Playway investment thesis

PlayWay – AV

Introduction to the PlayWay Investment thesis

The new investment thesis brings us a small cap, which does not report in English, with strong growth and quite interesting multiples, all with just 12 years old. Sounds good, doesn’t it?

We are talking about PlayWay, the videogame company.

PlayWay is a Polish company based in Warsaw, founded in 2011 and has become one of the leading video game companies in the country. It is engaged in the development, production, publishing and sale of computer, console and mobile games, specializing in the niche of simulation videogames.

However, I think that the most attractive aspect of PlayWay is not the result of its videogames, but its production strategy. The company acquires small videogame development studios in the initial stages, in this way they become shareholders and contribute resources, knowledge and their own sales and distribution channels. This allows the company to generate a large number of videogames at low cost and, at the same time, to improve the quality, marketing and sales of these studios. Currently, it has more than 110 titles among its more than 50 subsidiaries.

The company went public in October 2016 and since then its share price has more than 5x multiplied, capitalizing about $550M.

At first sight, this is a very attractive option, but is the current growth rate sustainable? What is the position of the shareholders? What are the risks?

Join me in the search for value in these 10 points!

PlayWay Business Model

The company’s business model is quite curious. For this purpose, we have to focus not only on the final result (the videogame), but also on the process, which is what distinguishes the company from the others.

PlayWay develops and publishes a large number of low-budget videogames annually, mostly simulation-type. This causes it to have a very diversified pipeline, reducing risks and cyclicality.

Most of these games have a low impact to overall sales, but since they are low-cost games, it is not difficult to cover the costs. However, some titles achieve greater success, allowing them to multiply their investment several times over and continue with DLCs and sequels to these successful franchises.

However, I find that the greatest singularity of this Polish company is its ability to finance, integrate and empower new studios through internal or external development teams.

It usually participates in small studios in the initial stages, offering Start-ups tools such as capital, technical resources and sales and distribution channels; in this way, developers can worry 100% about the execution of the video game, improving its performance and sales. In short, providing resources and facilities to promising ideas and working teams.

As a result of this business model, the company has more than 50 subsidiaries and as many companies with “significant influence”, in addition to dozens of internal teams. The following map shows the distribution of these teams, including the two micro-campuses and the headquarters.

Playway 70 development teams
Playway revenue per launch

All acquisitions are made by taking a stake in the company, which actually makes them partners, as the managers of each subsidiary continue to hold a % of the shares in their company. There are lock-up clauses which prevent the founders from selling their stake while PlayWay remains a shareholder.

Among the external studios that have grown the most, there are Ultimate Games, Frozen Distict and Big Chease, to name a few.

Within the niche market of simulation video games, PlayWay offers a wide variety: mechanic, thief, beggar, reformer, pope, Jesus Christ or pharaoh, among a long etcetera. This made it possible to publish 34 videogames in 2021 and to have more than 100 in development.

The data for top video games reach $8M in turnover, as in the case of Car Mechanic Simulator 2021 and its DLCs. The following 12 games have reached a revenue of more than $1.5M in the first two months since their launch:

Playway Steam wishlist top publishers

Another curiosity that makes this company’s business model unique is its promotion strategy. Before the game is developed, PlayWay creates a publicity trailer, using previous renderings or CGI graphics and launches it on its Social Media channels. After this publication, PlayWay adds the project to Steam, without a concrete release date. Finally, as CEO Krzysztof Kostowski confesses “we read the comments, we look at what people say on Facebook, YouTube and Steam, and we adjust to that”. This can also lead to the contrary reaction and, in case there is no interest in the video game, its development can be cancelled.

This strategy significantly minimizes the risks of launching new videogames, since, as a rule, the games that have been developed already have hundreds of players closely following their launch on social networks and putting the videogame on their Steam wish list. In this way, PlayWay is positioned as one of the companies that appears the most on users’ wish lists.

Last but not least, when analyzing the group’s business model, we must look at the financial side. A fundamental part of the company is its role as a lender from the holding company to the developer teams of the different subsidiaries that make up the group.

