Keyword Studios PLC (LON:KWS) saw its shares take on 5% today as German broker Berenberg reiterated a ‘buy’ rating on the stock, pointing to a recent share price fall as “creating a compelling entry point into one of the highest-quality stocks” in its UK mid-cap coverage.
In a note to clients, Berenberg’s analysts noted that Keywords’ shares have come under pressure recently, falling around 15% from their recent high of 862p hit near the end of May when its founders sold a sizeable chunk of their stake in the video game ancillary services group to meet institutional demand.
READ: Founders cut their stake in Keywords Studios
The analysts pointed out the share price decline has come despite consensus 2017-19 EPS estimates rising by around 6-8% over the past month as a result of three bolt-on acquisitions.
They said: “Given management’s impressive integration track record, we believe it is likely that it will be able to leverage Keywords’ scale, client base and global sales reach to generate synergies from these deals. If successful, it could bring upside risk to our estimates.”
The analysts added: “Despite making four acquisitions this year, management has reiterated its desire to consolidate what remains a highly fragmented market. As such, we believe further acquisitions are likely over the coming year.
“With every acquisition to date having been earnings accretive, we believe M&A will continue to drive considerable earnings momentum over the coming years.”
WATCH: GameSim acquisition takes Keywords into new line of business
The analysts concluded: “Given Keywords’ impressive track record of creating substantial value from acquisitions, no change in the underlying investment case and the company continuing to deliver strong EPS momentum, we view the pull back as a compelling entry point into one of the highest-quality stocks in the Berenberg UK mid-cap coverage.”
Berenberg repeated a 980p price target on Keyword shares, which were changing hands at 790p each in late afternoon trading, up 5.6% or 42p on last night’s close.
On May 24, Andrew Day, chief executive, and PEQ Holdings Ltd, a vehicle for founder and non–executive Giorgio Guastalla, combined sold just shy of 4.5mln Keywords shares or 8.05% of the company at 820p per share.