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Nice plug here for KWS as a share to hold for the next 5 years:
Https://uk.finance.yahoo.com/news/three-shares-buy-hold-5-132921613.html
"With that in mind, here are the three shares I would buy and hold for the next five, 10 and even 30 years and beyond.
Five years
Over this relatively short term, capital growth is more important than dividends, and you can aim to take advantage of a more immediate market or technology shift. This is why for the next five years, I would buy and hold technology firm Keyword Studios.
Keyword develops tech and software predominantly for gaming, including online mega names such as Fortnite. With the upcoming implementation of 5G, online gaming is set to move even faster to mobile devices, likely vastly expanding the industry in a fairly short period of time.
By supplying multiple firms, Keyword has a hedge against any one company or game failing, but is in prime position to take advantage of the industry growth over the next five years."
Encouraging for the sector - and KWS - that Team17, a "global games label, creative partner and developer of independent ("indie") premium video games", issued this excellent trading update today:
"The Company has continued to experience strong customer traction from both new and established games throughout the second half of the year and now expects both adjusted EBITDA and revenue to be ahead of market expectations for the current year"
Aaaaaaahhaha! Very good.
Hadn't realised J.R.R. Tolkien was a KWS shareholder.
A wizened old man sat down next to Markparker at the fireplace and looked at him queerly "Shorts increased for a month, you say?" he barked, "well, to my eye they appear to have been increasing for about three, while the share price has steadily decreased over the same period. The price was too heady, I tell ye, attracting the beady gaze of bad mean shorters, and contemporaneously, sentiment had grown wary and fearful over the sputtering bull market, surely it was an endangered species, overdue for abrupt termination? So, sadly, noble handsome investors were persuaded they had to cut risk, and sold shares with tears running down their pretty flawless faces. The nasty shorters seeing their evil acts meet with immediate success, followed the money, crying out "Momentum! Momentum!" in harsh, unmusical voices. Truculent gits. But, courage, young radar enthusiast, because meanwhile, in offices and grottos all over Softwareland, the business was growing and prospering, the rebel alliance poised to strike back, so you gotta ask yourself: when and where will the freaking bounce occur?" Markparker looked into his beer glass, stared into the fire for a while, then turned to ask the mad old codger the answer to his riddle, but he had hobbled off to play strip skittles with the one-eyed barmaid.
Difficult to make sense of this stock. There was nothing particularly worrying in the last statement other than some costs were brought forward into H1. In fact the results were upbeat with a good H2 expected. I think a lot of 'growth' stocks are being hammered at the moment but it still seems a brave decision to short KWS unless there's something I'm not understanding. Personally I've added at recent price levels, probably a little too overweight in my portfolio now but it seems a good price going into the Christmas period.
Just to say I looked to buy this morning.
Price is lowish BUT I was put off by over 5 % short positions. And the fact they have increased their
position in the last month . Their rational ight be misplaced but I have burnt .y fingers on shorted stock before.
On my radar...( The world wide gaming industry is worth some £150 bil)
https://www.fool.co.uk/investing/2019/10/13/2-5g-stocks-id-invest-in-before-2020/
Down over 5% today on news of the new loan facility. I find it strange but the market (share price) seems very unforgiving of the management strategy to grow by acquisition. I've noticed this several times; the reaction to acquisitions is either luke warm or even adverse. Today's news of the new loan facility is a continuation of managements strategy. I could understand the market reaction if management had a poor record on integrating these acquisitions but the opposite seems to be the case.
HSBC have initiated coverage with a BUY recommendation and a target price of 1700p.
HSBC are pretty weighty influencers - no wonder the price is moving up nicely.
Both Numis and Citi are positive - it's ironic that short-term investment in growth to meet increasing demand and raise margins going forward should be met with a reaction like yesterday's:
"1226 GMT - Keywords Studios will benefit from its expanded capacity in the second half after investing to satisfy strong demand in the first half, Citi says. The Dublin-based, London-listed provider of services to the videogame industry says it has started the second half well and expects continued organic growth, although at a lower rate than in the first half, and stronger margins. In light of increased demand across all its service lines, the company pulled forward its capacity expansion plans and invested in recruitment, training, IT and human resources, Citi says."
