Keywords Studios PLC (AIM:KWS, OTC:KYYWF) has enjoyed a strong showing on the junior AIM market this Thursday, owing to a promising acquisition and positive outlook from equities analysts.
The international technical and creative services provider to the global video games and entertainment industries acquired Digital Media Management (DMM), a leading full-service social media agency based in Los Angeles, for an initial consideration of US$67.5mln (£54.8mln).
“The acquisition appears to be in line with the group’s previously set out target areas and strategy, and in our view, it will further strengthen Keywords' position to benefit from the increasing convergence between the video games and media and entertainment sectors,” said Katie Cousins, equity research analysts at Shore Capital Markets.
Shore Cap “continues to like Keywords”, while noting that the group’s share price as of March 30 is only 6% away from analysts’ 2,900p fair valuation (at the time of issuing the broker note), “appropriately reflecting the high-quality and diversified business model”.
On the other hand, Peel Hunt analysts see the potential for further upside.
Noting that the acquisition of Digital Media Management should increase Keywords’ underlying EBITDA by 5% based on 2022 results, Peel Hunt issued a 3,300p target share price and a ‘buy’ rating.
Keywords Studios’ share price has responded positively to today’s developments, adding 4% to 2,830p with a £2.2bn market valuation.