Computer game stocks and one in paticular

Max Damage

Member
83 0
Thanks for the Hello TraderX. The name Max Damage comes from my portfolio one year that I managed to descimate(but it taught me a great deal) and from Sci themselves. For my own recent success I’ve concentrated on a very few shares and one sector in particular. The computer games sector. From little Acorns the specialistion has worked and allowed me to pick up Eidos well before lift off and sell before collapse. It as also got me into my current favourite SCI at 62p – 80p, but unfortunately missed Rage at 4p as I did not like them at all and still don’t. I firmly believe that they will be running out of cash soon and the shares are still overvalued. If anybody wants to know anything about the sector I will try to answer any questions as I believe this is a wrongly ignored sector in the Uk as PE’s are less than half and usually quarter of their US and European counterparts. This will change however and recent events and articles are starting to show a change. My favourite stock in the sector is Sci as you may have guessed so I will summarise why below

Not being an expert at all on charts Could somebody possibly be able to have a look at the chart for SEG and let me have their thoughts. The current thoughts I’ve heard is that the price will either break up or down as its trading range is showing a descending triangle pattern. My own belief is it will break upwards as the results on Jan 18 confirm the companies future prospects are very bright

As for the recent share price it came off the rails with the general tech downturn but has recovered from its lows of 160p to the current 270p today. The main catalyst for the sell off was the change of year end by 3 months. In other words no releases no profit, share price down. That’s a little unfair however as the nature of the business means these things happen and are not generally bad. Releasing flawed product is bad. Delays often lead to the product quality being correct and sales being good. To see why delays are good look at the downfall of Eidos. Flawed product leading to poor reviews and poor sales then look at Codemasters. Continual delays to release yet 22 million profit in 2000 due to top quality critically acclaimed product being released and the envy of Eidos. Eidos’s other downfall was the reluctance to use licenses and their decision to attempt to create another Tomb Raider. You need both not just one route.

Okay finally moving on to Sci

Okay lets start with the games as these are the money makers. Sci’s big advantage over Eidos, Rage, EA, Infogrammes in the past has been very low costs meaning lower sales needed for profitabilty. However that is changing with the newer titles. Risk is however reduced as Sci contract out development which means lower profit per unit sold but due to the financial incentive for the developer often produces higher quality games.

Carmageddon TDR 2000 – Released in UK and Europe sales seem better than expected . Recently released in USA were the publishing rights sold to Xicat I believe ensuring profitabilty of the title.

Milla Miglia – As above. But unbelievably cheap to develop( Done by 2 guys. Yes 2 guys) Most definatly profitable due to low costs

Milla Miglia PSX2 – Being done by the highly talented Climax studios
www.climax.co.uk

Aqua Aqua – PSX2 launch title. Cheap for Sci to buy. Retail sales price 24.99 and receiving very good reviews http://www.totalgames.net/PSX2/reviews/a-c/aqua_aqua1.html

Thunderbirds – Massivly popular at the moment. Released DEC 1 on Gameboy. Sci have stated that orders have been Quadrupled for the game and Day one orders are now fully filled and on back order so sales around 150,000 are expected. PSX 2 title to follow next year which is looking quite incredible( those are the words of EBQ staff who have seen it!!). GBA title planned and WAP title to be launched Feb 2001

Italian Job – PSX 1 release for next year

Titanium Angels – Superb looking adventure receiving excellent previews planned for release on PSX2, PC next year http://www.sonyweb.com/previews/ps2/titaniumangels.html

The Great Escape – Based on the film and planned for 2002 release http://www.sci.co.uk/Press/06-10-00_greatescape2.htm http://www.sci.co.uk/Press/05-10-00_greatescape.htm

Desert Storm – Based on the gulf war and designed by the people behind Warzone 2100. Designed for PC, PSX2, X-Box

Rally Championship – The next instalment of this popular title developed by Actualise (Sci recently acquired these http://www.sci.co.uk/Press/actualize.htm )

Gumball Rally – Really no idea!!!

Peoples game – Wap based football game release early 2001 http://www.sci.co.uk/mobilemedia/products/peoplesgame/peoplesgame.htm

Find a Blind Date – Not a game but a WAP dating service. Interesting first to the market could make it very succesfull http://www.sci.co.uk/mobilemedia/products/findablinddate/findablindate.htm

I strongly recommend that anyone interested telephones SCI on 0207 585 3308 and request a copy of the media disc. This disc contains demos of the above games and is updateted Quarterly. Titanium Angels and thunderbirds have to be seen to be believed. Downloads are available at http://www.sci.co.uk/Downloads/download.htm but the disc is much easier


Okay that’s most of the games. Next bit I’ll do is their investments


Sci have 2 main investments

Music3W.com http://www.music3w.com In a recent interview Rob Murphy the finance director said

Mr. Murphy (Finance Director): In addition, about 12 months ago, we made an investment in a company called Music3W, which is an Internet music portal. It is a site that runs the official Website for a number of leading pop groups and rock groups such as Genesis, Tina Turner, Brian Adams, Pink Floyd and a number of other very well-known acts. We have the rights to the games portion of that site, and we are planning to use that to put some games online in future, so it is an exciting broadening of the entertainment area.


