Keywords Studios Share Discussion Threads

[newtothisgame3] 09/4/2019 02:50

#Keywords #Studios (#KWS) Tip Update: Buy at 1313p

[alphabeta4] 08/4/2019 11:45

Me too, just added a few this morning - I actually quite like these numbers.

My add was mainly centred around feeling I can derisk the organic calculation which the market seems to have latched on to following the weak H1 last year.

2017 was 15% and they've now produced an outcome of 10.1% or 15% ex VMC. By my calculation the market is pricing in a figure of 8% organic for the year having done a pro rata revenue calculation on each acquisition.

On the revenue side I think there's a decent amount to go for. I've calculated VMC lost €8m revenue last year, the biggest loss being in the functional testing line as growth is stated at 6.4% from a €30m base (€1.92m) and 26.5% outside VMC (€7.95m) where they now expect VMC to grow at the same rate as it now has the same processes. So that's up to 3% organic there.

The bad debt took 5% off adj pbt (which would have been a beat outside btw), if you crudely take the gross profit percentage of 38% this works into €4.2m revenue (1.6/0.38) so 1.7%.

Localisation had a €6m Fortnite effect from one client (2.4% of rev) of which most has now been done in Q1 so up to 2.4% there.

Then there's the potential porting work from the move to streaming which we know Google has gone live and Microsoft looks well advanced.

IMO looking at games such as PUBG which seem to be running at 1/3 of sales via looking at review numbers on Steam vs H1 last year these games seem to tail off quite rapidly in yr 2. Apex Legends looks a risk but I suspect this is most likely to capture ex Fortnite/PUBG players with the genre stabilising, there's only so much you can add to entice new players from shifting from two battleground style games to three. Some existing players will also get bored by the genre. Seeing as KWS had kept at 15% organic growth ex VMC for 2018 anyway this looks a bit of a red herring to me.

So overall I have predicted organic potential of 10.1% + 3% + 1.7% + 2.4% + streaming, i.e. 17.2% + streaming overall. I think the market is going to be pleasantly surprised by just how well this year is going to go and forecasts are well covered.

[aimingupward2] 08/4/2019 11:09

Liberum raises it’s price target from 1245p to 1415p.

[gareth004] 08/4/2019 09:38

Been in this share for a while and topped up myself on dip... in for the long haul prospects all looking good!

[scooper72] 08/4/2019 08:54

Just bought a few on the dip. It has obviously being making relatively steady progress from the low at around 900p. So if it starts to reverse further will have to take the hit and make sure I have some cash to top up if it goes back under 950p. But this is definitely one I want to have some exposure to for the long term.

[rathean] 08/4/2019 08:38

There will always be disruptive games but the wider KS net gets the more of a positive it will become. Numbers impressive only concern as a medium term investor is the pace of cross selling services. It's improving but not setting the world alight, more work to be done there.Exciting business to be in though with US tech giant entering their market makes KS attractive from more than just a growth story imo dyor ofc.

[rivaldo] 08/4/2019 08:30

Interesting then that KWS said today that, as stated above, KWS are now heavily involved in "considerable" work on Fortnite.

[phowdo] 08/4/2019 07:50

> I thought Fortnite was a negative for kws

It indeed was. Probably not a one-off as thats the direction the industry is headed.


"growth was slightly held back by the anticipated low growth of VMC combined with the 'Fortnite effect' and, late in the year, certain unforeseen project delays and cancellations (both explained in more detail in the organic growth and investment section of this review). "

"The phenomenally successful Fortnite game attracted some 200 million players during the course of the year and in so doing disrupted other games which we support, although we ourselves now do a considerable amount of work on Fortnite. In some of those cases, the competitive effect and loss of player base was material enough for clients to reduce their spending on supporting games, to terminate games and, while it may not be the only contributing factor, a few companies ceased trading altogether (or went into insolvency processes), including Telltale and Starbreeze. Localization was the service line most affected by the 'Fortnite Effect"

[rivaldo] 08/4/2019 07:40

Yep, very encouraging. The numbers are absolutely spot on Edison's forecasts, with EPS slightly above those forecasts.

The outlook is promising, with an "encouraging start to 2019" and "the arrival of games subscription and streaming services from new entrants like Apple and Google" likely to drive demand for content.

Plus the reduction in investment for 2019 against the two prior years will also increase profitability as regards the non-capitalised element.

