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Team17 off the mark with a bang

Just three months since the float, this video game developer looks like a good bet in an attractive market
September 11, 2018

Maiden results offer an opportunity for newly-listed groups such as video game developer Team17 (TM17) to showcase their financial strengths. In the first half of 2018, operating net cash inflows nearly doubled to £6.5m, thanks to extraordinary operating cash conversion of 274 per cent. And, after excluding £2.6m of IPO-related costs, depreciation and intangible asset impairments, adjusted cash profits rose 36 per cent to £4.9m. Despite trading being largely second-half weighted, revenues still rose nearly 50 per cent, far outstripping the wider market.

IC TIP: Buy at 230p

But it’s not all about the numbers. Team17 has launched eight new games so far this year, including the highly acclaimed Overcooked 2, and tied up its first venture with a Chinese label partner. There's also a strong catalogue of older games (classed as those which were launched prior to the current financial year), which accounted for 85 per cent of total first-half revenues.

Management expects roughly 10 games to launch in 2019, split between its own products and third-party partnership divisions, so the group should benefit from the surge in new titles developed by smaller, independent companies and rising demand for high quality, multi-platform video games.

Broker Berenberg expects pre-tax profits of £12.5m and EPS of 7.9p in the year to December 2018 (from £7.3m and 4.9p in 2017).

TEAM17 (TM17)   
ORD PRICE:230pMARKET VALUE:£302m
TOUCH:225-235p12-MONTH HIGH / LOW:285p193p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:39.1p*NET CASH:£13.4m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£'000)Earnings per share (p)Dividend per share (p)
2017**10.480156.0nil
201815.431-41.0nil
% change+48-96--
Ex-div:na   
Payment:na   
*Includes intangible assets of £39.8m, or 30p a share **Pre-IPO figures