This financing is at market rates, most of it at WIBOR 3M + 2% (3-month Warsaw Interbank Offered Rate, the Polish Euribor), so the company may benefit from the recent interest rate hikes in this business segment. The number of borrowings as of December 31st, 2021, was 26M Zlotis, about $5.8M at the current exchange rate. Financial interest income in 2022 will be close to $1M.

Sector and the environment

The videogame industry is a constantly growing and evolving market. Since the first home game consoles such as Atari and NES in the 70s, videogames have become a form of mass entertainment and have generated a huge industry around them, as evidenced by the latest generation consoles such as PlayStation 5 and Xbox X Series, massive online games or mobile games that can be played from any smartphone.

Within the industry, Poland has become one of the world’s epicentres. Videogames in the Eastern European country have been gaining weight in the local industry to become one of the main places worldwide in terms of videogame development and publishing. Its importance is such that it has its own stock market index, the WIG GAMES INDEX.

Playway games index
Total video games revenue

But if there is a niche in which Poland stands out, it is in the development of indie games, this is, small-budget games developed by independent studios, usually small startups. This growth of the industry has allowed to generate a wide range of services around it, such as localization services, marketing and technical support.

As for the growth of the videogame industry, in the last decade it has maintained an annualized growth of over 13%, going from generating sales of $70,000M in 2012 to $214,000M in 2021, approximately. It is necessary to take into account the strong growth in 2020 and 2021 generated by confinements, which led to an increase in the videogame consumption as a form of entertainment.

According to PwC forecasts, over the next 5 years the industry would continue to grow at a rate of 8-9% to reach $320,000M in 2026. However, other more conservative forecasts predict that after the end of near global confinement in 2022 and with the possible imminent recession in 2023, this growth will slow down, even with a decline in sales in 2022, which has not been seen in the industry for many years, but then return to the growth path in the next five years.

World revenue gaming
Global gaming revenue forecast


The latest forecast published by Embracer, and conducted by Newzoo, one of the world’s leading video game companies, forecasts a 7% CARG between 2019 and 2025, implying a growth rate of almost 5% per year from 2022 to 2025. Growth in 2023 will come mainly from consoles, 9%, and mobile games, 5%.

What is quite clear is that videogames have become a very popular form of entertainment and the industry is expected to continue to grow in the future, but we must not forget that it is a very competitive sector, with many companies trying to develop and publish the most successful games.

Playway Customers

PlayWay is specialized in the simulation games niche. Simulation videogames are a type of videogames that attempt to realistically replicate an activity, being able to create and control virtual characters and live their lives in a virtual world.

Many of PlayWay’s videogames are first-person simulation, trying to emulate real professions such as mechanic or farmer, criminal activities such as a thief or historical characters such as Jesus Christ.

Although there is no exact data, as it depends on the classification of the videogames, different estimates place this niche between 5% and 10% of the total sales of the videogame industry, i.e., approximately $10,000M to $20,000M in sales.

Within the monetization of the industry, this can be done through the sale of the videogame itself or through advertisements or payments within the videogame.

PlayWay mainly opts for the sale of videogames, mostly for computers and through the STEAM platform, its predominant sales channel (48% of the total). Other important platforms are those for consoles, such as Xbox (Microsoft), Play Station (Sony) and Nintendo Switch (Nintendo), which together account for almost a third of total sales. Finally, there are other platforms dedicated to VR, such as Meta’s Oculus and platforms for mobile sales such as Google Play or Apple Store, as well as other lesser-known platforms.

Simulation videogame sales
Gaming sales distribution

The average price of the company’s releases is around 20€, reaching up to 30€ in some of them. Over the time they can be purchased with discounts in a range of 10-15€. In addition, the company also releases DLCs to complete the original games, giving different optionalities, and boosting revenues.

The good thing about this model is that a title that works can be monetized on many occasions, through DLCs, second and third parts, adaptations to other platforms, etc. These later versions have a large player base that “guarantees” greater success.

