King Digital has Successful Games with Doubts of Future

August 13th, 2014 Posted by Company Research Report No Comment yet

King

Company Research on King

King founded by Riccardo Zacconi and Melvyn Morris and incorporated on July 3, 2013. KING is an interactive entertainment company that makes games like Candy Crush Saga, Pet Rescue Saga, Farm Heroes Saga, Papa Pear Saga, and Bubble Witch Saga. The company designs digital games with puzzle element on mobile devices including tablets and mobile phones. Users access its games for free anywhere and anytime on king.com

In addition, King launches new game IPs on royalgames.com, for feedback from its core user base of VIP customers. The Company then identifies the games based on deep performance analytics and historical experience, then enhances them with additional features and capabilities in its Saga format before releasing them on Apple App Store, the Google Play Store, the Amazon App Store, and Facebook.

How does the company make money?

King Digital Entertainment offers its products and services to customers around the world, the operators in developing and monetizing casual online and mobile games. As of December 31, 2013, an average of 128 million DAUs played its games more than 1.2 billion times per day. The massive network 324 million monthly users and track record of long-term retention driven by game longevity and ability to cross-promote new games to its audience.

King2

King designed a technology platform to offer a seamlessly synchronized, cross-platform experience to their audience.

Who is running the business?

CEO

Mr. Riccardo Zacconi is one of the founders and has served on the board of director and as Chief Executive Officer, he has more than 14 years experience in the online and consumer industry. Previously, Mr. Zacconi served as Vice President of European Sales and Marketing at uDate.com Ltd., an online dating service, until it was acquired by InterActive Corporation in 2002. Prior to uDate.com, Mr. Zacconi was an Entrepreneur in Residence at Benchmark Capital Partners, Managing Director at Spray Network GmbH, a Qualified Case Leader at The Boston Consulting Group, Inc., and a consultant at LEK Consulting LLP. Mr. Zacconi holds a B.A. in Economics from LUISS University, Italy. 

CFO

Hope Cochran has served as Chief Financial Officer since October 2013. Ms. Cochran has more than 18 years of senior executive experience at various technology companies. Prior to joining us, Ms. Cochran served in several positions at Clearwire Corporation, most recently as Chief Financial Officer, until it was acquired by Sprint Nextel Corporation in 2013. Prior to Clearwire Corporation, Ms. Cochran served as Chief Financial Officer at Evant Incorporated, as Controller of the Americas – Sales Operations at PeopleSoft, Inc., as a founder and the Chief Financial Officer of SkillsVillage until it was acquired by PeopleSoft, Inc., in 2001, and as an auditor at Deloitte & Touche LLP. Ms. Cochran holds a B.A. in Economics and Music from Stanford University.

Value Investing Guide

Balance Sheet

Financial Liquidity

It is important to be knowledgeable about the financial status of every company we intend to invest in. Shown in the table below, we could determine how liquid the company is through calculations of data from 2012 to 2013 of King Digital.

king liq

Current ratio average for two years is 1.4 which means the current asset is 140 percent of current liabilities while the quick ratio is also 1.4 since the company has no inventory record. Debt to equity ratio and solvency ratio are both 0. Detailed data showed that King Digital is debt free.

Income Statement

This is the statement where we could find the historical earnings, expenses and the margin of the company.  This is also called “ Profit  & Loss Statement”.

Income

Revenue is the amount of money that is brought into a company by its business activity. It is the “top line” or “gross income” figure from which costs are subtracted to determine net income. The table below shows  the  detailed  income of  KING  from  2009 to 2013:

king inc

King started only in 2011, its revenue from 2011 to 2013 was 64, 164 and 1884, increasing year over year. It has a trailing twelve months of 2,285. Gross income has a similar pattern with the revenue, the team of 1569. Operating income was negative 2011 but continue to rise up in the succeeding years, with trailing twelve months of 812. This is the result after deducting total operating expenses from the gross income. Moreover, the company’s net income was also progressing with trailing twelve months of 642 and the average was  304.

Margin

It refers to the percentage result over total revenue.

king marg

The company’s gross margin was 69 percent trailing twelve months and a 66 percent average.  The highest percentage is in 2013 while its lowest is in 2011. The results also showed up and down with a slight difference. The operating margin was 36 percent time and a 35 percent average. And net margin was 28 percent trailing twelve months and average.  It shows here that the company continues to progress year after year since it started in 2011.

Cash Flow Statement

Cash Flow Statement provides information about an entity’s investing and financing activities during the accounting period as well as showing how much cash was generated by the period’s operation. It is categorized into operating, investing and financing:

king cf

Cash Flow From Operating Activities

King’s operating cash flow was continuously increasing from 2011 to 2013. The trailing twelve months was 816 with an average of 378. King’s financing cash flow also consistent negative balance on this category which means they are paying back their debt.

Free Cash Flow

Free cash flow is the amount left after deducting capital expenditures from the company’s operating cash flow.

king fcf

King’s free cash flow was a positive balance. It has an average of 364 and trailing twelve months of 788 from 2011 to 2013 operation.  It shows that the company has excess cash for possible expansion.

Investment Valuation

Enterprise Value

The concept of enterprise value is to calculate what it would cost to purchase an entire business. King enterprise value of 5.450B as of August 13, 2014 (Data derived from multiple sources or calculated by Yahoo! Finance). It measures the value of productive assets; both equity capital (market capitalization) and debt capital.

King’s market capitalization of 5.780B. King’s share outstanding as of today is 317.68M or $17 per share. Since enterprise value is lesser than its market value. It is a company’s theoretical takeover price when the buyer buys all of the stock and pay off existing debt while pocketing any remaining cash. The formula of Enterprise Value = Market Capitalization + Total Debt – (Cash and Cash Equivalent + Short Term Investment) wherein Market Capitalization = Market Price x Number of shares outstanding and Total Debt = Market value of Short Term Debt + Market value of Long Term Debt.

CITATIONS

http://www.sec.gov/Archives/edgar/data/1580732/000119312514113704/d564433df1a.htm https://www.google.com/finance?q=NYSE%3AKING&ei=Hr_qU8D5FoaPigKesoDIDQ http://www.reuters.com/finance/stocks/officerProfile?symbol=KING.K&officerId=2487362 http://finance.yahoo.com/q/ks?s=KING+Key+Statistics

Researched and Written By:  Meriam,, Rio and Nellyt

Re-edited by Criselda

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