11 bit studios: Let’s play it again… (stays BUY)
11 bit has a proven track record in delivering very good quality games, improving with further releases, developed both in-house (This War of Mine, Frostpunk) and by external studios (Beat Cop, Moonlighter, Children of Morta). Currently, we are just ahead of a “gap†year, with no new releases on the horizon. The latest game (Frostpunk) is over a year old and the next game (Projekt 8) should be released in 2021E (our estimates), which means that the company should generate lower results yoy in 2020E, because of its normal multi-year production cycle. We believe the latest weakness in the share price performance is directly from this upcoming “gap†year, as well as some delays in releases that happened in 2019 (Frostpunk and Children of Morta on consoles). Taking into account, however, that it: i) has expanded its development team; ii) is already working on two new games (Projekt 8 and Projekt 9); iii) still has more ways to monetise existing titles (new devices: mobile, Switch); and iv) is increasing the threshold of copies sold and profits generated with every new game, we believe the latest weakness is the perfect time to build a position in 11 bit studios. We have refreshed our forecasts, keeping our BUY rating unchanged, but setting a new price target (PT) of PLN 464/share (down from PLN 560).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.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
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