Buy junior video game stock Axion Ventures on weakness, PI says

In an update to clients on Friday, Kwan reiterated his “Buy” rating and C$1.75 target price, which represented a projected return of 243 per cent at the time of publication.

Video game investment platform Axion Ventures last Thursday provided a corporate update, saying that after five years of development and testing Rising Fire is now in the late stage of being tuned to the market in open-beta release by Tencent, which began testing Season 1 at the end of July.

“Axion has experienced a thorough tuning process working towards a commercial launch that is typical of the video game industry. As an analogue, one of Tencent’s current games, Crossfire, was subjected to an almost 24 month ‘tuning to market’ process prior to full commercial launch,” said CEO Todd Bonner in a press release.

“Crossfire is now in its tenth year of revenue generation and is Tencent’s highest grossing lifetime video game. The scope, size, and potential of Rising Fire are reflected in the amount of time that Axion and Tencent have attributed to ensuring the programmed success of the game at commercial launch,” Bonner said.

The corporate update also contained news of a small convertible debenture financing of $873,000 for growth and on-going expenses. (All figures in US dollars unless where noted otherwise.)

Kwan says an announcement about licensing of Rising Fire should come soon, which would amount to a key catalyst for the stock and a boost for AXV’s finances.

Axion Ventures: Share price pulled back on “little to no news”

“The stock has had a small rebound on the back of the corporate update, following the sharp pullback in recent months (on little to no news). However, we believe the stock still looks oversold, considering it is now back to the same level when we launched coverage over two years ago when Rising Fire was at a much earlier stage of development and its pipeline/game portfolio was a lot less diversified and mature, amongst other things,” he writes.

Axion also announced that retention numbers from a “very successful” open beta launch of mobile game Invictus: Lost Soul in May 2019 were “highly encouraging,” with the company now fine tuning the game and stating that it has gained the attention from multiple distribution partners globally.

Kwan says Invictus has the potential to generate a very high return on investment, seeing as the development cost was just $1.4 million.

Following the corporate update, the analyst is leaving his estimates unchanged, calling for fiscal 2019 revenue and adjusted EBITDA of $21.0 million and $4.8 million, respectively, and fiscal 2020 revenue and adjusted EBITDA of $35.8 million, respectively.

Kwan notes that a more comprehensive corporate and portfolio update from Axion is expected in October. Axion’s share price has fallen considerably over the past few months, dropping 42 per cent over the past three months. The stock is now down 43 per cent year-to-date.

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