PlaySide Studios Limited

PLY Details

Business Update: PlaySide Studios Limited (ASX: PLY) operates in mobile video games that are provided in the apple app store, google play store in Australia and collaborated with studios, such as Disney, Pixar, Warner Bros, and Nickelodeon. As per a recent update, Eley Grimths Group Pty United, a substantial holder represents 5,903,655 no. of securities with the voting power of 5.63%.

Q4FY21 Financial Performance:

• The company has recorded strong revenue growth (unaudited) of 33% to $3.13 million in Q4FY21 (excl. R&D Tax Incentives and Government Grants) and reported total revenue of $11.53 million in FY21. US revenue in 4QFY21 went up 483% year over year.
• The company launched Idle Area 51, a mobile casual title on google store, in late June following its Apple App Store launch in Q3 FY21. The company witnessed a 12% improvement in Player Revenue by Day 7 utilising new data, analytics systems, and live operations.
• PLY has reported net cash used in operating activities of $1.22 million in 4QFY21, including spending on games already in LiveOps such as Equestrian and World of Pets.
• The cash position of the company stood at $11.23 million as of 30 June 2021.

Original IP Revenue (Source: Analysis by Kalkine Group) 

Key Risks:

• Innovation Risk: To sustain in the international market, the company should bring an innovative offering and new titles for the clients. Therefore, the company should invest in R&D for its market growth.
• Technology Risk: Any disruption in the app could have a negative impact on the company's financials.

Outlook:

• The company remains on track to focus on investing in user acquisition activities. PLY has announced seven new titles and is currently under development which is planned to launch in FY22.
• Additionally, PLY has signed an Innovative work-for-hire development agreement with Facebook Technologies to release multiple titles on the Facebook Horizon VR platform throughout FY22.

Stock Recommendation: The stock of PLY is trading above its average 52-weeks' levels of $0.255-$0.490. The stock of PLY gave a positive return of ~19.67% in the past three months and a positive return of ~40.38% in the past one month. Considering the current trading levels, technical levels mentioned in the below para, recent rally in the stock price, the pandemic impact on media & entertainment operations, and the key risks associated with the business, we suggest investors to book profit and give a 'Sell' rating on the stock at the current market price of $0.370, as on 30 July 2021, 10:36 AM (GMT+10), Sydney, Eastern Australia.

Technical Overview:

PLY's prices witnessed a sharp upside movement in the recent past and now trading around a major resistance level $0.400, indicating the possibility of a downside correction. On the daily chart, the leading indicator RSI (14-period) is trading in an overbought zone at ~76.23 level, further supporting a downside correction. Now an immediate support level for the stock appears at $0.320 level.

PLY Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the charts indicates RSI (14-period)

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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