WSE: CREATIVEFORGE GAMES - analytical report - summary
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We are disappointed with the results for 4Q'22, which were below our expectations, and throughout 2022, the company generated a loss again. On the other hand, in March CFG released a prologue for their new game "Beer Factory," which reached a peak of 1.3 thousand, the third-highest among all PLW group games, which fills us with optimism about its monetization and potential improvement in results in future periods. The release of this title is scheduled for 2Q'23, and CFG is entitled to 50% of the profit from each copy sold. Based on the prologues of games already released and their subsequent sales, we predict that this title will sell approximately 67 thousand copies throughout 2023. With this in mind, we maintain our HOLD recommendation for CreativeForge Games, setting a target price of 11,8 PLN per share, which is 5% below the current market price.
Results for 4Q'22 are below our expectations
The company's results for 4Q'22 were below our expectations and we perceived them negatively. At the revenue level, CFG generated PLN 1.2 million in the discussed period (-28.3% y/y, -30.6% q/q). The sales revenue amounted to PLN 0.9 million (+44.8% y/y, +12.4% q/q), which were in line with our expectations. The significant decrease in this position was influenced by the change in the product state, which amounted to only PLN 0.2 million (-75.7% y/y, -72.0% q/q) compared to our forecast of PLN 0.9 million. During the discussed period, operating costs decreased by 32.7% y/y, while q/q they increased by 8.4% to PLN 1.7 million, which was higher than our expectations (PLN 1.5 million). We were negatively surprised by the other operating costs, which amounted to PLN 0.4 million (of which PLN 0.3 million was the update of non-financial assets value). At the EBITDA level, the company generated a loss of PLN 0.8 million in 4Q'22 (compared to a loss of PLN 1.6 million in 4Q'21 and a profit of PLN 0.2 million in 3Q'22), while the EBIT amounted to -0.9 million PLN (compared to -1.6 million PLN in 4Q'21 and a profit of 0.2 million PLN in 3Q'22). If we exclude the change in the product state from the company's results, the EBITDA would amount to -1.1 million PLN, compared to our forecast of -0.7 million PLN. In 4Q'22, CFG generated a negative financial result of 1.0 million PLN. In addition, a significant negative impact on the results of the discussed period was a loss (-0.7 million PLN) related to the sale of all or part of shares of subordinate units. In the last period, the company incurred a gross loss of 2.5 million PLN (compared to -2.0 million PLN in 4Q'22, 1.2 million PLN in 3Q'22). In 4Q'22, the net loss amounted to 2.5 million PLN (compared to -1.7 million PLN in 4Q'21, 1.1 million PLN in 3Q'22), while the minority loss was 0.1 million PLN. As of the end of December'22, the company had 0.5 million PLN in cash, which is 0.3 million PLN less q/q. At the end of 2022, CFG no longer has any subsidiaries, only associated companies.
„Beer Factory" prologue with the third highest peak among the games of the PLW group
In the first half of March, the company released a prologue of the game "Beer Factory", which reached a peak of 1.3 thousand, making it the third highest among all games in the PLW group (preceded only by titles such as "The Tenants" and "Perseus"). Its rating is equally impressive, currently exceeding 90% positive reviews. CFG is entitled to 50% of the profit from each copy sold of this game. We assume the premiere of this production in 2Q'23. Based on the prologues of already released games and their subsequent sales, we predict that this title will sell approximately 67 thousand copies throughout 2023 and will significantly impact the company's results during this period.
Further perspective of this year
This year, in addition to the aforementioned game "Beer Factory," we expect the most from titles such as "Colonize" and "Builders of Greece." For the whole of 2023, we forecast revenue of 9.9 million PLN, EBIT of 3.3 million PLN, and net profit of 3.3 million PLN. We hope that after last year's disappointing release of "ACS" and disturbances related to the game "Stargate: Timekeepers" as well as production teams, the releases planned for 2023 will allow the company to strengthen its balance sheet and create a "safety cushion" for the development of further titles. We do not expect that any of the planned releases for this year to be a game-changer. However we expect, that they will generate a satisfactory stream of revenue.
The report was prepared by Dom Maklerski BDM at the request of the WSE as part of the Exchange's Analytical Coverage Support Programme
Krzysztof Tkocz
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Dom Maklerski BDM S.A.
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