Video game developer PlaySide Studios (ASX: PLY) shares started trading on the ASX early in December, and the PlaySide share price has already doubled in value and currently trades at around 46 cents per share.
PlaySide’s initial public offering (IPO) issued 75 million shares at 20 cents each, raising $15 million before associated costs.
What does PlaySide Studios do?
PlaySide is a Melbourne-based video game company founded in 2011 and is one of Australia’s largest independent game developers.
The company has over 70 game creators that have contributed to a portfolio of 52 titles delivered across 4 platforms: Mobile, Virtual Reality (VR), Augmented Reality (AR) and PC.
PlaySide does have self-published games based on original intellectual property, but it also works in collaboration with major Hollywood studios such as Disney, Warner Bros and Nickelodeon.
PlaySide’s future growth drivers
Future growth will be partly driven by the ongoing release of new mobile game titles as well making its games available on other platforms. Additionally, management indicated that it sees eSports as a large potential growth opportunity and will leverage strategic partnerships with influencers as a marketing strategy for its titles.
Other growth will come in the form of scaling its workforce and increasing its international presence through its LA office focused on business development.
Was the price jump justified?
On one hand, the market has valued PlaySide shares at a collective value of around $160 million, with the company generating around $6 million in annual revenue. So using a price/sales (P/S) ratio, shares seem expensive.
On the other hand, PlaySide is operating in a large, growing addressable market. The company primarily generates revenue through its mobile games segment. The total addressable market for mobile gaming is estimated to be around $77.2 billion in 2020.Thinking about it this way, shares may seem relatively cheap if the company is able to tap into this huge addressable market.
For other ASX share ideas I’d buy before PlaySide, click here to read: 3 ASX growth shares I’d buy for 2021.
