DAVY VIEW

We upgrade Keywords Studios (KWS) to ‘Outperform’ from ‘Neutral’ with a revised price target of 1400p. We continue to believe in the outsourcing opportunity for KWS within the US$150bn-plus video game industry. KWS’ sales are growing above the industry average, further testament to developers’ increasing move to outsourcing partners. Within this, we believe KWS’ increased engineering exposure will benefit in 2019 and 2020, driven by the move to cloud gaming. Additionally, cloud gaming is likely to drive many divisions within KWS over the longer term as further outsourcing disrupts the traditional video game business model.