Ten Square Games – Scaling to Win
Ten Square Games (TEN) grew 2020 first-quarter EBITDA by a staggering 205% compared to the same year-ago period, thanks mainly to smart scaling of the sales and marketing strategy for its hit mobile game, Fishing Clash. In April 2020, TEN registered an acceleration in the annual rate of sales expansion to 197% from an average of 126% experienced in the three months prior. This after the Company significantly scaled up marketing expenses for the month to PLN 19.2m versus a combined total of PLN 18.3m spent in the first three months of the year. In May, marketing spend in the month to date has already exceeded PLN 16m. TEN decided to up expenditures on user acquisition after conducting assessments into the impact of the coronavirus pandemic on gamer behavior, which identified potential to increase profits from greater traffic. An up-sized budget dedicated to driving users to Fishing Clash will pay dividends for several months to come. TEN can afford to freely and flexibly scale its marketing spend thanks to a comfortable cash position. The Fishing Clash team is constantly working on improving user experience and making the game more engaging. Based on the strong first-quarter performance, looking at the potential of Fishing Clash in the current reality, we opt to raise our 2020 sales growth forecast for the fame from 80% to 162%, and revise the 2021 projection upward from 20% to 30%. At the same time, we also adjust the expected 2020 ratio of marketing expenses to sales higher to 28% from the original estimate of 26.9%. Accordingly, we now expect TEN to generate revenues of PLN 588m in 2020 compared to the original estimate of PLN 417m, and we are anticipating the annual net profit to be PLN 179m, representing an increase on the previous forecast of PLN 131m. With that, we upgrade TEN to accumulate and we raise the target price to PLN 592 per share.
Ten Square Games SA is a Poland-based mobile games development company. The Company is focused on 3D simulation hobby games for people who seek outdoor experiences on their mobile devices, like fishing or hunting games. Its games are available on social platforms, a network of partner sites, as well as on Google Play, App Store and Microsoft Store.
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