In terms of where videogames are sold (considering STEAM data), the United States is the company’s main market, accounting for 1/4 of sold units and more than a 1/3 of total revenues. It is followed by China, which accounts for 9% of sold units and 6% of revenue, and then the rest of European countries such as Germany, the United Kingdom, France and Poland itself. Canada and Australia also stand out, each accounting for 3% of the total, both in terms of sold units and revenue.

Revenue & units


As we have already mentioned, gaming is a very competitive industry, with hundreds of companies publishing videogames, from large platforms to small “garage” teams. All of them competing to capture the attention of players who increasingly have a wider range of products to choose from.

Currently, early 2023, it seems that sales have slowed down after the pandemic years where they accelerated. However, the number of gamers seems to continue to increase. Therefore, we are facing a situation where people seem to spend less money on videogames, opting to go back to older games or for lower priced titles, but they do not stop playing.

This market situation may be less detrimental to companies like PlayWay, whose average price per videogame is lower than the market average, compared to companies with big AAA releases, whose production and marketing costs are much higher.

Let’s make a comparison of PlayWay with companies of similar size and origin (Poland and Nordic countries) to get a brief idea of the industry situation. It should be considered that I have taken the multiples of some of these companies from estimates, being many of them small caps with very little coverage from analysts, so “handle the numbers with kid gloves”, although I think that it is useful to get an overall idea. Forward table:

Playway competitors

At first glance, I think the most remarkable thing is the growth of the company. 2020 was a really good year for videogame companies. The confinements caused a boom in game sales that positively impacted the revenues of all the companies within the industry. However, 2022 has not been such a good year for the industry, and the growth experienced by the sector has been moderated.

In this sense, we see how on average the companies do not even reach 10% annual sales growth in this period, some of them even being flat. However, despite this slowdown in the sector, PlayWay has been able to maintain annualized growth of nearly 30% and is the company with the best prospects for future growth of all those analysed.

It is also the company with the best margins, since the model, as we have explained, allows us to reduce risks and achieve very good returns.

In terms of valuation, we can say that it is close to the average, slightly above in EV sales and EV FCF, and slightly below the estimated PER for the year 2023. These data, taking into account that it is the company with the highest growth rate and best margins, we consider them really positive.

Shareholders and management team

One of the things we like most when analysing a young small-cap is that its founder is still at the head. In this case, its founder, Krzysztof Kostowski, not only remains at the head of the company, but also controls 40.9% of the shares.

Other major investor is Michal Kojecki, who controls another 40.9% through his sole proprietorship, ACRX Investment Limited.

All this causes the company’s free float to be very low, added to its low capitalization, it can be a serious problem for investment funds, but a great opportunity for those of us who are small investors.

As you can see, the team’s salary is really low, Krzysztof Kostowski only earns 22.000€ per year, so the interest will come from the revaluation of his portfolio, being the interest completely in line with the shareholders.

Krzysztof Kostowski’s experience in the sector began in 1991 when, together with his brother, he founded PLAY, a videogame wholesale distribution company. However, in 2011 he decided to take a step forward and focus on videogame development, creating PlayWay. His vision for fostering and building teams and his alignment with shareholders make him a perfect model of an insider to follow along his path. In fact, Krzysztof Kostowski was elected as the best valued CEO on the Warsaw Stock Exchange in 2019, beating some well-known CEOs in the Fintweet community, such as Piduch Szymon, CEO of Dino Polska.

The other major shareholder is Michal Kojecki. Michal is a former professional tennis player who set up his investment fund, ACRX Investment Limited, and has from the very beginning owned 40% of the company and until December 31st 2021, was a member of the supervisory board, at the date of his resignation.

Jakub “Kuba” Trzebinski is the third important member of the company. Although he is not a shareholder, he is one of the most responsible persons, both for operations and Marketing. Kuba has extensive experience in the videogame industry and has served as chairman of the Supervisory Board of such companies as Ultimate Games and Movie Games S.A. (both subsidiaries of PlayWay).

In total, between the board of directors and the supervisory board, the annual salaries amount to 55,000 US dollars, which is derisory for a company that expects to earn more than $60M.

Playway shareholders

Financial analysis (financial statements)

The company has very strong fundamentals, with a large net cash position and earnings that continue to grow quarter on quarter.