"1326 GMT - Keywords Studios was hit by lower margins in the first half, but the issues behind that are expected to be temporary, Numis says. These margins headwinds should start to abate in the second half and be gone next year, as they are the result of costs associated with an unexpectedly rapid increase in staffing, higher operating expenditure and an inherited underperforming contract, Numis says. The Dublin-based, London-listed provider of services to the videogame industry should benefit from structural industry growth, further outsourcing and value-creating acquisitions, the brokerage says."
Liberum retain their 1700p target.
The results were solid, and the outlook for H2 is decent, with revenues at the top end of expectations and profitability essentially unchanged.
Another small-ish acquisition today too.
KWS have the capacity to make much larger acquisitions. If I'm not mistaken VMC was the last large acquisition? It's about time for another one, which would make all the difference to expectations.
All the investment and new facilities being put in place this year will lead to greater expansion and bigger margins from next year. I'm happy to continue to hold and play the long game in a market leader in a sector which will only grow and grow.
The SP has been all over the place in the past 12 months since hitting an ATH in August 2018 (2065).
The recovery from under 900 to 1800+ between February and late June intimated that good times lay ahead, but the SP has been weak throughout July and August, and has dropped off a cliff today touching 1333.
What's going on?
Good to see the legendary Harry Nimmo buying in to KWS via the Aberdeen Standard Investments UK Smaller Companies fund:
Https://citywire.co.uk/funds-insider/news/nimmo-bets-on-gaming-and-digital-media-to-defy-downturn/a1257379
"In step with the online theme, the fund has taken positions in two UK gaming stocks: videogame developer Team17 (TM17) and Keywords Studios (KWS), which has capitalised on the outsourcing of videogame development.
Citywire AA-rated Abby Glennie, manager of the Standard Life Investments UK Opportunities fund, said the video game industry had ‘opened up’ in recent years.
This is due to the ‘introduction of digital distribution that put many players out of the value chain so there is more margin to play for’ and also increased visibility of earnings thanks to the evolution of games, additional purchases, and mobile gaming that have enabled companies to ‘spread the income from gaming’.
Glennie said both Team17 and Keywords were ‘lower risk because of the quality dynamic’, with the latter having a number of ‘service lines’ around the globe and the former working with a number of companies so it was not ‘dependent on a hit-or-miss game launch’."
KWS set to "skyrocket" according to this given the explosion in 5G:
Https://uk.finance.yahoo.com/news/believe-5g-stocks-set-sky-065202324.html
"Brilliant software
Keywords Studios (LSE: KWS) is a technical service provider to the video game industry and could be a very wise investment when it comes to 5G. The developments 5G will bring include improved network speeds that will increase the appeal of already popular mobile gaming still further. Gaming will be more accessible than ever and Keywords Studios should reap the rewards of this popularity.
Gaming has exploded in recent years with huge technological advances and the rise of gaming ‘influencers’ encouraging more young people to play. This has benefitted Keywords Studios with its value soaring a huge 600% since 2016. Furthermore, the insane popularity of Fortnite helped boost the company’s pre-tax profit last year by 65% — a strong example of the direct correlation the popularity of gaming has on the company.
Keywords Studios’ annual earnings per share have risen a huge 49% for the past three years and I think that this figure could be even more impressive after the launch of 5G."
...and Canada is thriving too:
Https://obj.ca/techopia-ottawa-snowed-in-studios-doubles-headcount
Extracts:
"Ottawa’s Snowed In Studios doubles headcount one year after acquisition
A year after his company was acquired, Jean-Sylvain Sormany’s studio has doubled its headcount – and his biggest problem is that it’s not growing fast enough.
Snowed In Studios, an Ottawa-based game development studio founded by Sormany and his partners more than a decade ago, was acquired last year by Irish gaming giant Keywords Studios in a $4-million deal. At the time, the local firm had just under 30 employees to its name; today it’s nearing a headcount of 60.
