The report was prepared by Dom Maklerski BDM at the request of the WSE as part of the Exchange's Analytical Coverage Support Programme
Last recommendation BDM: HOLD with target price 9,1 PLN/share (2022/10/28)
BDM Comment: The company's results for Q3'22 at the level of EBIT profit are below our expectations, therefore we perceive them negatively. At the level of revenues, CFG generated PLN 1.7 million in the discussed period (-17.1% y/y), of which PLN 0.8 million from sales revenues (a decrease of 22.6% y/y, despite the premiere of ACS” in Q2'22, however, we think that it may be related to the lack of payments for the production of the game "Stargate Timekeepers") vs. PLN 1.0m our expectations. This position was significantly boosted by the change in the state of products, which amounted to nearly PLN 0.9 million and turned out to be significantly higher than our forecasts. In the period under review, operating costs fell by 24.2% y/y and increased by 4.8% q/q to PLN 1.5m. The largest cost, as usual, is associated with game production - the costs of external services increased by 21.8% y/y and 46.7% q/q to PLN 1.2 million, and salaries decreased y/y by approx. 66.1% and 49,7% q/q to PLN 0.3m. Despite the company focused on maximizing the efficiency of the production team and optimizing production, it did not reduce the most important costs and they are significantly above our expectations, which we perceive negatively. At the EBITDA level, the company generated a profit of PLN 0.2 million (+237.8% y/y), EBIT amounted to PLN 0.2 million (+355.4% y/y). In Q3'22, the company generated a PLN 1.0m financial balance due to the profit from the disposal of financial assets (the effect of the agreement with PLW regarding the game "Gnomepunk"), which translated into a net profit of PLN 1.1m (vs +294 .1% y/y). In Q3'22, net cash flows from operating activities amounted to PLN -0.3 million (of which PLN -1.0 million related to investing activities). At the end of September 2022, the company had PLN 0.8m in cash, i.e. PLN 0.1m less q/q. The company continues to focus on maximizing the efficiency of the production team. Production stages and team management are being optimised.
• In Q3'22, the company generated PLN 1.7 million in revenues (-17.1% y/y), of which PLN 0.8 million from sales (-22.4% y/y, -34.6% q/q), the second part, i.e. PLN 0.9m, was due to a change in the product state (-11.0% y/y vs. -PLN 0.1m in Q2'22).
• In the period under review, operating expenses decreased by 24.2% y/y and increased q/q by 4.8% to PLN 1.5 million. The largest cost, as usual, is associated with game production - the costs of external services increased by 21.8% y/y and 46.7% q/q to PLN 1.2 million, and salaries decreased y/y by approx. 66.1% and 49, 7 q/q by PLN 0.3m.
• At the EBITDA level, the company generated a profit of PLN 0.2 million (+237.8% y/y), EBIT amounted to PLN 0.2 million (+355.4% y/y).
• In Q3'22, thanks to the profit on the sale of financial assets, the company generated a PLN 1.0 million financial balance, which translated into a net profit of PLN 1.1 million (vs +294.1% y/y).
• Over the past quarter, "products and semi-finished products" decreased q/q by PLN 1.5 million to PLN 3.2 million, and "finished products" decreased by PLN 0.1 million to PLN 1.7 million.
• In 3Q'22, net cash flows from operating activities amounted to PLN -0.3 million (of which PLN -1.0 million related to investing activities). At the end of September 2022, the company had PLN 0.8m in cash, i.e. PLN 0.1m less q/q.
• At the end of September 2022, in CreativeForge Games, there were no people employed on the basis of a full-time employment contract, while CFG employed 11 people on the basis of civil law contracts and one person from the Management Board employed on the basis of an employment contract. vocation. In total, in the group, converted into full-time jobs, no persons were employed on the basis of an employment contract, 3 persons were employed on the basis of appointments and 37 persons on the basis of civil law contracts.
• On September 5, 2022, Annex No. 2 was signed to the publishing agreement of July 1, 2021 regarding the game entitled Gnomepunk, under which PlayWay became the new publisher of this title. CFG decided to transfer the role of the publisher to the above-mentioned game due to the need to focus its resources on other productions that are more important from the company's point of view. PlayWay covered all the costs incurred by CFG so far.
• Deadwater Sallon - the game was introduced to players at the beginning of last quarter. This title was received with good reviews, and the developer is already working on another production, for which CFG will also be the publisher.
• Handyman Corporation - 3Q'22 is intensive work on the release of the game, which will have its premiere soon, i.e. on November 30, 2022. CFG is very pleased with the effects of the above-mentioned.
• My Hotel - the game is already in full production. Bugs and performance-degrading elements are still being removed on an ongoing basis. Production is not at risk. Analyzes are also underway examining the direction in which the game's marketing should go, and an appropriate release window is being sought to maximize premiere profits.
• In addition to the above-mentioned games, titles such as Blacksmith Simulator, Beer Factory, Colonize, Black Gold and House Flipper City, Builders of Greece are in development. Each of these games is already at an advanced stage of production and each of them has great potential for success.
• The company continues to focus on maximizing the efficiency of the production team. Production stages and team management are being optimised. Appropriate procedures have been created to identify potential bugs related to adding new features and mechanics to games more quickly, while at the same time the bug reporting and identification system has been improved, and thus, faster removal of irregularities by the testing teams. CFG already sees that the applied improvements have a positive impact on development activities.
Analyst:
Krzysztof Tkocz
krzysztof.tkocz@bdm.pl
tel.: (+48) 516 086 705
GPW’s Analytical Coverage Support Programme 3.0
