If you wish you had bought Starbreeze at SEK2.0 based on the fact that Payday2 was performing very well on Steam, this is the chance to redeem yourself.
Frontier Development has one franchise today (Elite Dangerous) with a hardcore player base generating about £20m. in revenue per year for the company.
They have now launched a second franchise which is performing very good on Steam.
- Planet Coaster Thrillseaker Edition has been in the top-10 since November 9
- Planet Coaster (normal edition, 10% promotion) is top-11 at the moment.
I cannot make any other conclusion than that Planet Coaster is a new franchise for Frontier that will generate at least £10m in yearly revenue going forward. The company has no debt and cash on hand.
That will put the company on the trajectory of 50% growth next year and give it the possibility to launch its third franchise, which they have mentioned to be a work in progress. I can see no other way than that this should give it a valuation slightly below Starbreeze and Paradox of 6-8x sales. That is equal to a share price of about 600p - an upside of 200%. The main reason this arbitrage exists in my view is that the stock is listed on AIM, which is a very difficult market to trade and many institutions outside of the UK are probably not even allowed to own AIM-listed companies as AIM is defined as an unregulated exchange.
With such a potential it is difficult for me to motivate a serious investments in any other gaming company at the moment.
The one risk I see is that the Elite Dangerous franchise will completely die once Star Citizen and some of the other AAA-quality open space games are launched in the near future.