Keywords Studios - Pillars of growth standing firm
Keywords saw strong revenue growth in H119 (17.5% like-for-like, l-f-l) and although investment and some one-off factors compressed margins, the company looks well placed to sustain double-digit EPS growth in the future. We upgrade our FY19 revenue estimates by 5.2% and FY20 by 4.3% and although H1 investment, together with a revision to the adjusted tax calculation, compresses FY19 earnings by 15.8%. FY20 EPS reduces by 2.5% as margins normalise on a higher sales figure. The FY20 P/E of 22.2x is in line with peers, before factoring in the potential for organic upside and further accretive acquisitions.Keywords Studios is a technical services provider to the video games industry. Co.'s segments include: Localization Services, which relate to translation and cultural adaptation of in-game text and audio scripts; Localization Testing, which includes testing of linguistic correctness and cultural acceptability of computer games; Audio/Voiceover Services, which relate to audio production process for computer games; Functional Testing, which relates to quality assurance services provided to game producers; Art Creation Services, which relate to the production of graphical art assets for inclusion in the video game; and Customer Support, which relates to the live operations support services.
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