# tinyBuild appears well positioned to nurture a megahit game says Zeus

- Link: https://www.directorstalkinterviews.com/tinybuild-appears-well-positioned-to-nurture-a-megahit-game-says-zeus/4121067803
- Published: 2022-06-08T07:39:01+01:00
- Author: Amilia Stone

**CMD 2022**

tinyBuild plc (LON:TBLD) provided deeper insight into its business by presenting
how it manages each step required to release a game from discovery to marketing 
and distribution. The presentations provided a strong sense of the company’ culture,
its strategic focus and the unique talent and IP in the business. The company appears
to have an innovative and nimble culture that we believe has the potential to develop
unexpected hit games while also being diversified to take advantage of fast-moving
trends in the sector.

**Megahit potential**

¨ **Diverse talent**: The company has a differentiated culture and diverse talent
pool that appears well positioned to nurture a megahit game. The CMD presenters 
came from diverse backgrounds including professional wrestling, Ivy League economics,
the US military as well as AAA gaming. In addition, it was recognised that the founders,
Alex Nichiporchik, CEO, and Tom Brien, Creative Director, alongside Luke Burtis,
COO, appear to have the unique ability to identify games that capture zeitgeist 
of the moment.

¨ **Innovative culture**: According to Alex Nichiporchik, CEO, the company still
feels like a start-up. The company structure is decentralised and organised around
products and management has a transparent and open approach. Moreover, tinyBuild
has “gamer first” culture that permeates across many departments. This fun and creative
working environment likely supports its low employee churn rates.

¨ **Diversification**: The company believes it is critical to be diversified at 
multiple levels given the rapid innovation in the sector and the unpredictability
of consumer sector trends. tinyBuild believes game trends move faster than developers.
As a result, the company discovers games through a broad range of sources, distributes
games across many platforms and its game portfolio is diversified across multiple
genres and price points.

¨ **Valuation**: Clearly no megahits are factored into our forecasts, despite the
company’s potential to deliver one, discussed above. Indeed, tinyBuild’s EV/ EBIT
multiples are at the bottom of UK video game peer group range (14x 2022), while 
its 2023 EBIT growth is in line with the peer median (14%) and its EBITDA margins
are at the highest in the group (40%).

**Summary financials**

| Price | 172p | 
| Market Cap | £348m | 
| Shares in Issue | 204m | 
| 12m Trading Range | 143p – 280p | 
| Next Event | AGM – July |

**Financial forecasts**

| Yr end Dec ($m) | 2021A | 2022E | 2023E | 2024E | 
| Revenue | 52.2 | 66.9 | 72.4 | 78.4 | 
| % growth | 38.5 | 28.3 | 8.2 | 8.2 | 
| Gross profit | 34 | 34.1 | 38.2 | 41.3 | 
| Admin expenses | -11.8 | -7.6 | -8 | -8.4 | 
| Adj. EBITDA | 22.2 | 26.5 | 30.2 | 33 | 
| EBITDA margin (%) | 42.6 | 39.6 | 41.7 | 42.1 | 
| Adj. PBT | 22.1 | 26.3 | 29.9 | 32.7 | 
| Adj. dil EPS | 0.09 | 0.09 | 0.11 | 0.11 | 
| Net Cash | 48.8 | 73.8 | 91.6 | 110.5 | 
| EV/Sales (x) | 7 | 5.5 | 4.9 | 4.3 | 
| EV/EBITDA (x) | 16.3 | 13.8 | 11.6 | 10.2 | 
| EV/ Adj. EBIT (x) | 16.4 | 13.8 | 11.7 | 10.3 | 
| Adj. PE dil (x) | 23.7 | 22.9 | 20.3 | 18.8 |

Source: Audited Accounts and Zeus estimates

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