Video game developers have balked at the challenge of launching titles in dozens of languages on multiple platforms, leading them to outsource tasks such as localisation, testing and customer support to Keywords Studios (KWS). Strong demand, supplemented by acquisitions that have broadened the group's service range and global footprint, has resulted in rapid earnings growth. Given the group's widening margins and potential for further acquisitions, we think Keywords' shares undervalue its outsized prospects.
- Strong sales and earnings growth
- Geographic expansion
- Dominant position in fragmented markets
- Widening range of services
- Risk of acquisitions misfiring
- Cost of growth
Keywords has offices in more than 15 countries and counts 20 of the top 25 video game companies among its customers, including Microsoft, Supercell and Electronic Arts. Brisk trading and new customer wins including Amazon and Facebook-owned Oculus VR, drove comparable sales up a fifth in 2015, propelling adjusted pre-tax profits up by more than half.