eResearch is pleased to publish an Update Report on Kuuhubb Inc. (TSXV:KUU). The report covers the Company’s Fiscal Q3/2020 Financial Results. You can download the full 12-page report by clicking here: eR-KUU-UR-2020_06_15_FINAL
COMPANY DESCRIPTION:
Kuuhubb 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.
FQ3/2020 FINANCIAL RESULTS:
- Revenue for the 3 months, ended March 31, 2020, was $1.8M compared to revenue of $2.8M for the 3 months ended March 31, 2019. Revenue for the quarter was slightly lower than our estimate of $2.1M.
- Revenue was primarily generated from sales of the Recolor App, in-application sale of virtual goods from the My Hospital game, and in-application advertising.
- In March, during the COVID-19 crisis, Kuuhubb announced that it was providing free access to “Recolor by Numbers”, in support of people coping with quarantine & self-isolation, and this free access marginally impacted revenues in the quarter.
- In FQ3/2020, Expenses were $2.8M, higher than our estimate of $2.6M, mainly due to higher spending on Sales & Marketing.
- During the three months ended March 31, 2020, Kuuhubb incurred a net loss of $1.2M compared to a net loss of $2.6M in FQ3/2019. Cash flows from operating activities was negative $1.2M, compared to negative $0.8M in FQ3/2019.
- Due to delays caused by the COVID-19 crisis, we decreased our revenue estimates in F2020 to $7.9M from $10.2M and in F2021, FY starting in July 2020, to $20.3M from $25.2M.
FINANCIAL ESTIMATES & VALUATION:
- For the next 3 Fiscal years, ending June 30, our revised estimate of Kuuhubb’s revenue is as follows:
F2020: Revenue $7.9 million; EBITDA -$3.0 million;
F2021: Revenue $20.3 million; EBITDA $1.2 million;
F2022: Revenue $55.3 million; EBITDA $8.3 million.
- We estimate an equal-weighted price per share target of C$1.90, blending a target price based on a DCF valuation (C$2.94/share) and a Revenue Multiple valuation (C$0.89/share).
- Currently trading at 1.6x F2020 EV/Revenue compared with the Large Cap gaming comps trading at 4.3x C2020 EV/Revenue and the Nordic gaming comps at 5.0x C2020 EV/Revenue.
We are maintaining a Buy rating and the one-year price target at C$1.90/share.
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You can download the full 12-page report by clicking here: eR-KUU-UR-2020_06_15_FINAL
