Article from Individual Investor...
For those investors who believe that the video game industry has finally become a mature business, NewKidCo International (OTC BB: NKCIF - Quotes, News, Boards) could be for you. This profitable microcap of $45 million publishes and markets video games for young children ranging in ages 3-10. What makes this age group compelling is that it is growing much faster than the typical video game industry, which is growing at 35% a year.
The company is targeting the video game business, which has high barriers to entry compared to making PC games. In the PC market, there are more than 3,000 titles for young kids, while there are maybe a dozen video games for new platforms, according to NewKidCo. Also, for products for preschoolers, there are even fewer titles to choose from.
NewKidCo recently inked a worldwide deal with The Learning Company, which is now owned by Mattel (NYSE: MAT - Quotes, News, Boards), and will distribute NewKidCo's products worldwide. Aside from this deal, NewKidCo also has a multi-year agreement to produce new titles based on Sesame Street characters.
In its first quarter, Canada-based NewKidCo issued five titles, including two Elmo games for the Sony Playstation and Nintendo's Color Game Boy, as well as another title for the Sony Playstation based on the character Hello Kitty.
NewKidCo recently raised $10 million in a private placement, which gives the company the capital it needs to apply for listing on the Nasdaq. The only requirement needed is getting the stock price high enough for listing. 'Our goal is to be on Nasdaq by year-end,' said Richard Rabins, CEO of NewKidCo.
Rabins believes that there are several catalysts going forward for the stock, one being the company's name change from SoftQuad. In addition, NewKidCo has two Canada-based analysts covering the company, the deal with Mattel, and several new titles due by the end of the year that can help drive the stock.
NewKidCo had a profitable first quarter, which is not the strongest of its four quarters. During that time, the company reported $10 million in sales and $0.11 in earnings per share, both in Canadian Dollars. Rabins believes that sales could be between $30 and $50 million this year, and earn $0.50 a share, which would translate into $0.34 a share in U.S. Dollars. At a recent $2.16 a share, shares trade for 6.4 times that $0.34 estimate, pretty cheap for a company involved in an industry growing more than 35% a year.
iionline.com |
