Ultimate Games: Shifting Strategy, Anticipated Growth, and Exciting Releases
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In the past few years the company decided to shift f rom multiple small game production and instead focus on a few major titles with material budgets. Both this process of a change in strategy as well as ongoing wage pressure have t ranslated into lack of growth in recent y ears. That said, we expect that the company is currently entering a period of monetization, which will start with the r elease of Thief Simulator 2, a sequel to one of the top-selling Polish titles. In our model we assume the sales of the game to arrive at 10% higher levels than the predecessor on PC in the initial 12M.
At the same time, Ultimate Games is approaching the reveal of its next major games, which we expect to be a positive t r igger.
The company is currently working as well on Ultimate Fishing Simulator 2 on mobile and the Ultimate Fishing Simulator China version, which we currently per ceive more as upsides to the core business.
We forecast Ultimate Games r evenues in 2023E/24E at PLN 32.3m/PLN 54.8m and norm. net income of PLN6.0m/PLN 12.9m. On our forecasts, the company trades at a 2023E/24E P/E of 11.2x/5.2x, representing a high double-digit discount to its foreign peers. We upgrade our r ecommendation to BUY f rom HOLD, setting a FV at PLN 17.0 (33% upside).
Thief Simulator 2 is coming this summer
According to the Steam webpage (we note that the dates may change), Thief Simulator is going to be released on 23 August 2023, published by Ultimate Games in cooperation with PlayWay.
The game successfully passed the tests, including a prologue published on 3 May 2023 (83% positive reviews on Steam from 568 players, CC peak at 1.5k). As of now the game is in 135th place in SteamTop Wishlist rankings and has 11.2k followers. The game also garnered significant interest on YouTube (100-200k views for top materials), which suggest substantial chances for commercial success. In our forecasts, we assumed 240k copies sold in 2023E on PC, which represents a roughly 10% increase vs.
Thief Simulator 1 in the same timeframe. As for Ultimate Games, the key will be the release on consoles (substantially higher revshare), which we expect to occur in 2024E with franchise sales for the company at PLN 15.4m in that year. We highlight that Thief Simulator is one of the best-selling games from PlayWay group, with over 2m copies sold on Steam alone.
Ultimate Hunting and ensuing games
We maintain our expectations for one annual release of a larger game with potential sales of 150k copies in 12M since release, starting from 2024E.
Currently the major pretender for best sellers (besides TS2) is Ultimate Hunting, which we expect to be released in 2024E. Nevertheless, we highlight that Ultimate Games is working as well on three other larger scale projects which still has been not announced and whose reveals could be visibly supportive for the sentiment to the stock.
