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 |