Having access to Keywords’ network – the billion-dollar company has worked with nearly every major gaming studio around the world – has meant a flood of business opportunities for Snowed In, which became the larger firm’s engineering division in Canada. Sormany says Snowed In is fielding multimillion-dollar contract offers every month – but he hasn’t been able to take on as many as he would like...
....He says he expects his studio will hit 85 employees by the end of the year, with another 40 to come in 2020. Sormany says Snowed In should hit “maturity” with a couple hundred employees in a few years’ time."
News of further global expansion:
Https://www.irishtimes.com/business/technology/keywords-studios-to-expand-operations-in-poland-and-mexico-1.4001056
"Keywords Studios to expand operations in Poland and Mexico
Irish-headquartered video gaming firm already has operations in Montreal and Manila
AIM-listed Keywords Studios is to expand its operations in Poland and Mexico, growing its ability to provide player support and testing services.
The Irish-headquartered video gaming company has a Polish support studio, located in Katowice, which it opened last year. Its expansion is aimed at serving Keywords’ European clients’ needs, with room to cater for 290 seats and the capacity to add a further 160.
Keywords’ Mexico City facility has also seen new investment that provides an additional 150 seats at its audio and localisation services operation, and allows the facility to provide player support and functionality services aimed primarily at North America.
“It’s incredibly valuable to be able to leverage established presences from the group to deploy our solutions in new territories,” says Frédéric Arens, service line director for player support, Keywords Studios.
“Mexico is a perfect nearshore solution for our US customers, complementing very well our existing presences in Montreal and Redmond to provide English and Spanish player support services in a very accessible way, yet still consistent with what we offer in Manila and in Poland.”
H1 revenues were well ahead of forecasts at EUR153.1m - the forecast for this entire year is EUR298.9m, so KWS are running nicely ahead.
H1 adjusted PBT is EUR18.4m, so with the H1 capacity increase/investment costs leading to further H2 business and margin improvement, plus H2 seasonality, the forecast EUR44m should be achievable.
The core businesses seem to be booming. Plus there's lots of scope for acquisitions.
There's a new note from Edison - they note that H1 was "stronger than anticipated" and that KWS looks "set for a strong H2".
And in view of "the strength of the H1 performance, we may need to review our forecasts for FY19":
Https://www.edisongroup.com/publication/firing-on-all-cylinders-6/24737
Good news from Brazil, where KWS are growing "very fast":
Https://www.gamesindustry.biz/articles/2019-07-05-keywords-opens-new-brazilian-recording-studio
"Keywords opens new Brazilian recording studio
Earlier acquisition Maximal Studios expands with 3,550 square foot localisation facility
Friday 5th July 2019
Keywords Studios, the international technical services provider to the global video games industry and beyond, today announces that it has opened its first dedicated recording studio for video games in São Paulo, Brazil.
Maximal Studios, acquired by Keywords Studios in 2018 and responsible for localizing more than 150 games since 2011 (including Overwatch, World of Warcraft, FIFA, PES), will now benefit from a new 3,550ft², state-of-the-art facility. It features six individual studios for recording, 5.1 surround sound mixing as well as pre- and post-production. The space also features an administration wing for co-working and meetings.
Keywords Studios first entered the Brazilian market in 2015 with the acquisition of Reverb, a localization studio. Voiceovers and localization are increasingly in demand for the Brazilian video games market, a country where actors who provide dubbing voiceovers for beloved characters become stars in their own right. Dubbed content is one of the first things many consumers look for in films, cartoons series and, of course, video games, as 66% of Brazilians are gamers, according to the Brasil Game Show 2019 research.
"With our new space in São Paulo we are further consolidating Keywords Studios' presence in Brazil," says Priscila Caiado, Head of Keywords Studios in Brazil. "We are creating new jobs, increasing our capacity and, as a consequence, offering a greater variety of services to our clients."
"Keywords' growth in Brazil has been very fast," adds Cristiano Prazeres, Studio Manager. "Since the incorporation of Maximal by Keywords last year, the company has grown exponentially and our new studio reflects that. Our production capacity has doubled and we are very excited about the expansion that our new facility allows, not only in recording, but in areas such as production and project management."
