- Margin expansion from more own IP revenue
- Improved net cash position
tinyBuild’s (TBLD) management is currently concerned with relocating its Ukrainian and Russian based employees, with most already moved to Lviv in the west of Ukraine, mercifully away from the frontline. But investors will be pleased to see significant revenue growth and improving margins in what is another strong set of results for the game developer.
Revenue increased 39 per cent to $52.2mn (£40mn), which was 4 per cent ahead of broker Berenberg’s forecast. More of that growth occurred in own IP games which now make up 81 per cent of total sales, up from 70 per cent last year. Own IP means no licensing fees so this helped expand the adjusted cash profit margin by two percentage points to 42.6 per cent.
A promising feature is that 83 per cent of revenue came from back catalogue sales. Lots of the most popular games – such as Hello Neighbour – were released years ago, but are consistently updated to keep fans interested. This high recurring sales shows the strength of tinyBuild's IP and there are plans to move into other forms of media with the release a Hello Neighbour film in the coming year.
New game Potion Craft launched in September has crossed 600,000 downloads after topping the Steam download charts at release. This year Hello Neighbour 2 – a sequel in tinyBuild’s most popular franchise – is set to be released and there is a current pipeline of over 30 games.
FactSet broker consensus is for EPS to rise to 8p in 2023, which gives a 2023 PE ratio of 18.7. There was a time when games stocks were trading in the low 30s – but now tinyBuild is looking very affordable.
Gaming is a cheap way to socialise and have fun in a world where other luxuries that depend on long supply chains are inflating, although opinions differ as to the price elasticity of the sub-sector – we shall see. Buy.
Last IC View: Buy, 260p, 15 Sep 2021
TINYBUILD (TBLD) | ||||
ORD PRICE: | 151p | MARKET VALUE: | £306mn | |
TOUCH: | 147-152p | 12-MONTH HIGH: | 304p | LOW: 143p |
DIVIDEND YIELD: | nil | PE RATIO: | 46 | |
NET ASSET VALUE: | 48¢* | NET CASH: | $48mn |
Year to 31 Dec | Turnover ($mn) | Pre-tax profit ($mn) | Earnings per share (¢) | Dividend per share (¢) |
2018 | 24.8 | 4.20 | 1.32 | nil |
2019 | 28.0 | 7.30 | 2.71 | nil |
2020 | 37.6 | 7.70 | 2.80 | nil |
2021 | 52.1 | 12.5 | 4.30 | nil |
% change | +39 | +62 | +54 | - |
Ex-div: | - | |||
Payment: | - | |||
*Includes intangible assets of £57mn, or 28p a share |