Venture: UK Tech
Issue 27;
Keywords Studios (KWS UK)
“Keywords is a growth company, trusted and relied upon by the world’s leading video game and entertainment companies to work alongside them during the full game development cycle to bring immersive content to life for the joy of billions of people across the world. We are a critical enabler of a large, dynamic industry, and are building out our proprietary technology platform to augment our future growth.”
You might also read their investment case, which is fairly convincing. They are essentially a shovel provider to the gaming industry and, therefore, have broad exposure across the industry as opposed to being game owners collecting royalties. That’s helpful because not being a gamer, I couldn’t tell one game from another, and my focus is strictly on the financial data and the future prospects.
KWS has resurfaced since I first looked at it late last year in a value and growth screen. It was interesting, but the news flow and technicals suggested we revisit it at a later date. With the earnings forecasts now stable, the Hollywood strikes behind us, and a forward PE of 12x, this is a cheap growth stock.
Listed in 2013, it has completed 60 acquisitions since inception and 51 acquisitions since listing. There have been no divestitures. That basically makes this a story of expansion through a mix of acquisitions and organic growth. If it’s just the former, there is no added value, but it is not, as organic growth is a management priority. I can confirm this historically from the key metrics on a per-share basis, which stands up, but the real opportunity is for the company to see more organic growth in the future.
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