eResearch is pleased to publish our initial report on Kuuhubb Inc. (TSXV:KUU). You can download the full 32-page report by clicking here: eR-KUU-IR-2020_02_18-FINAL2
We are Initiating Coverage on Kuuhubb with a Buy rating and one-year price target of C$1.85/share.
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COMPANY DESCRIPTION:
Kuuhubb Inc. (“Kuuhubb” or “the Company”) focuses on digital entertainment and casual eSports targeting the female demographic. The Company creates and acquires games and applications for female audiences with a focus on relaxation, expression, and entertainment. Kuuhubb’s main apps are Recolor, a digital colouring book application, and My Hospital, a simulation game application. Currently in soft launch are two Match-3 apps with story-based formats, Tiles & Tales and Dance Talent, and, in development, is a new casual eSports Match-3 Battle Royale game.
INVESTMENT HIGHLIGHTS:
Mobile App Gaming Market – Large and Growing Market
- According to Newzoo, 2.4B gamers spent $152B on video games in 2019, a 10% Y/Y increase. Mobile games represent $68.5B or 45% of the gaming market.
- Strong and Growing Product Portfolio
- KUU currently has three gaming titles generating revenue and three in “soft launch”. Kuuhubb’s third-generation casual eSports Match-3 Battle Royale game is currently under development with revenue expected in early 2021.
- Each game has the potential of generating $1-5M per month in revenue.
- In January 2020, Recolor reached the Top 10 in Apple’s Top App Charts.
- Targeting Specific Demographic – Female Gamers
- Kuuhubb’s vision is to become a major player in the mobile games market for female gamers, as it believes this segment is currently underserved.
- Experienced Management Team
- Kuuhubb has established a highly experienced team of 70 professionals in the fields of game development, user acquisition, creative content, business development, graphical art, production, customer service, and operations.
FINANCIAL ANALYSIS & VALUATION:
- We estimate Kuuhubb’s revenue as follows:
- F2020: Revenue $10.2 million; EBITDA -$3.8 million;
- F2021: Revenue $25.2 million; EBITDA $1.3 million;
- F2022: Revenue $59.3 million; EBITDA $13.0 million.
- We estimate an equal-weighted price per share target of C$1.85, blending a target price based on a DCF valuation (C$2.95/share) and a Revenue Multiple valuation (C$0.80/share).
- Currently trading at 1.7x C2020 EV/Revenue compared with the Large Cap gaming comps trading at 4.2x C2020 EV/Revenue and the Nordic gaming comps at 3.3x C2020 EV/Revenue.
We are Initiating Coverage on Kuuhubb with a Buy rating and one-year price target of C$1.85/share.
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You can download the full 32-report by clicking here: eR-KUU-IR-2020_02_18-FINAL2
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Figure 1: 2019 Global Games Market – Mobile Games Represent a US$68.5B Market
