11 bit studios – Consistent business development
11 bit studios proved that unconventional ideas of creating games and care for the quality of production allows achieving above-average rates of return & financial profits. The revenues on the launch day of the Frostpunk game were 10x higher than the War of Mine (TWOM), sales figures amounted to PLN 82.1 million in 2018 vs. PLN 16 million in the year of the TWOM launch. The releasing segment, which first commercial success was Moonlighter, offers huge opportunities for development. The next big launch in the segment will be Children of Morta (summer of 2019), and another two projects will be announced in 2019/20. The potential of releasing activity is visible in Paradox Interactive, which improved its sales over 5 times over the last 4 years to PLN 480 million in 2018 recording higher sales in each of the following years. In our forecasts, we assume an increase in 11B sales by more than 2x to PLN 195 million in 3 years (vs. 2018) and over 3x in 5 years. In our opinion, the catalysts of 11B results in the following years will be: (i) issuing further own productions, (ii) intensification of releasing activities, (iii) enhancement of the amount of DLC; (iv) an increase in the average price of the game/DLC and (v) an increase in the range of games issued. Taking into account the specificity of the industry, we adopt more conservative assumptions, which creates the potential for positive surprises in each of the above areas. We set a target price @PLN 518 & a buy rating.
11 BIT STUDIOS SA is a Poland-based company engaged in the game development industry. Its product portfolio includes four games: Anomaly Korea, Sleepwalker's Journey, Funky Smugglers and Anomaly Warzone Earth. The Company produces video games for different devices, such as video consoles, personal computers (PC), and Apple products (iPhone, iPad), among others.
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