Keywords Studios, the video game services specialist, jumped 6% as broker Shore Capital upgraded to “buy” following its acquisition of Seattle-based Hardsuit Labs.
“The deal appears to be in a classic sweet spot, in terms of size and potential, where KWS has typically been able to add value, and further, it is consistent with management’s previously set-out growth strategy,” Shorecap said.
In 2022, Hardsuit generated around US$11m of revenue and on the assumption of an underlying profit [EBITDA] margin of 20%. Shorecap has raised its forecast for group 2023 revenue by €6m and underlying profit by €1m, c.1%.
KWS's share price has fallen recently and trading on a PER of 19 and EV/EBITDA ratio of 11 for 2023, falling to 15 and nine for 2025, is too low given its diversified revenue streams, strategic leading position and recent investments in technological services., the broker said.
“With now c.30% upside from our £29 fair value, we are upgrading our recommendation from hold to buy, said the note.
Shares rose 132p to 2,316p.