Starbreeze: A strategic partnership that adds to the potential

Starbreeze announced yesterday a work-for-hire agreement with KRAFTON Inc, the South Korean gaming giant behind the global hit PUBG: Battlegrounds. We view this agreement as a good strategic fit as Starbreeze takes no financial risks, retains full ownership of the PAYDAY IP, and gains increased visibility and reach by introducing the PAYDAY gameplay experience to one of the world’s most popular games. In addition, Starbreeze secures additional cash flows during a transitional 2025. While we continue to assess the investment risk to be elevated, the continued decline in the share price following the Q3 report suggests that much of the downside is already reflected in the valuation. For risk-tolerant investors, we believe this presents an opportunity to take a contrarian stance. Hence, we are raising our recommendation to Accumulate (was Reduce), while keeping our target price unchanged at SEK 0.22.

Starbreeze partner up with KRAFTON to bring the PAYDAY experience to PUBG

Under this agreement, 25% of Starbreeze’s development team (some 35 FTE) will work on integrating PAYDAY’s heisting gameplay into PUBG over a 12-month period. This collaboration offers mutual benefits, with Starbreeze gaining exposure to PUBG’s vast global player base, while KRAFTON enhances PUBG with fresh and immersive content. Additionally, the agreement generates new revenue streams for Starbreeze and ensures effective utilization of its workforce, particularly as capacity has been freed up following the conclusion of initiatives like Operation Medic Bag for PAYDAY 3 (“PD3”). Furthermore, this arrangement provides Starbreeze with the flexibility to allocate resources toward new projects or respond to a potential PD3 turnaround once the partnership concludes.

Adding the partnership value into our 2025 estimates but keep the longer term estimates unchanged

This partnership aligns with Starbreeze’s broader strategy to generate additional value from its PAYDAY franchise. Securing a deal with a reputable player like KRAFTON, despite the current challenges facing PAYDAY, show signs of the strength and ongoing relevance of the IP. Based on the scale of the partnership and the typical structure of a work-for-hire agreement, we estimate that Starbreeze could generate 60–70 MSEK in additional revenue for 2025. Since the company’s cost structure remains unchanged, this added revenue would reduce cash burn during what we anticipate to be a transitional year ahead of the next game release in 2026. At this stage, we are not revising our revenue estimates for the PAYDAY franchise beyond 2026, as we await further details and measurable outcomes from this partnership before incorporating any long-term benefits. Nevertheless, the extended reach provided through this partnership could attract new players to the PAYDAY franchise while Starbreeze retains more of its cash, which creates future upside potential. However, we maintain our assumption that Starbreeze will onboard a co-financier or partner for the launch of Project Baxter and the planned 2028 game.

Now could be a good time to take a contrarian stance given the current depressed levels

In our latest update, we highlighted the lack of short-term catalysts, with a PD3 turnaround unlikely in the near term. While this assessment largely holds, the work-for-hire agreement with KRAFTON provides Starbreeze with a low-risk access to PUBG’s massive audience and showcase PAYDAY’s heisting gameplay, which adds to the future potential. Our DCF model, reflecting a moderately optimistic scenario, values the share at SEK 0.39 after including the partnership. However, we still believe the DCF provides limited near-term support, as the share price remains closely tied to PD3’s performance. That said, we believe much of the downside is already priced into the current valuation, which should limit further downside risk, presenting a good opportunity for a more optimistic outlook on the share.