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Just Google:- Games Workshop resisting rising costs
Not sure about this "level of return" argument. Company earns outrageous ROCE and is getting turbo-charged by 100% profit margin royalty income. In what sense is "level of return" inadequate given extremely high ROCE, ROE, ROA etc., strong cash generation and dividends?
An article for today:
https://monopolyinvestor.substack.com/p/games-workshop-a-modern-day-tom-sawyer
I think there's very little existential risk to the company - debt free, own their own manufacturing and distribution chain, own their own IP, very loyal customer base. There are certainly execution risks, but I'd argue that someone like Apple/ Microsoft have probably higher risks to their performance. But then that's the fun of this game, we can both have different views and evidence for them - Mr Market and Mr Bank Account will determine who is right (and the answer may be both if looking for differing outcomes). Right now I am not putting any more in here (way overweight in my portfolio already), but if it gets down to the £60 mark again I might have some more.
IMV - you either putting below benchmark/practically non-existent risk premium or not accounting for prevailing (and growing) market interest rate (e.g. risk-free) into your valuation, it's not Microsoft or Apple (or any other top100 bluechip company) after all.
"sp is way to high to justify investment.
They would need do increase profits at least 4x or 3x to get it into investable category on "level of return" basis."
EPS = £3.91, for the sake of easy maths I'm saying that's £4.00 and at a multiple of 20 that would be an SP of £80 - at the higher end, but a still growing company. At 15 (more of a steady state), that would be £60.
For your 3 - 4 * profits, you would be looking at about £12.00/ share EPS which at a current price of £75 ish would be a multiple of 6 - 7. Good luck finding a company this good on a 6-7 multiple. That would imply you'd only think this was a worthwhile investment currently at £25-30. Again, Good Luck.
Probably only ok if anyone wants some cash flowing back, but sp is way to high to justify investment.
They would need do increase profits at least 4x or 3x to get it into investable category on "level of return" basis.
IMO - market capacity is very unlikely to allow them growing this big, competition is too high there and there are limitations on other markets they're trying to expand to (I see material retail sector growth and some minor online segment reduction).
It's an excellent set of results, yet again. Superb board and management, not to mention products.
GAW got sold off in Covid, people said it wouldn't do well in lockdown. GAW got sold off after lockdown, people said it was a lockdown stock. GAW got sold off in the current inflation/recession fears, saying people will have no discretionary income to spend on its products.
But the results speak for themselves. Consistent growth, despite every financial headwind thrown its way. Increased manufacturing in the USA, new 30k Heresy refreshed setting, new WarCry edition on the way, rumours of 40k 10th edition next summer... Darktide video game on its way... the future has never looked brighter.
I've been in since 2016 and it's a solid long-term hold for me.
Delighted to be invested, few months only, very healthy dividend a great bonus.
21-Jul-22 16:35:20 7,580.00 35,126 Buy* 7,565.00 7,580.00 3m
Say's it all.
Share price is up 4-5% since your post less than 24 hours ago saying that the share price has peaked.
I'll stick to my own plan, thanks :)
Games Workshop Group PLC Full Year Results
Could be worth a read of my previous post.
Won't be long until the next dividend is announced, so probably not topped out just yet.
Withdrawn!
Now by the looks of it!
Re the previous post from Richred_uk I have selected a sentence that has indeed applied to me. 'The drop in prices means the shares have also caught the attention of investors who had previously avoided the shares.' Now although I saw Games Workshop tipped in CITY.AM, I also liked the fallback of the share that had been affected by market conditions, but I also agree that GAW is very unlikely to be affected badly in any recession. With the results out 26th July & the company expects £150m profit after tax, this is also a growing company that might also have a share split the next time they are £100 + , & with their expansion in The United States plus intending to open their business up to Asia in a big way, this share would most likely then have still only 64m shares in issue with a share price of £50 to grow upwards again. So any price below £70 is a gift as they also pay 5 - 6 dividends a year currently equating to £2 - 40 approx.
And who knows ? The government change in P M may turn the markets to recovery mode.
Games Workshop Group should also deliver a good return over the next 1 - 2 years as they intend to expand in the States & also introduce themselves to Asia, China being the bread winner here.
They post results on 26th July & expect £155m profit at least. They also pay about 5 to 6 dividends a year = £2 -40 approx.
No doubt their ex div announced will be 40p approx with an ex dividend date of 3rd or 4th August. Their graph is also worth viewing as it peaked around £120. This is a company that most likely will survive any downturn in the markets or even recession. Their War Hammer is very popular.
Management are laser-focused on protecting their IP (intellectual property) on the one hand and improving returns on capital for shareholders on the other.
When the company makes an investment, be it in tooling to make better models, new IT systems or new warehouses to better support its stores and stockists, it is always done with the aim of driving more volumes and improving gross margins.
The firm has no debt and doesn’t make acquisitions, so it has no goodwill on the balance sheet, just cash which it distributes to its employees as bonuses and to shareholders as and when it builds up a sizeable surplus.
