logo-loader

Keywords Studios set for double-digit revenue growth for years to come, Barclays says

Published: 11:12 25 Mar 2021 GMT

Keywords Studios PLC -

Keywords Studios PLC (LON:KWS) looks set for double-digit percentage revenue growth for many years to come, according to Barclays and Berenberg.

In separate notes following yesterday’s results announcement from the computer games development services provider, Berenberg upgraded its recommendation to 'buy' from 'hold' and increased their price target to 3,110p.

Berenberg said the strong operating momentum and likelihood for further acquisitions could result in Keywords outperforming consensus estimates by as much as 15-30% in 2021 and 2022.

Aside from M&A, they see the 'key catalyst' being the first-half trading update in August, where Keywords could deliver organic growth of 15-17% compared to expectations of 11-12%.

Barclays, meanwhile, felt there was nothing too surprising about the results, with company guidance in line with the consensus forecasts in the analyst community.

“But 1) we think it is a positive that management has provided specific guidance (not the case before); 2) there is a tone of conservatism around their comments given good YTD [year-to-date] momentum (appropriate in current environment but leaving room for positive forecast momentum); and 3) management remains positive on further outsourcing among video game groups, enhanced by the pandemic,” Barclays said.

READ Keywords Studios profits jump a third as gaming market booms during pandemic

The Barclays team said that as per usual there is scope to boost organic revenue growth with bolt-on acquisitions in “a fragmented landscape”.

“So while the shares do not look cheap on 34x 2022E P/E [projected price/earnings ratio], we estimate this could come down to 24-26x if they were to spend a further EUR200mln on bolt-ons at 6-8x [annual EBITDA}. That might not be easy to execute but they have the room and the desire,” Barclays said.

The broker advised its clients to remain overweight in the stock, which trades at 2,490p versus Barclays’ price target of 2,900p.

Keywords Studios chief Bodson expects “much more” in game development after...

Keywords Studios PLC (AIM:KWS, OTC:KYYWF) chief executive Bertrand Bodson joins Katie to talks about Age of Empires, the London listed games firm’s latest acquisition, along with its continued strength services 23 of the world’s largest 25 game development studios. Last year Keywords saw 37%...

on 13/6/22