Stock Pitch - Codemasters (LON:CDM)

22nd Oct '20 by Ben Hobson

53 comments 7028 reads

Video game developer and publisher Codemasters was pitched to the Stockopedia Investment Club on 7th April 2020. With a lockdown in place and the economy in turmoil, one of the first sectors to see a boost from the unusual conditions was the video games industry. The shares were bought at 270.40p and they currently trade at 400.00p. NB - CDM is from our archive of several pitches made earlier in the year. In future, stock pitches will be published immediately after meetings.

TLDR;

Codemasters Group Holdings plc: a mid-cap growth stock offering exposure to the burgeoning video gaming and e-sports industries.

Bull Points: Strong niche position in "racing" games, strong brand connections, multiple growth levers, becoming more profitable, Covid beneficiary.
Bear Points: Potentially over-reliant on the success of a few games, competitive market, shares could be expensive, CEO and CFO both sold shares in January 2020.

Profile

About the Stock: Codemasters is AIM listed and classified in the Technology sector. It develops and publishes video games that are either bought by consumers from retail outlets or digitally via games platforms. It currently trades at 400.00p per share and has an EMS of 3k.
Opportunity Type: This is a Mid Cap with a £629.5 million market cap and is classified as Adventurous on the RiskRatings spectrum. The StockRank is 74, with quality and momentum being the strongest factors - qualifying it as a High Flyer.

Business & Model

Company History: Thirty year track record as one of Britain's best known video games developers, specialising in high quality racing games. Founded in 1986, based in Warwickshire and floated on AIM in June 2018.
It manages four main games franchises, including ‘DiRT™, GRID™, Project CARS and F1®. Earlier this year it won the right to develop and publish games and e-sports tournaments under the FIA World Rally Championship brand (coming in 2023). It also has a growing back catalogue of ~15 profitable titles plus many others. It is growing well organically but has made acquisitions and intends to make more.
Business Model: Codemasters owns the IP to DiRT, GRID and Project CARS and licences the IP to F1. It has teams of developers introducing new versions of the games, often annually. Distribution to traditional retailers is handled through a…

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AndyCDC

27th Nov '20

Codemasters price up to 500p today ..... what ?

Rusty2

Take Two shares are up.

Westway001

Sold out the rest of my holding today on this rise, fed up with it!

sharw

$TTWO was $175.51 at London Close making the bid worth 494p. Clearly anyone buying above that thinks that either there is more upside to the TTWO share price or that the bid value will have to be sweetened to get it through.

30th Nov '20

$TTWO was $177.7 at London Close making the bid worth 497p.

The prospectus was published today - key dates:

Court Meeting 10:00 a.m. on 21 December 2020

Last day of dealings in Codemasters Shares 1 February 2021 (provisional on Court Sanction Hearing 10:30 a.m. on 28 January 2021).

MiserableJacktPotato

So we should be getting our voting intentions from brokers soon?

3rd Dec '20

$TTWO closed last night at an all time high of $181.3 = £134.86 making the bid worth 502.2p but it is trading at 504/506 at the moment so someone is buying thinking it will be worth more so let's look at the declaring holders:

Sellers - the big one is Slater, the largest holder at the start with 9.32% but now 6.03%
BlackRock Group 4.20% to 3.34%
AXA Investment Managers SA 3.03% to 1.45%

Buyers - Artisan Partners 7.99% now 8.776%
Kite Lake Capital Management (UK) LLP 1.16% now 2.06%
Sand Grove Capital Management 3.15% now 5.99%
Carlson Capital, L.P. 1.1459% now 1.903643%
Odey Asset Management LLP 1.49% now 2.05%

8th Dec '20

At 16 00 GMT today $TTWO was trading at $184.28 making the bid worth about 511p. Meanwhile the quote is 512-520.

I have come across an article by Edmond Jackson dated Friday 4th in which he discusses various aspects of the bid, including Slater selling vs, Odey/Sand Grove buying. If you're following the bid it is worth a read: https://www.ii.co.uk/analysis-commentary/stockwatch-red-hot-sector-risk-and-opportunism-ii514396

Carey Blunt

I sold today for an 86% gain on my holding. I don't really want Take Two shares at the moment and although the price could continue to go up in an Xmas rally I think I have reached my risk/reward balancing point and so i'm going to look for other places for the profit,

9th Dec '20

Thanks to Peter M who posted this link on SCVR:

https://www.thetimes.co.uk/article/watch-for-white-knight-says-odey-p8vspb7j5

There is enough text before the paywall to get the gist of it with the owner of Formula One motor racing and Ubisoft, the French video games group being named as possible counterbidders. Stpcko gives the latter a MCap of £8.81bn.

Odey declared today that it has reached 3%. At the same time there have been some large deals going through today with 1,150,635 shares changing hands at 10 16 and 400,000 at 15 56.

10th Dec '20

New name on the list this morning. Alpine Associates Management Inc., a New Jersey hedge fund, has declared 1.29% after buying 500,000 @ 517.588p. At the same time they have increased a short position in $TTWO. This is their speciality: http://www.alpineassociatesmanagement.com/documents/FG/alpine/news/465866_Alpine1115_asi.pdf

Phuntt

13th Dec '20

Damn nearly bought on this link but held off. Rumor today is EA is about to get involved - good luck to all here

dustyie

Sky news is reporting a second bidder is emerging for Codemasters .. see link below

https://news.sky.com/story/games-giant-electronic-arts-gatecrashes-725m-codemasters-takeover-12160582

with broadband speeds increasing worldwide especially in less developed counties .. the gaming market has hugh growth potential the next ten years ... Codemaster potential future earnings is very much under estimated in my opinion

Here is the link for this latest possibility - let's see what happens in the morning:

https://news.sky.com/story/games-giant-electronic-arts-gatecrashes-725m-codemasters-takeover-12160582

Edit - Dustyie you beat me to it by posting while I was typing!

timarr

14th Dec '20

There she blows ...

https://www.londonstockexchang...

604p cash offer from EA.

Shares are now around 637p.

carmensfella

Rival in the sector #SUMO are presenting with a Q&A at the MelloMonday Christmas Special this evening.

https://melloevents.com/mellomonday-14th-dec/

It is a great line up with Sumo at 6.55pm but starts at 6pm so worth tuning in. Stockopedia readers get half price tickets with the code MMStocko21

bananarepublics

15th Dec '20

As a newbie trader can anyone provide links to what happens in a takeover? Much appreciated!

9th Jan '21

The scheme document dated 7/1 has now been published and can be found at:

https://www.codemasters.com/investors/#electronic-arts

The key date, the Court meeting, has been set for Wednesday 3rd Feb.

As a reminder the current offer was made just a week before the Court meeting on the Take Two offer was due so there is still plenty of time for another counterbid - indeed the share price says that the market expects one.

covkid

25th Feb '21

Stock Pitch - Codemasters (LON:CDM)

TLDR;

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Ben Hobson

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