The AIM-listed group reported first-half sales grew to EUR238mln, up roughly 37% on EUR173.5mln in the same period of 2020.
Berenberg expects the Keywords business of ancillary services to the game producers to outgrow the video game segment by 7% annually as developers continue to outsource a larger percentage of the development cycle.
“Organic revenue growth of 23% (15% on a two-year stack) and an improving margin profile, albeit helped by some one-offs, illustrate Keywords’ strong operating momentum and the demand for its services.
“With organic growth to remain strong given the buoyant demand backdrop and M&A also on the horizon, we expect further upgrades in H2 2021. We increase our price target to 3,250p.”
Peel Hunt notes that all of Keywords Studios service lines performed well with strong demand, driven by a strong underlying video games market.
Adjusted profits are expected to be EUR40mln, more than half the full-year consensus numbers of EUR73.4mln.
“The group’s cash position remains strong at EUR84m, allowing for further acquisitions. The search for a new CEO continues, but a number of candidates have been identified,” added the broker.
Liberum adds that looking ahead, management has commented that they expect strong demand to persist across most service lines and that FY21 results should be at least in line with market expectations.
“Overall we expect the business to continue benefitting from industry tailwinds, in particular the accelerating roll-out of new generation consoles.
“As these installed bases grow and developers ramp up their release roadmaps for both ported and exclusive new generation content, we believe that Keywords will see sustained momentum from these trends across all of its service lines for at least the next 12 months.
“On the M&A front, management commented that they continue to review a healthy pipeline; as we’ve noted previously, we do not expect Andrew Day’s departure to negatively impact the company’s acquisition strategy thanks to a strong internal M&A team, and continue to expect more deals over the rest of the year.”
Shares dipped 5% to 2,772p.