Mobile game designer KuuHubb Inc. (TSXV:KUU) posted a solid quarter to end 2018, says Echelon Wealth analyst Ralph Garcea, who rates the company a “Speculative Buy” with a $4.00 target price.
Last Friday, the Helsinki-based KuuHubb announced its financial results for the three- and six-month periods ended December 31, 2017, showing a 123 per cent increase in revenue from the previous quarter, which the company attributes to sales of their Recolor app, in-application virtual goods sales for their now fully-owned My Hospital game and in-application ad revenue.
Garcea says the company has a number of things going for it, including an experienced team led by co-founder and CEO Jouni Keränen. “Asia is the world’s largest and fastest growing market for online games,” says the analyst in a note to clients on March 2. “Jouni Keränen has extensive experience and expertise in the online games marketplace in Asia. He and his team also have a wide range of valuable relationships that KuuHubb believes will facilitate the introduction of its games in Asia and future growth in this key market.”
KUU is currently trading at a C2018 EV/Sales of 1.7x, versus its Gaming/Social comparables at
5.2x, says Garcea.
“We believe there is plenty of upside in our estimates as KUU expands across demographics and into adjacent lifestyle categories (like interior design, fashion and jewelry, home and garden, etc.),” says the analyst. “We note that the Global Social App comparables are trading on average (excl. FB) at a multiple of $40/MAU. Applying this multiple to KUU’s 7.0M MAUs would value KUU at $280M (or C$6.50-7.50/shr).”
Garcea rates KUU a “Speculative Buy” with a one-year target price of $4.00, representing a projected return of 220 per cent at the time of publication.