Keywords Studios - Reassuring CMD, residual concerns dispelled

Keywords Studios’ capital markets day (CMD) on 5 February 2020 was very well attended and reassuring. The company will continue to grow a balanced, diversified business. Organic growth remains strong over the short to medium term: for FY20 we forecast 15% y-o-y revenue growth, up 12% on the FY19 closing annual run rate (ARR), supported by the launch of next-gen consoles. Increasing scale helps to attract larger clients and raise barriers to entry. Keywords’ strategic approach to ‘buy and build’ delivers for both the company and the studios. We retain our view that Keywords is strongly positioned as the only games service provider at a global scale. The company’s P/E rating (29.2x FY20e) reflects its leading market position, track record and potential, but should fall further as Keywords continues to execute its buy-and-build strategy.