Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Computer games maker tinyBuild has big ambitions
Recently-listed tinyBuild (TBLD:AIM) is a computer games company with a difference.
The firm has created a partnership model which is designed to fully align developer and publisher interests and build long-term value by exploiting intellectual property.
A good example of the company’s approach is the Hello Neighbour game franchise.
Hello Neighbour, is a stealth horror puzzle game based on sneaking into your neighbour’s home to figure out what horrible secrets are hiding in the basement. The player is up against an advanced artificial intelligence algorithm that learns their moves and sets traps.
The original single player game has seen over 60 million downloads.
What followed was a multi-player spinoff called Secret Neighbour, a prequel, a book which has sold over 1.6 million copies, and an animated TV pilot which has had over 40 million views. Altogether the franchise has generated cumulative revenue of $94.6 million.
WHAT SETS TINYBUILD APART?
The company says it has built relationships with over 10,000 verified influencers which has created one of the largest social media gaming audiences with 784,000 followers.
By locating development hubs in Eastern Europe, tinyBuild has a significant cost advantage of between over more expensive countries like the UK and the US.
tinyBuild is aiming to leverage existing intellectual property and has a pipeline of 23 games in development. It is also seeking to acquire new intellectual property, development studios and service providers.
The firm aims to capitalise on the most successful games by monetising them across different media while retaining full creative control.
tinyBuild’s chief executive and founder Alex Nichiporchik tells Shares that the firm’s priority is to build long term partnerships with developers rather than shorter term transactional based relationships.
It’s not just about creating a successful game but building longer lasting content which can be monetised in multiple ways with spin-offs and sequels.
Revenue has grown at a compound annual growth rate of 53.1% since 2017 and hit $18.5 million in the first half to June 2020.
Despite significant investment in the pipeline to fund upcoming releases tinyBuild has converted on average, 99% of adjusted earnings before interest, taxes, depreciation, and amortisation into operating cash since 2017.
Operating margins, excluding amortisation of acquired intellectual property were 35.6% in the first half of 2020, generating $6.6 million.
Alex Nichiporchik and co-founder Luke Burtis own 38.2% and 7.1% of the company respectively.
In our view tinyBuild is an interesting growth business and one to keep an eye on, but having advanced materially from its 169p IPO price already at 226p and with no analysts forecasts available and 2020 full year numbers yet to be reported, it is one to watch from the sidelines for now.