EXPERT VIEWS
David Beggs, analyst at Sandford Deland – which manages the CFP SDL UK Buffettology Fund (BF0LDZ3), a big backer of Games Workshop – flagged the fact core sales in both the first and second halves of the year to May were above those during ‘peak’ lockdown.
Meanwhile, royalties are making a bigger contribution. ‘This is pure profit, with no cost of sales attached,’ notes Beggs.
The drop in prices means the shares have also caught the attention of investors who had previously avoided the shares.
For Mark Wright, co-manager of the VT Momentum Diversified Income Fund (B7JTF56), at today’s price the stock ticks all the boxes in terms of valuation, growth and a solid balance sheet.
‘Having had a very good pandemic, Games Workshop was previously too expensive but the shares have de-rated along with many other growth stocks.
‘It’s a fantastic business with high gross margins, largely due to the fact that its customers consider it a hobby to assemble and paint the miniatures it manufactures’ says Wright.
‘There is unlimited scope for product innovation by virtue of the fact that Games Workshop’s miniatures and universes are fanciful and it’s all original IP.
Wright is ‘excited about what the future could bring… a TV series, film or even a theme park.
‘There are so many different growth avenues for the company.’
www.youinvest.co.uk/sharesmagazine/2022-06-23/games-workshop-shares-have-rarely-looked-as-cheap-as-they-do-today
"Fantasy games and miniatures maker Games Workshop (GAW) is the definition of a business which has chunky gross margins with high and sustainable returns on capital, allowing it to re-invest its cash flow to grow in size or hand back the surplus to shareholders.
Its strategy is simple: ‘To make the best fantasy miniatures in the world, to engage and inspire our customers, and to sell our products globally at a profit. We intend to do this forever.’
Having virtually halved in the last nine months, we believe the company’s shares have rarely looked such good value.
VALUATION MATTERS
Games Workshop shares have been drifting steadily since September 2021, after investors began rotating out of highly-rated growth companies into lowly-rated financial and commodity stocks as expectations of interest rate rises grew.
Cheap, economically-sensitive sectors such as banks and oils typically do well in stock market terms when central banks start ratcheting up rates while more expensive stocks, including those with superior long-term cash-flows, tend to do less well.
At a price of £120 nine months ago, shares in Games Workshop were trading on a multiple of more than 32 times earnings for the year to May 2021.
At today’s price they are trading on just over 15 times this year’s earnings, which makes them an outstanding bargain in our view.
LIFE AFTER LOCKDOWN
There is no doubt the company was a big winner from the restrictions imposed during the pandemic.
A generation of hobbyists with time on their hands and furlough cheques in their pockets practically competed with each other to drive up sales of Warhammer miniatures and subscriptions as they sought to entertain themselves during their confinement.
While sales of many discretionary items have since slumped as the economy has reopened, in its recent trading update for the year ended in May – which was customarily short and sweet – the firm revealed core sales would be at least 9% above last year’s record level of £353 million.
In addition, royalty revenues – which it receives from PC and console games based on its Warhammer miniatures – jumped 72% from £16 million to £28 million, and there are several more video games due to be launched this year which will generate future royalties.
SIMPLE MODEL
The firm’s business model is beautifully simple: it continually invests in making the best products on the market and making its games fun and enjoyable.
‘Our customers are global. People with our particular hobby gene, that is collecting, painting and playing with fantasy soldiers, exist all over the world. Our job is to find them.’
The more customers it can attract and retain, the more miniatures it can make and sell, and by sticking to fantasy it has unlimited scope for product innovation.
116k shares in one trade today?
I say a weak buy in present market conditions, so maybe wait until later next week perhaps. However Games Workshop's generous 6 dividends a year is a reason to be cheerful with this stock. Quote 'Ian Dury.'
Very happy to invest for a £16-50 a share return by or pre May 2027.
https://walletinvestor.com/lse-stock-forecast/gaw-stock-prediction
In CITYA.M. ' The wargaming specialist should ride the pandemic wave and remain resilient to easing restrictions. Also expected to be resistant to any future recession this year. Also being in a ''strong position'' so has considerable opportunity to grow in North America & largely untapped potential in Asia, and so has kept it's buy stance. Peel Hunt also expects full year profits before tax to reach at least £155m.'
So I say roll on those results near middle July.
Everyone looking for negatives in every press release, it's not specific to GW, so the share price gets hammered.
What you can't see is the recent expansion of US stocking and the massive Horus Heresy release, which will be shown off in H1 2023, then 40k 10th edition in summer 2023.
I'm happy to sit and collect divis and ride this all out.
If I put my pessimist's hat on, top line growth rate has slowed (although still positive). Dividends didn't grow Y-o-Y. Although profits grew, it was only by £4M when royalties (100% profit) increased by £12M, so we made £8M less profit from core operations (making and selling stuff) on £32M extra sales i.e. our margin has been squeezed, so future growth may be less profitable as opposed to the massive margin increases we have had on extra turnover in the last few years.
That's not entirely my personal opinion, but it's not unreasonable to read it with a negative slant.
thought as much =. )
Necrons mate. Engineered a market crash...