Shame about the first ever bad debts, but these look to be a one-off due to Fortnite - and KWS are now heavily involved in "considerable" work on Fortnite.

Everything looks rosy going forward:

[togglebrush] 08/4/2019 07:28

On first reading FY looks v good.
;
Increased Dividend 1.08p x 31 May Paid 21 June
'
-- Group revenue increased by 66% to EUR250.8m (2017: EUR151.4m)
-- On a Constant Currency(1) basis, revenue grew to EUR258.6m (2017: EUR151.4m)
-- Gross margin increased to 38.2% (2017: 36.4%)
-- Adjusted profit before tax(2) increased by 65% to EUR37.9m (2017: EUR23.0m)
-- Adjusted basic earnings per share(2) up by 53% to 47.75c (2017: 31.18c)
-- Return on capital employed (ROCE)(3) of 19.4% (2017: 15.8%)
-- Cash conversion of 91% (2017: 91%)
-- Net debt(4) of EUR0.4m (2017: EUR11.1m net cash)

[alphabeta4] 05/4/2019 15:31

Am I missing something? I thought Fortnite was a negative for kws and had been mentioned in a previous rns as a headwind. Fortnite is produced in house by a boutique gamer rather than the large established ones that tend to outsource and it's success held back game releases in H1 last year (presumably as they wanted the fanfare to die down).
I'm a long time holder by the way and agree with the 5G stuff but just want to keep objective. Perhaps others can enlighten me :)

[aimingupward2] 05/4/2019 10:32

Interesting stuff indeed. Many thanks for your contributions to this board, rivaldo.

[rivaldo] 05/4/2019 10:08

Interesting stuff re a KWS subsidiary and its involvement in Big Data and AI:



"Founded in Tokyo in 2017, Yokozuna Data, a Keywords Studio, is the first data science company in the video game industry to develop a machine learning engine that predicts individual player behavior, an achievement that is pushing back the frontiers of behavioral data science. Yokozuna Data provides game studios with a prediction platform and recommendation system that employs next-generation machine learning algorithms and the latest techniques in big data processing and cloud computing to increase game monetization, playtime, and VIP retention, while supporting a player-focused data-driven development. Yokozuna Data is at the forefront of behavioral data science research, having published numerous peer-reviewed papers and regularly participating in top-tier international conferences and delivering seminars in academic and educational institutions. The company has won several accolades for their technology and research."

[rivaldo] 04/4/2019 22:58

Nice tip on Forbes' web site:



"Today I’m looking at two brilliant companies whose share prices could rise next week.

Keywords Studios

You may not have heard of Keywords Studios but it’s a stock that’s making some serious waves in the global video games industry.

The AIM-quoted company -- which provides technical assistance to game developers -- is riding the stunning popularity of the Fortnite franchise across the world, and said in January said that it expected full-year revenues for 2018 to have leapt to “at least” €250m from €151.4m the year before.

The Fortnite phenomenon is yet to show any signs of dying down any time soon as developer Epic Games stays committed to bringing out different playing modes for the popular franchise. Indeed, the company estimates that the Creative mode which was launched in December has attracted some 100 million gamers already. And this bodes well for Keywords’s bottom line for a long time yet.

For this reason I’m expecting another strong update when full-year results are put out on Monday, April 8. But Keywords is by no means a one-trick pony.

The tech titan is expanding its range of services to cover exciting new areas, ones like “predictive analytics, music services, marketing services, sound design, and Hollywood-based voice production and writing services” (as the firm itself noted in January’s update), and areas which the business has built its presence in with the help of ongoing M&A activity. It’s made nine acquisitions since the start of 2018 alone.

One other reason to be bullish: the rollout of 5G mobile networks and improvement in internet bandwidths, moves which will bolster the growth of so-called cloud gaming, also presents stunning sales opportunities for Keywords further down the line.

City analysts are certainly optimistic and they predict earnings expansion of 21% in 2019 and 12% next year, projections that make the business a bargain on paper (it sports a forward PEG reading of just 1.1 times). In fact, this low rating could provide the platform for Keywords’s share price to take off in the wake of fresh trading details next week."

[togglebrush] 04/4/2019 08:50

Irish Press
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Begins
Dublin-based video game content provider Keywords Studios is expected to make fewer acquisitions this year but could well spend more on the purchases it does make.