If we go to the balance sheet, the main assets of the company are its participation in associate companies, seeing that it is an asset-light business. In addition, it has plenty of cash (10x current liabilities) avoiding any liquidity problems or defaults in the short term.

The company has a net cash position of $60M, in addition to generating a high and growing cash flow. In terms of debt structure, most of the debt is deferred taxes with the Polish tax authorities (zl40.000 out of zl53.000) and the rest is almost all trade payables.

Playway Financial statements

One of the biggest financial risks for companies in the sector is that the investment is made at the beginning, long before knowing how successful the videogame is going to be, leveraging an amount of money that is impossible to know for sure if it will be recovered. If the videogame is a success, we will be able to multiply this investment several times over. If it is a failure, we will lose the money invested.

However, we have seen how PlayWay has two strategies that greatly reduce this risk. First, it has a very diversified videogame pipeline with relatively low investments for the size of the company. In other words, “they do not put all the eggs in one basket” as can happen in other companies such as CD Projekt. This allows that in many cases, a few hours after the release, the game has already covered the development costs of the game, such as “Mr.Prepper”, which recovered the invasion within 12 hours of its release, “The Tenants” which took 72 hours or “Farm Manager 2021” which also raised the money invested in 72 hours. Once the breakeven is reached, the future sale of these games is practically all profit for the company.

Secondly, the publication of the trailers before the start of the development of the games allows to get an indication of the success of the game, creating a player base and being able to discard those that generate more uncertainties.

Another important aspect is the share dilution. And here is another bit of good news. The company does not give stock options and doesn’t dilute (they haven’t diluted since 2016, 6,600,000 shares).

They do not issue stock options for the same reason that the salary is modest, and that is that the reward is expected to be through share appreciation and dividends. This, as shareholders, gives us total alignment with the CEO.

On the other hand, PlayWay does not issue shares for the acquisition of new companies.

The forward-looking of Playway

From a financial point of view, the CEO himself has confirmed that PlayWay is a dividend company (his form of remuneration, given his low salary) and that he wants to keep it that way, so he does not want to reduce either his shareholding or the amount of dividends (we recall that his salary is very low). Therefore, a mixed policy will be maintained between distribution and continuing with investment and growth.

Another important point in the future will be the sell-off of group companies. In 2021 PlayWay sold SimFabric and now they intend to sell a block of Movie Games shares. This may be a good way to unlock value from the company and obtain liquidity to continue to grow and remunerate shareholders.

In this regard, Krzysztof has warned that the sales of these companies will serve to increase investments in current and future companies and teams.

For example, the sale of SimFabric, which was sold at a price significantly lower than the market price, was invested in 12 projects within two months of the sale. Movie Games’ capitalization is 86 million zlotis, and one- third of the company is held by PlayWay.

On the other hand, the company has repeatedly announced in the last two years increases in investments related to Virtual Reality (VR). I believe this is one of the points where the company has the greatest potential, which I divide into two scenarios:

  1. Firstly, many of PlayWay’s current videogames focus on first-person simulation. Virtual reality fits perfectly with these types of activities, having a huge potential for growth on VR platforms, such as Meta’s Oculus, which are in full growth, as evidenced by the download data for the linked apps over the last two Christmases.

  2. Secondly, and fundamental to the bullish thesis looking forward, is the ability to adapt current videogames to the education of the future. Technology in education is starting to be of great help, especially in Vocational Training. Virtual Reality, together with Augmented Reality, can be a fundamental element for professionals such as mechanics, plumbers, electricians, etc.

    If you look at PlayWay, they have simulation games that cover all these professions and many more. Applying these simulators to VR and VA and being able to adapt it to training lessons, would open up a really impressive new sales segment, not only for reaching training companies, but also for companies to reinforce the training of their workers, give them the possibility to practice certain tasks or, on an individual level, for self-taught people.

Finally, and although we are talking about the future of the company, we are going to look back to evaluate a project that seemed to be a catalyst for the future but nevertheless has not been very successful and has now been abandoned. In 2021, the company launched, a platform that worked with its own cryptocurrency and served to finance projects and ideas.

