Berenberg raises target on Codemasters, spies potential for a bid
By Iain Gilbert
Date: Thursday 05 Dec 2019
(Sharecast News) - Analysts at Berenberg raised their target price on 'buy' rated games developer Codemasters from 290.0p to 380.0p on Thursday, stating that its acquisition of Slightly Mad Studios was more than "slightly" accretive.
Berenberg said the acquisition had "all the hallmarks of an intelligent deal".
The German bank pointed out that the transaction would not only be accretive to its 2021 earnings per share estimates by 32%, it would also improved Codemasters' strategic positioning, further diversify its revenue streams and provide additional resources for growth.
"Investors should be taking note," stated Berenberg.
On the back of its now higher estimates, Berenberg said Codemasters shares were left trades on a price-to-earnings multiple of only 12x, which was more than 40% below that of its global peers.
"Codemasters' enhanced positioning could ultimately lead to interest from potential acquirers should this discount fail to narrow," said the analysts.
Berenberg said the group was now "an apex predator" within racing games, with lower revenue concentration, better growth opportunities and exposure to all categories of the genre.
"Simply put, Codemasters is an undervalued asset. Buy."
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