viewCodemasters Group Plc

Codemasters on the road to fast growth, says its nomad

The company made its name in motor racing games and then, perhaps unwisely, moved into other genres. New management came in four years ago and returned the focus to racing games

Formula 1 motor racing
Codemasters has the Formula 1 franchise until 2021

To no one’s great surprise Liberum, the nominated advisor of recently-listed Codemasters Group Holdings PLC (LON:CDM), has initiated coverage with a ‘buy’ recommendation.

The video game developer and publisher, which specialises in motor racing games, listed at the beginning of June at 200p and has since raced higher to 216p but Liberum thinks the shares are worth 310p.

READ: Codemasters sees good start to first day of trading on AIM

The broker said there are several potential opportunities to expand its portfolio of racing games while regular upgrades of its current batch of franchises should keep the money rolling in.

Throw in the possibility of a new revenue stream from digital services, the growth in mobile gaming and eSports – competitive computer gaming – plus the potential of making inroads into the Chinese market and Liberum thinks Codemasters could clock up annual sales growth of 12% over three years.

The company holds exclusive licensing rights for the Formula 1 game franchise and also has three racing franchises that are its own intellectual property (IP): DiRT, GRID and ONRUSH.


Liberum expects Codemasters to double underlying earnings (EBITDA) between 2018 between 2021 on the back of several factors, including the gaming market's digital transition, the introduction of in-game transactions, expansion in China and the launch of an official free-to-play Formula 1 mobile game.

Having raised cash at the time of its flotation, Codemasters has the wherewithal to participate in sector consolidation.

“The upside from M&A is fairly obvious based around both revenue upside (global, multi-platform marketing of games) and cost synergies (leveraging the engine and know-how). We expect management to review the potential to use [its] EGO [game technology engine] to support other genres, but in the short-term, we would expect any acquisition targets to sit within the racing game sector,” Liberum said.


Quick facts: Codemasters Group Plc

Price: 341.6 GBX

Market: AIM
Market Cap: £517 m

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