"Brazil is a key territory for video-games," explains Nicolas Liorzou, Regional Managing Director - Americas, Keywords Studios. "Yet localization in Brazilian Portuguese was lacking a dedicated and scalable state-of-the-art, go-to voice-over recording capacity. We believe that with this expanded studio in São Paulo, we'll now be in the best position to accommodate the always-increasing needs of our customers in Brazilian Portuguese voice-over."
Berenberg comment that "there is an abundance of structural tailwinds that are likely to drive the games industry forward over the coming years", with streaming heralding the "dawn of a new age" for companies including KWS, who are namechecked as follows:
Https://advanced-television.com/2019/06/26/video-game-streaming-is-the-dawn-of-a-new-age/
"Video game streaming is the dawn of a new age
June 26, 2019
Analysts from investment bank Berenberg visited E3, the annual gaming expo held in Los Angeles, and in a comprehensive report provided a valuable analysis of the importance of the event to the industry, and pay-subscription patterns.
Berenberg’s first comment is that there is an abundance of structural tailwinds that are likely to drive the games industry forward over the coming years....
....Streaming will also provide a strong tailwind for Keywords Studios (Keywords) and Sumo, which have both announced agreements with streaming platforms also....
....Lastly, there is some concern from publishers that the increased graphical power of the new consoles will increase the cost, and risk, of new game development. Publishers may look to offset this risk by securing upfront licence agreements for new content. In terms of the outsourcing companies – Keywords and Sumo – backwards compatibility and the potential increase game development costs are supportive dynamics".
Encouraging sector narrative from Sumo's update today:
"The Association for UK Interactive Entertainment (UKIE) reports that the UK market for games was valued at a record of £5.7bn in 2018, representing +10.0% growth on the previous year. Newzoo expects the global games market to grow from $152.1billion in 2019 to $196 billion by 2022....
...The resounding global confidence in the gaming sector was evidenced at the recent E3 Conference in Los Angeles. Microsoft announced its new console 'Project Scarlett', which is scheduled for release in 2020. Google confirmed its Stadia platform by releasing pricing options; and Apple Arcade continues to excite. Five of the largest businesses in the world, Apple, Microsoft, Google, Amazon and Tencent are actively driving growth in our industry, so the demand for content has never been higher."
Https://fora.ie/keywords-studios-4681016-Jun2019/
Extracts:
"Day says that Keywords has no plans to slow down anytime soon.
“There is a very active pipeline of acquisitions. On the one hand we have strong organic growth, and then acquisitions to come on top,” he says."
"Now, Keywords and Day are in the thick of another shift as massive players such as Google, a Keywords client, and Apple are looking to get a share of the market."
“What has been validated over the years is that, as a trusted provider of services to the industry, we are taken with the industry. When the industry goes to streaming they take Keywords with it. We are working with Google and others in the space to help them get their services up off the ground,” Day says.
"While games remains the primary focus, Day also has designs on broadening Keywords’ reach."
“It is an area of the strategy that we articulated at the time of our IPO in 2013, when we said we will step out into neighbouring areas. You can’t help (but) see the similarities in what we do for video games in film and television, where they are using a lot of the same technology,” he says.
A decade since taking over, Day’s enthusiasm is as strong as ever.
“I hope we can carry on doing what we are doing. Our plan is to get to the point where these big clients of ours would feel comfortable in offloading big chunks of what they are currently doing internally to a company like us,” he says."
Relatively small, but quite significant. It's firstly very complementary, secondly gives DVW the opportunity to scale up through the KWS group, and thirdly brings a beachhead into Vancouver and new geographies/markets.
And it's also extremely good value and earnings-enhancing at CAD0.66m PBT for just a CAD3.2m price. Another canny acquisition.
lootgaloot, didn't we see this price a month ago? what makes you think we won't see it again?
I predict a steady drop to 1200 and then a nice rise to 1700, rinse and repeat
Took the opportunity to add more. Don't think we'll see this price again.