Analysts at Liberum Capital have reiterated a 'buy' rating and hiked their target price for Keywords Studios PLC (AIM:KWS, OTC:KYYWF) to 3,400p from 3,150p after raising estimates following the video games developer's recent trading update.
The analysts noted that Keyword Studios saw strong H1 organic growth continue into H2, meaning FY22 revenue and adjusted operating profit will be materially ahead of consensus.
They said: "The FY23 outlook is positive so we prudently upgrade adj. PBT estimates by 10-14% over FY22-24. Our organic FY23/24 revenue growth assumptions of c.11/14% are very achievable as the outsourcing trend continues and Keywords embeds itself deeper into client workflows."
"The update highlights KWS’ resilient model and that its clients continue to spend on content even against a tough macro backdrop. On 16x CY22 EV/EBITDA, a 25% discount to historical average, the shares offer good value for the growth potential on offer (16% EBITDA CAGR 21-24E)," the analysts added.
On November 21, Keywords Studios said it expects revenue and profit for 2022 to beat market consensus forecasts on the back of a boost from the strong US dollar and also predicted results at the upper end of the analyst forecast range for 2023.
The strong performance seen in the first six months continued into the second half, the creative and technical services provider to the global video games industry said in the trading update, adding that the continued strength of the dollar during the period meant the adjusted pre-tax profit margin remained higher than anticipated.
Looking ahead to 2023, Keyword said organic growth is expected to moderate but remain above its medium-term guidance of 10% growth, with adjusted pre-tax profit margins forecast to move to historical levels of around 15% as previously guided.