[rivaldo] 04/4/2019 08:37

New commentary from the analyst at Goodbody's stockbrokers in Ireland:

"Keywords Studios is well-positioned to gain from tech giants' move into cloud gaming, as demand for localization and videogame software engineering should rise, Goodbody says. Alphabet's Google has unveiled plans for its Stadia platform and Microsoft, Tencent and Amazon are expected to follow suit, the brokerage says. "There is an opportunity for Keywords to act as a key strategic partner to such platforms," Goodbody says. A key investor focus on the Irish provider of services to the videogames industry--which is due to report 2018 earnings next week--will be its deal pipeline, as the company is expected to spend EUR60 million on acquisitions this year, Goodbody says."

[gareth004] 04/4/2019 08:10

Great prospect and growing business model with great acquisitions in a huge growing industry, what's not to like along with strong revenue to be announced... gla buy

[rivaldo] 03/4/2019 08:40

Here's the tip FYI:



"Geeks have never been more in demand

In the video games arms race, developers have to spend big on manpower. Grand Theft Auto creator Rockstar Games is a case in point: the company employed more than 3,000 people to make the Wild West epic Red Dead Redemption 2, which sold 17m copies in eight days after release.

Keywords Studios wants to exploit that trend. The Dublin-based company, valued at £740m and listed on London’s junior market, is the largest provider of third-party services to the gaming industry, from visual effects to games testing.

Keywords is convinced that as games become more complex, developers will have to outsource more work so they can scale up quickly and release games on time.

That argument has been largely overshadowed of late. Keywords’ share price has dropped by 25% to £11.56 over a year as some of the industry’s biggest developers took a hit from the growth of online shooter Fortnite.

Activision Blizzard, the company behind the Call of Duty series and Candy Crush, surprised the market in February when it posted lower-than-expected profit forecasts for the first quarter.

However, Berenberg analyst Edward James thinks doubts over Keywords are “ill-founded” and says big developers have shown little sign of easing investment in new titles. Outsourcing could even grow faster than the video games sector as a whole, according to Liberum analyst Alexandre Schmidt, with the likes of Keywords snaffling market share by cross-selling services.

These are not the only reasons to give Keywords a second look. Google announced this month that it would break into the £100bn global computer games industry by launching the Stadia streaming service.

The American tech giant expects big things from “cloud gaming”, where players stream games from Google’s vast data centres. The move could trouble console makers such as Sony and Microsoft. For those down the food chain, it’s a big opportunity.

If cloud gaming follows the Netflix route, the cost of playing games should fall. A monthly subscription fee for access to multiple games could work out cheaper than the £45 it costs to buy a new game off the shelf.

It would also do away with the need for an expensive console, making gaming more affordable in countries such as India or areas of South America. That could prove a boon for Keywords, which is also a big provider of translation services to the video games industry.

With Amazon also preparing a push into cloud gaming, Keywords looks like a solid long-term bet. Buy."

[aimingupward2] 01/4/2019 09:38

Yes, a nice positive review of the future scope of the business to develop and expand.

[rivaldo] 01/4/2019 09:31

Moving nicely now.

And KWS were tipped as a Buy in yesterday's Sunday Times.

[togglebrush] 31/3/2019 10:11

RESULTS due Monday 8th April
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The Group expects to announce its full year results for the year ended 31 December 2019 on 8 April 2019.
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Trade update 31st Jan extracts:-
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The Board expects full year revenues to be at least EUR250m (FY17: EUR151.4m) and adjusted profit before tax* of approximately EUR37.8m (FY17: EUR23.0m). The Group's effective tax rate, based on Keywords Studios' measure of profit before tax* has continued to reduce and is expected to be 19.0% (FY17: 20.5%). As a result, adjusted earnings per share are expected to be c.47.0c, which would be an increase of 51% compared to the prior year (FY17: 31.18c)
...
Almost all of the seven service lines have delivered a strong performance, with particularly strong growth in our Player Support and Engineering businesses, partially offset by a weaker than expected performance from Localisation Testing which saw a number of titles move from the last quarter of the year into the current year.

[ali47fish] 27/3/2019 14:18

Octopus Investments Nominees adds a tiny bit

[bamboo2] 20/3/2019 12:34

hi Rath, price does look more stable.

Potential for an INVH&S, on the major falling trendline/neckline although so far, confirmation has been rejected.

Hist support range at approx 1000-1050.
Potential turn 22/3/2019

[rathean] 20/3/2019 12:19

make = market... fat fingers strike again