Mighty Kingdom looks a bargain basement buy with costs coming back under control

Former ABC managing director Michelle Guthrie chairs Mighty Kingdom.

The tyre kickers are starting to circle the Michelle Guthrie-chaired game developer Mighty Kingdom, after its short but torrid run as a publicly listed company has left its share price in tatters.

Look past the noise, however – including surrounding its fight over $2m in unpaid ­capital-raising money arguably owed by former chief executive Shane Yeend – and the theory is there is value to be had.

Mighty Kingdom listed in April 2021, after raising $18m at 30c a share, and proceeded to rapidly burn through that cash, with a huge hiring spree understood to be at the core of the problem.

The company hit the boards with a market cap of slightly more than $50m, having lost about $2m the previous financial year but, with a number of potential income streams such as work for hire and developing its own games available, there were high hopes.

Bringing Ms Guthrie – the former ABC managing director and Google senior executive – on board as chairwoman was also a major coup.

But while revenue growth was healthy in its first full ­financial year as a listed entity, employee costs of $14.5m ­contributed to massive losses of $10.8m that year, backed up by a loss of 9.1m in 2022-23.

A $7m capital raise in August last year – at a meagre 3.5c – brought Mr Yeend’s Gamestar+ company on as a major shareholder with a circa $4m commitment, of which about $2m has been paid.

Mr Yeend also came on board in May as chief executive, a role he told The Australian recently he had resigned, when it was noticed his name appeared nowhere in the most recent results release.

Mighty Kingdom has lawyered up in the dispute over the capital-raising funds, which Mr Yeend says he does not owe due to the failure for conditions to be met – which is disputed by the company.

Putting that fracas aside, what you’re left with, arguably, is a minnow of a company with a superstar board, a minuscule market cap below $5m, and growing fundamentals.

Mighty Kingdom told the ASX in late August that its revenue was up 20 per cent year on year to a record $9.8m, the second-half loss had dropped a massive 76 per cent to $1.7m as a result of a “complete overhaul of business operations’’ and it had had recent wins on the contract front.

The company’s developer team is understood to be well regarded, meaning you now have a leaderless listed entity with revenue greater than its market cap, trading at less than 2c a share.

“Mighty Kingdom’s realignment of its cost base allows the business to resource new contracts without facing unsustainable ongoing costs,’’ the company told the ASX on August 31.

“Balancing a fixed and flexible resource model will create, in due course, a significant talent pool that is sustained by work for hire revenue but allows for development or revenue diversification including co-development, original IP initiatives and global partnerships as opportunities present themselves.’’

And at the board level, ­despite the recent departure of London-based Melanie Fletcher, you still have Ms Guthrie, as well as former MGM and Fremantle Media executive Ian Hogg and Win Corp and Star TV alumnus David ­Butorac.

Mighty Kingdom’s team might be a natural bolt-on for the listed Playside, which had a hit revitalising Dumb Ways To Die for TikTok and mobile gaming, and delivered an underlying EBITDA loss of $1.7m on revenue of $38.4m last financial year. iCandy Interactive could also be another listed contender, while there are several private entities that could be in the mix.

Meanwhile, the industry is poised to gather for the Games Connect Asia Pacific Conference, which is being held as part of Melbourne International Games Week next week.

Mighty Kingdom will no doubt be the talk of the town. Its shares closed at 1.1c on Monday.