MIDAS SHARE TIPS UPDATE: Gaming gets serious as our tip Keywords Studios rises 17-fold in seven years

By JOANNE HART, FINANCIAL MAIL ON SUNDAY

Updated: 05:34 EDT, 24 January 2022

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Last week, Microsoft announced it was paying $69billion (£50billion) for Activision Blizzard, the video games group behind such hugely popular titles as Call Of Duty and Candy Crush.

The amount, roughly equal to Northern Ireland's annual economic output, provides graphic evidence of the store that industry giants set by the video gaming industry.

With good reason: the market generated sales of more than £130billion in 2021 and forecasters expect that to increase to £160billion a year within three years.

Fired up: Keywords Studios works on video games including Call Of Duty

Keywords Studios is a major beneficiary of gaming's growing popularity. The business was floated on AIM at £1.23 in 2013 and was recommended by Midas at £1.53 two years later.

Today, the shares are £26.38, Keywords is valued on the stock market at £2billion and City brokers are confident that there is plenty more growth to come.

Keywords helps games publishers to make their products more successful. The group provides music and artwork for games, creates enticing trailers and social media posts, tests titles before they are released and translates them into several languages.

Keywords even helps to develop games for publishers. Customers include both Microsoft and Activision, Sony, Google, Apple and Nintendo. The company has worked on hundreds of top games and the business is growing fast, expanding its range of services organically and through acquisition.

A trading update last month revealed that figures for 2021 would be ahead of market expectations with sales up 35 per cent to €505million (£420million) and profits up 55 per cent to more than €85million.

New chief executive Bertrand Bodson was even confident enough to declare that turnover this year would be at the top end of forecasts, as demand for Keywords' services expands and develops.

Another update this week should underscore December's upbeat outlook, perhaps prompting brokers to look again at their forecasts for 2021 and 2022.

Current estimates show sales rising 18 per cent this year to €594million, with profits up 9 per cent to €93million. The company reports in euros because it was founded in Ireland and is still headquartered in Dublin, but dividends are declared in sterling, with 2.1p pencilled in for 2021, rising to 2.25p this year.

Video games soared in popularity when the coronavirus pandemic erupted and lockdowns were declared across the world.

There were predictions that growth would slow when consumers were allowed to leave their homes and pursue other leisure activities. But it seems as if gaming has an enduring appeal, as there are now around three billion gamers worldwide – almost 40 per cent of the global population.

Midas verdict: Keywords Studios has been a phenomenal success story and investors who bought in 2015 have enjoyed a more than 17-fold increase in the share price. They may be tempted to sell out now, particularly following lacklustre numbers from streaming giant Netflix last week.

But Keywords is still growing fast and Bodson is keen to prove his mettle. Shareholders needing to find some cash as tax and credit card bills loom may choose to reduce their holdings. Others should keep the faith.

Traded on: AIM Ticker: KWS Contact: keywordsstudios.com or 00 353 1 902 2730