Celoxica – This one looks very interesting and Sci’s stake has it is believed dramatically increased in value http://www.celoxica.com take a good look at the site

Celoxica™ is a revolutionary company with revolutionary solutions for rapid system level design. Celoxica products are based on the industry standard C language. Our vision is to enable engineers to design electronic products in a day - bringing the era of The One-Day Design to reality.
In today's fast-paced market, an alternative is required to traditional design techniques. If you want to control your destiny and create the future, turn to Celoxica.
We are changing the rules of system level design.

Next the top mangement

In terms of the directors there is Jane Cavanagh as Chief Executive, who has had some 15 to 16 years experience in the computer games industry, so probably has one of the longest track records of anyone within the business. The Finance Director Rob Murphy, has been with SCi for three years. Previously, he was a partner at Arthur Andersen, so he has an extremely strong financial background. Bill Ennis is the Commercial Director, who has been with SCi for eight years and he has had vast experience prior to joining SCi within the computer business, generally. On the non-executive side, they have the Chairman, Charles Levison. He is a lawyer by profession and founded one of the leading law firms in
the United Kingdom some 20-25 years ago. The other non-executive is Clive Carver, who is a corporate financier at a company called Williams (Debroe), so he brings a lot of city experience to SCi.
Within the framework of those five people, SCi have some very specific, but very complementary, skills that work well together as a team.


Now profits and results and Deals

Results for 2000 are to be announced on Jan 18 and the concensus forcast is for a 1.8 million profit giving a historical PE of 24.5. The recent trading statement confirmed results were on track and the Xmas period had been very good for sales.

Forcast results for 2001 are 4.25 million profit giving a forward PE of 16 which is low considering the potential and the average PE for the sector

Forcast results for 2002 are 6.95 million profit giving a forward PE of 12 which is very low considering the potential and the average PE for the sector

So far in 2001 Sci have signed a deal with gameplay netting £500,000 to be recognised in 2000 and 2001 accounts I believe.

Sci currently have around 10 million in the bank which is more than enough to fulfil the managements ambitions

Thunderbirds GBC will launch initially in UK were as previously mentioned orders are very high and then worldwide as the series is rolled out. The Roll out is impressive as the statement below testifies and sales well in excess of 500,000 worldwide is achievable. More probably I estimate over 1 million could be sold worldwide

15th November: Thunderbirds, listed as one of the UK's top five toys for Christmas 2000, by the BATR (British Association of Toy Retailers), continues to be a best-seller for Carlton. A raft of deals have recently been signed in the UK, Europe and Japan proving Thunderbirds' timeless appeal to audiences worldwide. At The Brand and Licensing Show in October, Thunderbirds attracted phenomenal interest from UK and international licensees. UK deals signed by Carlton included Mondo for balls and space hoppers and a restaurant promotion with Little Chef for Spring 2001. Other deals currently in negotiation include apparel ranges, FMCG products, gift items and wheeled toys.
In the UK, a satellite TV deal has been signed with the Cartoon Network and Boomerang, which ensures transmission into 2002. New licensees are clamouring to get on board for 2001 and existing licensees such as Vivid Imaginations are planning new product lines. Thunderbirds will be supported throughout 2001 with a full PR and marketing campaign and £1.5 million worth of TV and cinema advertising promotions.
On the European front, TV stations are now rolling out the series, supported by strong licensing campaigns. In Holland, where Thunderbirds has just premiered on SBS, a new toy deal has been signed with Toys & Games Express. A DVD and video deal has also been agreed with Bridge Entertainment, for Holland and Belgium, with release scheduled for Spring 2001.
The Thunderbirds phenomena is poised for take off in France, with the TV series currently airing on the cable and satellite channel Canal Jimmy. TF1 Video, which has secured the French video/DVD rights, will be releasing Thunderbirds videos and DVDs in early 2001. The Copyrights Promotions Licensing Group, which has recently been appointed by Carlton International as licensing agents in Benelux and France, is launching a range of collectible products over the forthcoming months.
In Japan, where Thunderbirds has a massive following, two major promotions have been negotiated using the Thunderbirds brand. Top advertising agency Dentsu is to start a TV and print advertising campaign in November 2000 for NTT DoCoMo, one of Japan's largest mobile phone companies. Images of Thunderbirds will be used with other popular sci-fi characters from Japanese TV series. The second Japanese promotion, which also launches in November 2000, is with the advertising agency Sogei Create. This printed media campaign features Parker who is promoting apartment buildings in the Central Tokyo area. Tohokushinsha and Carlton have also signed a new toy deal for Captain Scarlet in Japan. This is with Tsukuda Original for Hyper Injection Toys of the Angel Interceptor, Spectrum Pursuit Vehicle and Spectrum Saloon Car. The products will launch in February 2001.
Bliss House has been appointed to handle some of the ITC Supermarionation and cult properties including Supercar, Fireball XL5 and Secret Service, aiming at the collectible market in the USA and Canada. Bliss House will work closely with A&E/New Video which will be releasing a number of these series on video/DVD throughout 2001 in the North American market.
And last but not least there are rumours that Carlton has requested to see print of both the Thunderbirds movies. Can things get any better?
 

