Keywords Studios PLC (AIM:KWS, OTC:KYYWF) sees is likely to continue to benefit from strong customer demand, says stockbroker Shore Capital, which has upgraded its forecasts for the video game industry services group.
Shore Cap has a ‘buy’ recommendation for Keywords and pitches its forecasts for 2022 at the top end of market consensus.
“Keywords has an impressive client list, in our view, working with 23 of the 25 top gaming companies and top 10 mobile games publishers,” Shore Capital analyst Katie Cousins said in a note.
“It has global exposure with almost 10,000 staff working in more than 70 studios across 5 continents.
“The group continues to cross sell its diverse offering, and during 2021 had 133 clients using three or more services ensuring greater visibility and potential revenue per client.”
Cousins added: “Trading in the first quarter has started well with strong demand across all of the service lines and a notable pick up in post-production services.
“As a result, the group s confident of delivering a performance for the full year towards the top end of current market expectations, we upgrade our forecasts to reflect this and anticipate that the group can use its healthy balance sheet to continue to investment in internal opportunities and further M&A activity, as it seeks to capture further market shares.
“The valuation remains at historic lows despite profit growth expectations.”
Keywords in late March increased its dividend as it confirmed a year of year of high double-digit growth for revenues and earnings. The provider of technical and creative services for the computer games industry confirmed revenue grew 37% to €512.2mln in 2021, of which organic revenues were up 19%.
The acquisitive company, which made another six purchases in the year, said it started 2022 with pro forma revenue of €528.5mln, compared to €409.2mln a year earlier.
Adjusted profit before tax jumped 56% to €86mln, with margins up to 16.8% from 14.7%. Statutory PBT rose 48% to €48mln and earnings per share 49% to 45.16 euro cents.
The board recommended a final dividend of 1.45p per share, which will make a total dividend for 2021 of 2.15p per share.
Recently appointed new chief executive Bertrand Bodson highlighted in a statement that the underlying video games market remained buoyant, with 2022 expected to be a particularly strong year for new game launches.
Keywords’ balance sheet had €105.6mln of net cash, backed by a €150mln undrawn revolving bank facility.