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Keywords Studios forecasts upgraded by Numis

The new Numis forecast sees 2018 revenue at €243mln, up from €232mln, while the profit is anticipated at €35.7mln, from €34mln
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Numis rates Keywords as a 'buy'

Keywords Studios PLC (LON:KWS) has seen its forecasts upgraded by Numis following its most recent positive trading update earlier this month.

The company told investors that it expects its 2017 revenues and profits to be “comfortably ahead” of market expectations.

READ: Keywords expects 2017 revenues and profits to be “comfortably ahead” of expectations

The AIM-quoted firm - which, among other things, tests video games for bugs and translates them into different languages - said it had enjoyed a year of strong organic growth which had been complemented by a “number of significant and successful acquisitions”.

As a result, Keywords expects revenues to be at least €150mln (FY16: €96.6m) for the 12 months ended December 31 and adjusted profit to be not less than €22.5mln (FY16: €14.9m).

The Irish company snapped up eleven businesses last year, including two of its biggest deals to date: the €53.3mln (US$66mln) takeover of VMC Consulting and the €21.8mln (US$27mln) acquisition of California-based Sperasoft. All of the new additions have strengthened Keywords’ service offerings as well as its geographic reach and access to talent.

Numis upgrades forecasts

“We increase 2017 forecasts in line with management's guidance,” Numis analyst Will Wallis said in a note.

“For 2018 we also revise up our organic growth forecast (we now model 14% growth in revenues in 2018 from businesses owned at the end of 2016).”

The new Numis forecast sees 2018 revenue at €243mln, up from €232mln, while the profit is anticipated at €35.7mln, from €34mln.

Wallis added: “We use scenario modelling to derive our 1865p price target, as while we don't include further acquisitions in our forecast model, we think it sensible to assume acquisitions in our valuation.”

“Despite our forecast upgrades today, our price target remains unchanged, as we have not changed our central scenario assumptions, and modestly negative £/€ exchange rate effects offset the slightly higher revenue base in 2017.”

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