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Ten Square Games: Fishing Clash speeds up

We keep a BUY rating on TEN and lift our FV to PLN 180.5 (from PLN 133) as we upgraded our 2019E/20E revenue forecasts by 24/15% and 2019E/20E net income by 34%/20%, respectively. The main reason behind the clear upgrades is our too conservative approach for 2019 especially in light of the excellent Fishing Clash results, which according to SensorTower in Mar-Apr’19 reached a record high USD 1m on iTunes (vs USD 0.8m in Feb’19) and USD 2m on Google Play (vs USD 1m in Feb’19) each month. The excellent Fishing Clash momentum has been confirmed by TEN’s preliminary 1Q19 revenues at PLN 45.2m vs the PLN 42.7m we initially expected. What is more, we believe that the record Mar-Apr’19 revenues will not necessarily be affected by very high marketing costs, which would prove that TEN continues to finetune its BI and live ops skills allowing it to allocate marketing expenses effectively (this was already seen in 4Q18 when after the strong Oct’18 TEN scaled down marketing in Nov-Dec’18 ahead of a visible increase in ad prices related to the strong Christmas season in ecommerce). We would again stress the importance of marketing, live ops, BI as we think that apart from game quality it is a crucial component in F2P gaming, enabling a visible increase in game monetization and prolongs its life cycle (best seen on Let’s Fish example). Based on 1Q19 revenue prelims, we expect PLN 14.1m net income (vs PLN 13.4m before) and lift 2019E net income to PLN 61.3m. We still do not assume any revenues from the Chinese market in 2019 and onwards.