After Keywords Studios PLC (AIM:KWS, OTC:KYYWF) provided a positive trading update following the completion of its 2021 financial year, Shore Capital reiterated its 'buy' rating on the shares.
The AIM-listed group benefitted from a buoyant gaming market, a high level of demand and a reduced cost base throughout the period, with guidance raised as the new year started with confidence, the broker noted.
On top of organic growth, the group remained active with six acquisitions in the period for a total consideration of up to circa €126m, with the purchases focused mainly on games development and marketing, and completed for multiples averaging around five times EBITDA.
Before adjusting her forecasts, ShoreCap analyst Kate Cousins calculated that Keywords is trading on full year-2022 forward p/e ratio of around 31 times and an EV/EBITDA multiple of circa 19 times, "supported by high teens earnings growth to FY23F along with incremental adjusted EBITDA improvement, at a circa 20% margin".
"We believe KWS provides ample exposure to an attractive industry, without the risk of a developer or publisher. As the video games industry continues to grow, the expectations of quality and features also increase and therefore we would expect outsourcing to be in greater demand, which we see as good news for KWS," the analyst concluded.