Vivid Games SA – (WSE:VVD) – Analytical Report - Warsaw Stock Exchange
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Analytical report
Strategy to maximize revenue effectively in progress, profitability is still very low
An ambitious strategy for the revenue growth set by the Management Board by focusing on three games from the current portfolio turned out to be implemented slightly faster than our forecasts, which should be perceived positively. The reasons include, inter alia growing users' interest in the two flagship titles (Real Boxing 2 and Eroblast) and USD appreciation, the most important currency for the Company revenue. Unfortunately, the increases in revenues are not accompanied by higher profits. Instead of generating a greater net profit margin after Q2, Vivid Games performed a result lower than in in the previous quarter and a lower than our expectations (PLN 22 thousand against the expected PLN 201 thousand and PLN 50 thousand generated in Q1 2022). The reason lies in the higher than expected costs of external services (plus 7.5%) and amortization (plus 4.2%).
Among the relevant information there should be mentioned the sale of BidLogic technology (advertising mediation service), which will positively affect the Company liquidity position and net result in the third quarter. Because of this transaction, the Company expects a cash inflow of approx. PLN 4.2 million, of which over PLN 3 million has already been received.
In our update report we perform a revision of the cost of capital and the assumed profit levels. Finally, we lower our valuation to PLN 1.07 (from PLN 1.29) per share at the end of 2022, still seeing Growth factors Risk factors potential for growth with relation to the current quotation.
This report was prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 3.0. This is a translation of the Polish analytical report.
Analysts ÅÂukasz Bryl Tel.: 785 500 874
