale of the company being acquired, which is three times the size of Keywords' previous largest acquisition.

“Based on the expected total cash paid of c.$71m, Keywords is acquiring VMC for 1.25x trailing revenues and we estimate a post synergy P/E [price/earnings ratio] of 11.5x,” Numis said, as it readjusted its target price to 1,865p.

For comparison purposes, Numis noted Keywords itself is valued at six times 2017 pro forma revenues and trades on a P/E of more than 50.

In addition to US$2.5mln of targeted synergies, VMC brings two new service approaches to Keywords: 1) embedded technical services; 2) the "Global Beta Test Network", described by Keywords' chief executive Andrew Day as “testing games in a real world scenario".

Numis said VMC's embedded technical services expertise could open the door to “long hoped-for broader outsourcing contracts”, which in turn could deliver significant longer-term organic growth.

“We model VMC delivering flat revenues in 2018, and look for improved processes to generate growth in 2019,” Numis said.

In yesterday's analysts' call, Day noted the significant disparity in VMC's margins and Keywords' own, and expressed confidence that Keywords could get VMC's margins up to Keywords' level.

“VMC's revenue excluding discontinued low margin contracts has been flat over 2015-2017, which we think is a poor result in a growing market, and we think better execution should deliver an improved performance in due course,” Numis said."

[saucepan] 25/10/2017 13:49

A related question is whether a US listing will at some point be on the cards, especially in view of the fact that yesterday's acquisition has significantly enhanced the North American interests and clout of KWS.

[alphabeta4] 25/10/2017 13:00

Double - take your point. Whilst acknowledging they're AIM listed and there's been no application as yet I wondered whether the price rise had been so fast it had taken them by surprise.

I asked the same question of RWS earlier in the year and in that case the chairman is quite keen to stay on AIM for IHT reasons. I wondered if that was the same here.

[alphabeta4] 25/10/2017 12:55

The 33% increase compares to the average on Morningstar, for Finncap reading through it says 2018 upped 24% post VMC and d3t.

They've also got forecast year net cash of €21m by the way so decent room for further acquisitions.

[doubleorquits] 25/10/2017 12:53

FDH,
Agreed - not an issue for AIM listed share.

Alphabeta
They do not want FTSE 250 entry as they have not applied for a main market listing. Doing that would be the biggest indicator that they do want it!

[shanklin] 25/10/2017 12:49

Thank you Alphabeta4

So, at the current GBP/EUR exchange rate of 1.1186, the 2018 forecast has been increased to 43.8p, a near 33% increase.

[fardistanthills] 25/10/2017 12:49

AIM listed? So not eligible?

[alphabeta4] 25/10/2017 12:45

I would love if someone has any idea whether they want FTSE 250 entry. They're clearly into auto entry territory after this morning :)

[alphabeta4] 25/10/2017 12:44

Shanklin

Finncap have €0.301 eps this year, €0.49 next. Average Morningstar analyst forecast eps for 2017 was 26.84p and for 2018 32.97p before the deal (sorry not in the same currency but they report differently).

[shanklin] 25/10/2017 10:57

Has anybody seen and updated broker forecasts please as opposed to updated target prices?

Many thanks, Martin

[alphabeta4] 25/10/2017 10:42

Numis also upgraded. £14 to £18.65.

Finncap were previously £13.25 so the two upgrades range from £3.52 - £4.65.

[ashehzi] 25/10/2017 10:41

Looks like day traders jumping in the morning, lets see COB price. Missed the train yesterday, so just waiting for price to settle as already full.

[nimbo1] 25/10/2017 10:02

from fc

Consideration – we estimate that KWS has paid 6x FY18 EV/EBITDA. We derive this by assuming 5% growth to €58m, a GM of 33% and €9m of cash opex (after €1m of cost synergies). KWS has identified a further c.€1.5m of cost savings, which we expect to benefit FY19 and beyond.


Valuation – we maintain our previous methodology, but update certain assumptions, namely that; this acquisition significantly accelerates KWS's growth strategy and; assume that KWS achieves a more dominant market share in a mature future market – now 20%, prev 15%. We revert to a Buy.

[panic investor] 25/10/2017 09:35

Keywords Studios PLC upgraded by FinnCap to buy. GBX 1,677 PT. ift.tt/2zQ3f4i $KWS #KWS

[saucepan] 25/10/2017 08:41

Shares Magazine today on the acquisition: North America customer support scale will double at a stroke.

[bamboo2] 25/10/2017 08:06

Added this morning

[ramridge] 25/10/2017 07:41

Thanks, madmix. This is all new to me. So does this mean that none of these are real transactions that took place after-hours?

[madmix] 25/10/2017 07:37

Ramridge,

Those are just 'worked orders' I suspect.

For example, if I wanted to sell 10,000 shares in one go, I would probably have to accept a price well below the 'touch' bid price. Alternatively, I could set a limit price and a market maker could 'work' the order throughout the day by finding buyers for the stock. The transaction might not be reported until after 4:30 depending on whether he has filled my order in full, or perhaps only partially filled it due to the price being below my limit price.

[ramridge] 25/10/2017 07:26

A lot of shares sold after-hours between last night and this morning. Reason?

[panic investor] 25/10/2017 02:16

Well I wouldn't worry either way

[invisage] 24/10/2017 23:38

Well if you read the slide it says one or two large acquisitions

[travellingtrader] 24/10/2017 23:05

Here are his actual words from the youtube transcript:
30:04:00
you should be expecting us to
make I don't know between four and ten
of these sort of smaller type
acquisitions every year by smaller I
mean anywhere from you know a couple of
million to ten million dollars in size
in consideration terms and you know
possibly find the you know the odd
larger one falls into our our hopper as
well

[bamboo2] 24/10/2017 21:14

A number of positive ongoing chart patterns [INVH&S, Cup/h, etc] joined the now confirmed High and Tight flag setup that fulfilled basic qualification criteria during Aug 17.

Not 100% certain that the cup/h that has since ensued, fully qualifies the HTF pattern, as it's not particularly tight. However, looking at some of examples offered by Bulkowski, I don't see why not.

The Cup/h pattern [cyan] targets 1600. HTF approx. 1844

[invisage] 24/10/2017 20:54

No he actually said 1 or 2 large acquisitions, you can watch the video again on youtube.