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Keywords Studios

Strengthening position in an attractive market

Update | Technology | 26 Sep 2018

Keywords has built an enviable position of strength, servicing a global games market expected to sustain 10% growth. Pockets of volatility, possibly related to the dramatic success of Fortnite create some near-term uncertainty, but we believe company's strength of model and customer diversity will continue to enable the group to outgrow the games market in the medium to long term. At 36x FY19e earnings, strong growth is priced in, but continued execution should drive positive shareholder returns.

Keywords Studios

Gobo strengthens engineering operations

Update | Technology | 28 Aug 2018

Keywords’ acquisition of Studio Gobo and Electric Square for up to GBP 26m meaningfully strengthens the company’s engineering service line, while enhancing our FY19 earnings by 6% based on conservative assumptions. In paying a maximum of 7.6x historic EBITDA for the business, the company looks to be buying a good asset in a high value-add service line at a very reasonable multiple.

Keywords Studios

Currency headwinds, outlook maintained

Flash note | Technology | 06 Aug 2018

Keywords’s trading update indicated continued robust performance with y-o-y revenue and PBT growth of 72% and 66% respectively, despite the currency headwind from a weaker dollar. With the integration of acquisitions going well, a robust demand environment and a stronger dollar, the company looks set for a strong H2 and is well placed to meet our (unchanged) FY estimates.

Keywords Studios

Investing in higher value-added services

Update | Technology | 24 Jul 2018

Keywords has taken a step into the games analytics market with the acquisition of Yokozuna Data (YD) for $1.5m. This follows the recent engineering acquisition of Snowed In (for C$4.5m) and the establishment of Keywords Ventures. We do not expect these developments to have a material effect on our forecasts in the near term, but they do highlight the company’s investment in building higher value-added, IP-based business lines. Given Keyword’s strong coverage of the gaming supply chain, we believe the business is well placed to gain leverage from these investments.

Keywords Studios

Keywords goes to Hollywood

Update | Technology | 11 Jun 2018

Keywords’ acquisition of Blindlight for up to $10m gives the group the ability to apply Hollywood movie production resources to the games industry. Factoring in Blindlight and the May acquisition of Fire without Smoke, EPS is enhanced by 2% and 4% for FY18 and FY19 respectively. With the EUR 75m revolving credit now secured, with scope to extend to EUR 105m, the company has plenty of headroom to continue its consolidation strategy while enhancing earnings.

Keywords Studios

Unlocking marketing budgets

Flash note | Technology | 31 May 2018

Keywords (KWS) has acquired Fire Without Smoke (FWS) for up to GBP 5.2m. FWS is a creative and marketing services provider to the video games industry. This is an incremental opportunity for KWS to work with games producers on marketing projects (eg trailers). At 7.4x trailing adjusted PBT, this was at the lower end of KWS’s recent acquisition range, and further upside via cross-selling synergies with pre-existing studios is likely.

Keywords Studios

Deeper, wider, higher

Update | Technology | 20 Apr 2018

FY17 was a transformative year for Keywords with revenues growing by 57% and EPS by 52%. Like-for-like revenue growth accelerated to 15.1% (we estimate 18% stripping out recent acquisitions) highlighting the company’s strengthened position in the supply chain. With an expanded debt facility, we believe the company potentially has the acquisition firepower to more than double its EPS run rate exiting FY18, and see no obvious reason why the cycle should not repeat in FY19. The shares price in further strong progress, but nothing is new there, and sustained execution should continue to drive strong returns.

Keywords Studios

Marching on

Outlook | Technology | 01 Feb 2018

FY17 was a transformational year for Keywords, both operationally and financially. Acquisitions have bolstered the company’s capability set and geographical reach, while driving strong double-digit earnings growth. Organic growth remains strong and we see potential for market share gains to accelerate, driven by a strengthened platform for cross-selling. It is not unreasonable to expect a similar scenario into FY18/19. Execution of this should drive further share price upside, despite the premium rating.

Keywords Studios

French audio and localisation consolidation

Update | Technology | 09 Aug 2017

The acquisition of four French companies gives Keywords Studios strong capabilities across all major European languages for localisation and voice-over recording. The transactions boost our FY18 EPS by 5%, although some investment in integrating the entities will be required. The expanded offering should also support organic growth, through helping secure more centrally procured, multi-language contacts.

Keywords Studios

Firing on all cylinders

Update | Technology | 28 Jul 2017

Strong trading nearly across the board reaffirms the strength of Keywords Studios’ model and prompts a further 8% upgrade to FY17 EPS. We believe there should be more to come, both organically and through acquisitions. Despite the premium rating, continued execution should drive further upside.

Keywords Studios

Red Hot art acquisition

Update | Technology | 22 May 2017

Keywords Studios' $6m acquisition of Red Hot CG further strengthens the company's position in the art service line, in China and with Activision. Management estimates that the deal will make Keywords the number one supplier of art production services to the games industry globally and increase art production capacity by 25%. The deal further enhances our estimated FY18 earnings by 6%, with the three acquisitions made so far in May enhancing earnings by 11% versus our April forecasts.

Keywords Studios

A new string to the bow

Update | Technology | 18 May 2017

Keyword's acquisition of GameSim for $4.76m marks the company's long planned entry into engineering. We expect follow-on acquisitions as it replicates its strategy of building a service line through consolidating the fragmented games outsourcer market. As with the company's Art service line, GameSim's teams work closely with the core engineering teams of its games developer customers, creating cross-selling opportunities and deeper relationships with customers. Incorporating GameSim, together with the earlier $0.9m acquisition of XLOC, we upgrade FY17e EPS by 3%.