The idea made a lot of sense, since it fed back on the developers’ own success, and at first it was very well received, accompanied by the boom in cryptocurrencies. We will see if the company is looking for alternatives that work better for this initiative or if they have finally given it up for a failed idea.

Competitive Advantages & Bull Scenarios

Let’s take a look at the company’s strengths and the scenarios where good returns can be obtained from current levels:

  • Big diversity. Low risk: As we have remarked throughout the thesis, one of the main advantages of the company is its diversification and its videogame development process. Faced with a very competitive sector, diversifying in many titles without large concentrated investments, allows successes to compensate for falls. At the opposite point are companies like CD Projekt, which with two IPs gambles years of profits. This also reduces the potential upside, because while it is true that successes compensate for failures, it is also more likely that there will be of these and undermine the maximum potential.

  • Acquisition strategy: This is a growth strategy, where with a “relatively small” investment for PlayWay’s size, it can empower development teams, giving them tools, distribution channels and the financing needed to bring their ideas to perfection. Entering the shareholding, aligns the interests of both companies, creating lasting relationships and in sync, as compared to having only employees, where you are more exposed to losing talent.

  • Videogames and Education: Another possible scenario that would catapult the company is to enter the education sector. Technology, especially that related to virtual reality and augmented reality, can have (and in many areas already have) a fundamental role in education, especially in more practical training, such as the development of trades: mechanics, plumbers, electricians, bricklayers, nurses, etc. This can allow many practices with advantages such as cost (workshops are expensive and the material is expensive), being able to practice unlimited scenarios or avoid risks, among many others. PlayWay, due to its technology and the development of its videogames, is in a privileged position to take advantage of this trend.

  • Lots of cash and low debt: The company’s risks are practically null, having a very good cash position and very little debt. This cash position can also be used to acquire new companies, foster internal teams or distribute dividends, which is what the company has been doing so far.

  • CEO in charge: the fact that the founder is in charge and controls a large part of the company, with a very small salary, conveys a sense of being strongly aligned with his objectives. In addition, we are very clear about his objectives: to continue growing by financing development teams and distributing dividends.

Risks & Bear Scenarios

We will now discuss the main risks of the company:

  • Highly competitive industry: The videogame market is highly competitive. There are many videogame developers and publishers, from small studios to large corporations, competing for the attention of gamers. It is also a very large and diverse segment, with a wide variety of genres and platforms. The offer has grown a lot in recent years due to the sharp increase in the number of players and the expansion of online games and games on the phone. This has also led to new business models based on the sale of downloadable content and micro-transactions, which has created additional competition.

    As the company says, “Sales estimates based on an analysis of player interest in the game at the production stage are subject to unpredictability”.

  • Lower expected growth: Now, with lower expected growth, competition will intensify for a piece of the pie that is not growing at the same rate, although good propositions may benefit in the medium to long term.

  • Investment up front: The videogame industry requires significant investment before sales occur. The initial investment goes into game development, which can take several years and require a team of software developers, artists, level designers, script writers and other professionals to create the game. In addition, the cost of producing high-quality graphics, sound effects and music for a game can also be significant.

However, the initial expenses do not end there, as the game publisher usually has to invest in advertising and marketing to get the game known to players (trailers, videos, ads on other platforms, market research, events, promotions, etc.).

It is a high-reward, but high-risk investment. Although, as we have seen, PlayWay’s approach largely mitigates all of these risks and reduces those initial investments, it is not entirely risk-free.

  • Drop in the simulation niche: Another risk that the company must assume is the drop in the number of games in the sector. PlayWay is very focused on simulation videogames, and even if the target audience differs according to the target, a general “boredom” for this niche in favour of others may affect the company.

  • Private company: Finally, and although we consider the % of insiders as an advantage in terms of the alignment of interests, it may also represent a risk if at a given point, they decide to make a low bid to privatize the company. This has been ruled out on several occasions, but the doubt is always there, since between the two of them they control more than 80%.

