Last recommendation BDM: BUY with target price 33,7 PLN/share (2022/04/13) LINK
BDM Comment: The company's results for Q2'22 are below expectations, therefore we perceive them negatively. Despite the premiere of its first own game ("Aircraft Carrier Survival"), released in a "new team", the company recorded another weak quarter in terms of results. On the level of revenues, CFG generated PLN 1.2 million in revenues in the discussed period (+ 110.5% y/y), of which PLN 1.3 million from sales revenues, incl. in connection with the premiere of "ACS", this item was reduced by the change in the status of products, which amounted to -0.1 million PLN (vs + 0.5 million PLN in 1Q'22). In our forecasts, we expected sales of "ACS" at the level of approx. 30 thousand. copies in Q2'22 and we stick to this number, but we estimate that the revenue per copy is lower than our previous forecasts. In the period under review, operating expenses decreased by 1.7% y/y and increased by 31.6% q/q to PLN 1.5 million. As usual, the highest cost is related to the production of games - the costs of external services increased by 18.2% y/y and by 45.5% q/q to PLN 0.6 million, and salaries decreased by approx. 16.4% y/y, and increased q/q by 22.3% to PLN 0.6m. On the EBITDA level, the company posted a loss of PLN 0.2m (vs. PLN 0.9m loss a year ago), EBIT was PLN -0.2m, and the net loss was PLN 0.3m (vs. PLN 0.4m losses in Q2'21). In 2Q'22, net cash flow from operating activities amounted to -0.5 million PLN. At the end of June 22, the company had PLN 0.9m in cash, i.e. PLN 0.6m less q/q. The company in 2022. plans to release games such as: "Deadwater Saloon", "Handyman Corporation" or "Colonize". The final version of the game "House Flipper City" will be ready next year (we were hoping for a debut in 2022 i EA). Attention is drawn to the date that appears next to the game "Stargate Timekeepers", i.e. 2022/23, which may indicate that the game will not appear as previously announced, in the summer of '22 and will not debut until 2023, which we perceive negatively.
In 2Q'22, the company generated PLN 1.2 million in revenues (+ 110.5% y / y), of which PLN 1.3 million from sales revenues, incl. in connection with the premiere of "ACS", this item was reduced by the change in the status of products, which amounted to -PLN 0.1m (vs PLN 0.5m in Q1'22).
• In the period under review, operating expenses decreased by 1.7% y / y and increased q / q by 31.6% to PLN 1.5 million. As usual, the highest cost is related to the production of games - the costs of external services increased by 18.2% y / y and by 45.5% q / q to PLN 0.6 million, and salaries decreased by approx. 16.4% y / y, and increased q / q by 22.3% to PLN 0.6m.
• On the EBITDA level, the company posted a loss of PLN 0.2m (vs. PLN 0.9m loss a year ago), EBIT was PLN -0.2m, and the net loss was PLN 0.3m (vs. PLN 0.4m). PLN loss in Q2'21).
• Over the past quarter, “products and semi-finished products in progress” decreased q / q by PLN 0.1 million to the level of PLN 4.7 million, and “finished products” fell by PLN 0.4 million to PLN 1.7 million.
• In 2Q'22, net cash flows from operating activities amounted to -0.5 million PLN. At the end of June 22, the company had PLN 0.9m in cash, i.e. PLN 0.6m less q / q.
• At the end of June '22, at CreativeForge Games, converted into full-time jobs, there were no people employed under a contract of employment, but she employed 9 people under civil law contracts and one person from the management board employed with the title of calling. In total, in the group, converted into full-time jobs, there were no people employed on the basis of an employment contract, 2 people were employed due to appointments and 42 people on the basis of civil law contracts.
• At the beginning of 2Q'22, the company presented players with a demo version of the game "House Flipper City". The final version of the game will probably be ready next year. The second demo that CFG managed to prepare concerned the game Deadwater Saloon. The prologue of this game is also planned to be released in the middle of Q3'22. This will be the introduction of players to the final product. The full version of the game will be available on Steam later this year.
• "HandymanCorporation" - the production phase is currently underway and the game is currently being tested for optimization. The planned release date is 4Q'22. Before this happens, however, the company plans to release a demo version this quarter to collect free player feedback and possible ideas for improving the gameplay.
• "MyHotel" - the pre-production stage was completed and CFG moved to the production stage. Errors and elements that lower performance are removed on an ongoing basis. The production is not endangered, currently analyzes are being carried out examining the direction in which the marketing of the game should go, and an appropriate publishing window is being sought to maximize premiere profits.
• In addition to the demo versions, players had the opportunity to see the trailer for the game "Colonize". CFG plans to release the full game in Q4'22.
• The company focuses this quarter on maximizing the efficiency of the production team, optimizing production stages and managing the team. Appropriate procedures have been created to quickly identify potential errors related to adding new features and mechanics to games, while at the same time improving the error reporting system and identifying them, and thus faster removal by testing teams.
Analyst: Krzysztof Tkocz krzysztof.tkocz@bdm.pl
GPW’s Analytical Coverage Support Programme 3.0