Uncle

Established member
671 2
Welcome to the "club" Max, and may i congratulate you on your post. This is a most comprehensive contribution, and am sure will be of benefit to members.

I will post something in reply from a tech opinion later.

Meanwhile i look forward to reading your futher posts

John
 

Riz

Experienced member
1,266 5
Welcome aboard, Max and thanks for your post of comprehensive research...very useful..

rizgar
 

Cigar

Well-known member
292 13
Congrats on a quality report.

Chart views

EID & RGE.. whats the wellknown phrase about a bargepole.

SEG..
short term - down a bit (Stochs and RSI still coming down.)
longer term - don't know. Weekly macd (trend) is down, daily macd(trend) is slightly down. Volume on troughs is higher than vol on peaks which is a bullish sign.
The price has retreated some 50% from the beginning of the uptrend in Jan 99, which is fairly standard.
The price should pop out of the top of the gigantic triangle, in theory.

So theres a real mixture of signals (in my view)

I don't think anyone knows.
 

Uncle

Established member
671 2
Closed down 7.5 today Monday, at 270 just below its middle Bollinger Band (275). The lower BB is at 250.

A clear Pennant pattern is forming and the outer edges (currently 263.5 lower, 297.5 upper) should cross on or about 23/1.

As mentioned above no support being shown by other indicators and with negligable volume, does not look like a buying opportunity.

If it dips below the rising trend line expect it it fall even futher perhaps down to the lower BB before any upward movement. If however, it rises and penetrates the falling trend line then a buying opportunity would have been signalled, provided this is supported by other indicators.

Good luck

John



[This message has been edited by Uncle (edited 08-01-2001).]
 

Max Damage

Member
83 0
thanks for the analysis. I have one question

Could the upcoming results break the chart upwards out of the trading range. The recent trading statement on the 20 DEC was positive and in the current mood of apathy possibly ignored or not looked at all!!. The staement confirmed profitability and excellent christmas trading. The Statement was

RNS Number:1440W
SCI Entertainment Group PLC
20 December 2000


FOR IMMEDIATE RELEASE 20 December 2000


SCi Entertainment Group Plc


UPDATE ON CURRENT TRADING

CONFIRMATION OF RELEASE OF RESULTS FOR PERIOD TO 30 SEPTEMBER 2000

SCi Entertainment Group Plc ('SCi'), one of Europe's fastest growing
publishers of entertainment software and new media content today announces an
update on current trading.

Trading conditions in the period to Christmas have been favourable for SCi.
All of the company's principal products, Carmageddon TDR 2000(PC), Mille
Miglia (Sony Playstation), Aqua Aqua (Sony Playstation 2) and Thunderbirds
(Nintendo Colour Game Boy) have featured in the charts. Sales of Thunderbirds
have been particularly strong in line with the huge interest in Thunderbirds
merchandise. Further Thunderbirds games including versions for Sony
Playstation 2 and Nintendo Game Boy Advance are planned for 2001.

SCi also confirms that results for the period to 30 September 2000 remain in
line with market expectations and will be announced on 18 January 2001.


For further information, please contact:

SCi Entertainment Group Plc
Jane Cavanagh, Chief Executive 020 7585 3308
Rob Murphy, Finance Director


Buchanan Communications 020 7466 5000
Mark Edwards
Jeremy Garcia

Notes to editors

SCi Entertainment Group Plc

SCi moved to the Official List in March 2000. It is a developer and publisher
of computer and video games for all commercially successful platforms
including PC, Internet, Sony PlayStation, Sony PlayStation 2, Microsoft X-Box,
Nintendo Colour GameBoy, and gaming via mobile phones. It owns the rights to
several leading games brands including Carmageddon, Thunderbirds, The Italian
Job, Mille Miglia, Gumball Rally, Titanium Angels, and The Great Escape.