    Another risk derived from this is the free float lack, which makes the company very illiquid and, therefore, difficult for funds to access.

Intrinsic value calculation

For the valuation, as we usually do, we took 3 scenarios: base, negative and positive. These scenarios are built on several assumptions that have been presented during the thesis. As always, the valuations in this section are dynamic models that we use as a reference. The prices indicated are approximations, not fixed values. Moreover, they are not recommendations, and we invite you to understand the companies and use your own valuation models.

For the calculation of the base scenario, we have taken a sales growth of slightly less than 20% for the next five years, which is a scenario in line with 2022, a year of decline in the videogame industry. We also took multiples below the average, close to historical lows (2022), considering that if growth decreases, so will the multiples.

In addition, this scenario practically does not take into account the revenues from investment activities (the years with the worst data from the company have been taken as a reference). This is a “pessimistic” scenario since the company’s model of investing in subsidiaries and teams of developers means that it has control of many companies, which usually generates sales of these assets (companies or part of them) that are valued as non-operating income. Understanding the company’s investment model is critical to understanding the accounting, valuation and upside potential.

Negative. The company grows at 15% annually, (less than half of the last three years), generates hardly any non- operating profit, EBIT margins fall, and the market values it at historic low multiples. In this case, the 5-year forward value yields an annualized profit of 6%. Given that this seems to me to be a very unlikely scenario, it seems to me that the investment offers a fairly good margin of safety.

Positive. The company grows at an annualized average of 25%, revenues from investment activities are valued higher, and multiples remain slightly lower than those at which the stock is currently trading, all at the margins of recent years. All in all, we arrive at a target price of 1,057 zlotys, which represents an annual appreciation of 21% from current prices.

Playway valuation bull case
Playway valuation base
Playway valuation bear


As we have seen throughout the text, PlayWay has now been in the videogame industry for twelve years with a focus on developing high quality simulation games and simulators in a wide variety of genres, including construction, vehicle, sports or daily life simulators, among many others.

During this time, the company has not only proven to make good videogames, but also to have an effective growth strategy through encouraging internal development teams and investing in or acquiring other teams or companies. This is a strategy that benefits both parties because it provides former teams with tools such as capital, technical resources and sales and distribution channels, in addition to achieving an alignment of interests between both parties as partners.

In addition, it has managed to greatly reduce the risks of the industry by diversifying in many titles, avoiding concentrating on large investments and exploring the market through trailers of potential releases, in order to achieve a player base prior to the development of the same.

The sector has benefited from very favorable winds in the last decade, with double-digit growth rates, boosted by the coronavirus crisis and the confinements; but which is now resulting in a general slowdown of the sector. Even so, the industry is expected to maintain growth rate of approximately 6% to 8% over the next five years.

The fact that the CEO is the main shareholder and continues to lead the company is another reason for our investment. Krzysztof Kostowski has everything we want in a leader, as he knows the sector, knows the opportunities and is closely aligned with the shareholder, as he has practically no salary.

The future of the company lies in continuing to strengthen internal development teams, acquiring good studios and companies, and leveraging the best titles through DLCs and sequels. The growth itself will also generate more financial and extraordinary income, with the sales of some studios revaluing. In addition, the VR and AR segment

opens up a new line of growth that, although we have not included it in our model because it is at a very early stage with still too many uncertainties, we believe PlayWay is in a privileged position.

For all these reasons, we believe that from current prices (although this beginning of the year has had a very high revaluation, +32% YTD) the company offers a good upside potential, with a solid model, double-digit growth, even with a bad year for the industry, and with almost no financial risk.

Finally, if you have made it this far, I would like to thank you for taking the time to read this thesis.  

Author: @AldeaValue

This investment thesis participates in the Moram investment competition. If you want to vote for it, voting will be open for Moram’ subscribers from this Sunday evening (5th March 2023) to next Saturday.

Disclaimer: This thesis is only for educational purposes and does not constitute any investment advice

Note: Every week we publish investment thesis, macroeconomic articles and comment the market situation in the recently launched blog section. You can follow us to receive an email each Sunday with the publications of the week. 

Some of our latest publications