Keywords Studios Plc

Keywords Studios PLC is a FTSE AIM UK 50 Index listed Company, which is involved in the creative and technical services platform for the video game industry. It was established in 1998 and now operates in 21 countries.

In August 2020, the Company will release the trading Update.

Recent News
On 26 June 2020, the Company has acquired Coconut Lizard Ltd (is a video game development services Company) for up to £2 million.

Financial Highlights (for the year to 31 December 2019, as on 16 April 2020)
The Group reported strong revenue growth of 30.2% to €326.5 million as against €250.8 million in FY2018. This was driven by strong organic revenue growth of 15.5% with a decent performance reported in Functional Testing and Game Development. It represented an acceleration of the strong growth experienced in the first half of 2020. In terms of percentage change against the financial year 2018, the Adjusted EBITDA increased 13.2%, Adjusted earnings per share surged 7.2%, whereas the total dividend per share declined by 64% in FY19. Regarding the liquidity, the Group had €82 million of funds available in cash balances and undrawn committed facilities, as at 31st December 2019.

Share Price Performance

1-Year Chart as at July-03-2020, after the market close (Source: Refinitiv, Thomson Reuters)

Keywords Studios Plc’s shares closed at GBX 1,845.00 on 3 July 2020, which was down by 0.81% against the last day closing price. Stock 52 week High and Low were GBX 1,892.00 and GBX 1,069.00, respectively.

From the technical standpoint, shares were trading well above the short-term support level of 50-day simple moving average prices, which reflects an upward trend in the stock.

Valuation Methodology


Key Risks
Most of Keywords’ services are of a time-critical nature with delays or service delivery failures potentially impacting the development or launch plans for games.The Group transacts in multiple currencies. Thus it is exposed to short-term currency risks. The COVID-19 pandemic has significantly impacted the Group's operations.

Conclusion
Following the near-term disruption, the Company is well-positioned with longstanding client relationships and diversifies portfolio of business to generate progressive returns in future. In the current trading scenario, the Group entered the FY20 with the momentum of strong growth, while the COVID-19 restrictions led to a rise in demand for online gaming. Further, the trading in FY20 so far is in line with the market expectations.

Despite the resilient position, the Group has not recommended a final dividend and considered prudent strategy to preserve cash during the uncertain market environment. Having raised £100 million in a placing lately, the Company has accomplished the first acquisition despite the COVID-19 mayhem. The Group also expects to accomplish further acquisition over the months ahead from the strong and attractive pipeline opportunities that the Company is currently reviewing. Overall, the Group is well-placed for growth and will enhance shareholder value in the near term.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing price of GBX 1,845.00 (as on 3 July 2020) and will recommend fresh buying at the right time.

iomart Group Plc

iomart Group Plc (LON: IOM) is a Software & Computer Services Company, providing cloud services and secure managed hosting services. The services offered by the Company help the customers to reduce capital costs, improve efficiency, productivity and improve business agility.

Financial Highlights (for the year ended 31 March 2020, as on 24 June 2020)

(Source: Company Website)

Despite the onset of Covid-19 outbreak, the Group witnessed a good financial position with revenue moving up by 9% to £112.6 million (2019: £103.7 million). From the time the business has transformed to cloud services, the Group has consistently grown in the last twelve years since 2008. The EBITDA of the Company surged to £43.5 million and basic earnings per share to 12.5 pence, but the adjusted profit before tax declined by 10.6% to £22.8 million. The cash position of the Group remained unaffected from Covid-19, realizing cash of £15.5 million by the end of 2020. Iomart declared a final dividend per share of 3.93 pence, down 22% from 5.01 pence the prior year.

Share Price Performance

1-Year Chart as at July-03-2020, after the market close (Source: Refinitiv, Thomson Reuters)

iomart Group Plc’s shares closed at GBX 325.00 on 3 July 2020, which was down by 4.69% against the last day closing price. Stock 52 week High and Low were GBX 409.00 and GBX 219.50, respectively.

Valuation Methodology


Key Risks
Excessive dependency on the channel partners; market and technological changes could further hamper the business of the Company.

Conclusion
The Company claims to have a strong business model, providing support in the tough times due to Covid-19. The Company had shown a good financial performance in the financial year 2020. Driven by good growth from all the businesses in which the Company operates, the Group’s revenue and the profitability have improved for the current period.

Looking ahead, the Group said in the first two months of the financial year 2021, it has traded in line with Board expectations. However, the timing of new projects is likely to be more uncertain.

Overall, the Company made good progress and is looking for further growth, both organically and through strategic acquisitions. The Group also have many projects under pipeline, which will help the Company to achieve strong organic growth.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing market price of GBX 325.00 (as on 3 July 2020) and will recommend fresh buying at the right time. 
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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