END

TSTILFILFTLIFII

One thing I forgot above was the shareholdings. They are

J Cavanagh 28%
Equitable Life 14%(recently upped form 11%)
Merril Lynch 6%
Other institutions below 3% = 18%

I also forgot that I believe UK will have to sit up and look as Microsoft don,t enter an industry with a $500 million marketing budget to lose money!!. It's just such a shame UK funds picked the wrong stocks to like last year, Eidos and Rage which has tarnished the sectors image.



[This message has been edited by Max Damage (edited 08-01-2001).]
 

ChartMan

Legendary member
5,580 46
Max.
You need to look at adx rate. From March 99 to June 99, there was a triange formation of this indicator,preceding the big break. A similar triangle is forming right now, and as we all know(!)history repeats itself.Watch out for a breakout of the upper trend line of this triangle, which I calculate will occur in the last week of January, if it's gonna happen.This should be accompanied by an increase in volume as already pointed out.
Lower support is at 256,withe the lower BB at 262. It is interesting to note that this stock has never broken the lower BB in the past 18 months.
Linked with your excellent fundamental picture, the future looks promising......

Martin
 

Uncle

Established member
671 2
Martin I note you lower BB Differs from mine which is at your support level. What parameters are you using.......I am 20/2.

John
 

Max Damage

Member
83 0
I obviously have alot to learn and understand on TA reading the replies. Is there any good books or websites that you can recommend.

Thanks

Max
 

Cigar

Well-known member
292 13
Click on 'links' at the top of the page.
Click on 'Clearstation'

This takes you to an educational site. Either work thro' the sections or, as I found easier, click on 'pdfs' and download the sections.. trending, oscillators etc. They are about 5/10 pages long and quite easy to read.

Don't be afraid to ask, or put your twopennyworth in.
 

Max Damage

Member
83 0
Thanks I'll get those files downloaded and start looking through them and hopefully learning the TA side of things :)

Just had a look at a few charts and as expected in this market they all showed negative money flow except one. the one is Vislink a recent purchase of mine along with 4 directors and the money flow chart was very positive. I take it this is a good sign as during the same period the share price seems to have now stabilised at the 60p level




[This message has been edited by Max Damage (edited 08-01-2001).]
 

Uncle

Established member
671 2
Max.......Three books I would recommend:

Technical Analysis of the Financial Markets by John Murphy published by New York Institute of Finance - 542 pages

Japanese Candlestick Charting Techniqes by Steve Nison published by New York Institute of Finance - 314 pages

The Way to Trade by John Piper Published by FT Pitman Publishing - 273 pages

The first two considered to be the bibles in their field; the latter on discovering your personality with regard to trading techniqes.

These three are my constant companions.

Plenty of websites offering discounts of which you are no doubt familiar.

Good luck in your quest.

John
 

Uncle

Established member
671 2
Max.........Re your question "Could it break up out of its present trading range" the answer is anything is possible. Good news does not necessarily mean the market will take it on board and push the share price up.

You will find news sometimes sends the price the opposite way to that which the news implies it should go - up or down.

Decide on your trading strategy - be it short medium or long term, decide when to buy, and stick with your strategy until it proves unworkable. Employ the discipline of a strict STOP LOSS and you will find if your strategy is not working, at least you survive to change it.

Meanwhile while trying out different strategies, paper trade a number of shares, then back test to see how it has worked out. Eventually you will find a system to employ you are comfortable with. There is no short cut it has to be worked at, and all the programmes produced, still havent produced the HOLY GRAIL, they are merely tools for you to employ as best you can.

Best wishes

John
 

cookie

Active member
248 1
Max,
Welcome and congratulations on your fundamental report I will be watching.
5% bounce today on 60% avg volume. 70% bought. Follow the trend my friend.

How do you see EBQ ??

Good Luck


Cookie
 

Max Damage

Member
83 0
EBQ are interesting and with a forward PE of 12 certainly not expensive. As the sector goes it follows that EBQ will do well. But does it?. Will Dixons increace their exposure to the sector or will the supermarkets start gunning for EBQ's share?.

Supermarkets I don't see as big a threat as people thnk. Just look at their efforts on music and video. If they are serious then they need knowledge and experience on purchasing in the sector. How do they get that?. If sensible they talk to EBQ about some sort of joint venture( Sainsbury may be trialing this but not sure).

So I think if the industry booms as predicted it has to be good for EBQ and on 12x forward earnings downside looks limited. Especially if you pop in regular to check how well they are doing which is the easiest research going
 

Similar threads