Report - Ultimate Games - The year of back catalogue -WSE:ULG
Aa
Share
In 2022 the company released 66 games, down from 83 titles released in 2021; however, likely thanks to a still strong back catalogue, Ultimate Games will be able to increase revenue to PLN 31.8m this year (up 26% y/y), according to our forecast. We also expect a slight decline in profitability (EBIT margin at 20%, down 4pp) driven by expanding costs of brought-in services (likely driven by the developers’ revenue share and in general higher costs of work). In the forecast for the next year, we tentatively assume no breakout hit (we believe both Ultimate Hunting and Thief Simulator 2 could arrive in 2024E); nevertheless, with expected multiple smaller releases and a solid back catalogue, we expect Ultimate Games to improve revenues by 5% y/y, up to PLN 33.4m and adj. net profit to PLN 6.4m, up 9% y/y. On our forecasts, the company trades at a P/E of 14.6x/13.3x in 2022E/23E, at a high, double digit discount to foreign peers. We maintain our HOLD recommendation and decrease our FV to PLN 15.5 (5% downside), due to weaker than expected performance of games, anticipated longer production cycles as well as lower profitability.
Ultimate Fishing Simulator 2.
On 22 August Ultimate Games released Ultimate Fishing Simulator 2 Early Access. The game reached 19th place on Steam’s Top sellers list and achieved the peak of concurrent players at 924, which represents an 140% increase over performance of its predecessor released in November 2017. What’s important, following its launch, the game has been systematically improving its reception – as of now the average user rating is at 79% positive on Steam with the most recent ratio at 94% positive (vs. 90% for UFS1). We believe this suggests its potential for a long lifecycle. In our forecast for 2023E, we assume UFS2 to sell 60k copies.
Ultimate Hunting and Thief Simulator 2.
We move our expectations for one top selling title from the group to be released in 2024E and subsequent years and achieve 150k copies sold in the initial 12M (vs. previously expected as of 2023E). We believe that among the potential top performing titles are Ultimate Hunting as well as Thief Simulator 2 (however, in the case of this title, Ultimate Games will be more beneficial on a console port than on the PC version). Potential Switch port deals for top performing PlayWay titles remains an upside story for the company.
Dividend.
We expect Ultimate Games to keep high dividend payments with DPS of PLN 0.85/0.92 in 2022E/23E (DY of 5.2%/5.6% respectively).
Analyst: Michał Wojciechowski Michal.Wojciechowski@ipopema.pl + 48 22 236 92 69 Marcin Nowak Marcin.Nowak@ipopema.pl
GPW’s Analytical Coverage Support Programme 3.0
