Keywords Studios continues to perform strongly and has acquired Canada’s Enzyme, which tests the localisation and functional aspects of video games. It will fit nicely with Keywords existing operations in this field and brokers are upgrading earnings by around 5 per cent.
Keywords Studios (AIM: KWS) continues to perform strongly and has strengthened its business by acquiring Canada’s Enzyme Testing Labs for €3.7 million. Enzyme tests the localisation and functional aspects of video games and will fit nicely with Keywords existing operations in this field. There should be meaningful cost benefits to be extracted once the business is integrated into the group. On top of that the purchase price looks very reasonable and is being met from low-yielding cash – so brokers are upgrading earnings by around 5 per cent.
This follows on from the trading update earlier in November which said sales and profits were expected to be ‘significantly ahead’ of market expectations. The earlier acquisition of Synthesis, which focuses on video game localisation and audio services, has sustained higher second half activity levels than forecast. Like-for-like growth across the business has also been strong, with the artwork operation cited as another good performer.
Keywords continues to have a healthy acquisition pipeline of specialist providers to the video game industry under review. Enzyme follows on from the Player Research acquisition in October which focuses on player behaviour and experience testing. The industry is huge and constantly changing, with virtual and augmented reality emerging as new technologies among other developments. This should keep the growth opportunities coming, justifying the p/e of 24 times 2017 earnings.