Sound Energy #SOU provides an update on a potential farm-in and operational progress in Morocco Watch Now
Decent update ysday, but muted reaction, do we have any watchers or takers here at current price? I see Paul Scott covered it although didn’t see the write up as not a premium member, usually a good sign if he likes it, from a balance sheet perspective
Take Games Workshop Group (LSE: GAW) as an example. The business – which produces and sells miniature war games for fantasy lovers – was one of the stars of the second quarter. Its share price rocketed 85% over the period despite its high P/E ratio. These more recent gains leave it trading on a high forward earnings multiple of around 45 times. Still, I’d happily buy it for my own ISA as it has all the tools to help you get rich and retire early.
Economic downturns can devastate profits for many retailers. But it’s not a problem that Games Workshop is likely to suffer from following the coronavirus crisis. Sellers of essential goods like supermarkets are widely considered ‘recession proof’ but they are not alone. Niche products retailers like this FTSE 250 share can also thrive in good times and bad.
Games Workshop’s trading update of mid June underlined this point perfectly. It said that its sales performance since re-opening its stores following the Covid-19 breakout “has been better than expected” and raises hopes that trading will remain robust despite the upcoming global downturn.
Games Workshop has a number of strings to its bow. It has a so-called ‘economic moat’ against its competitors insomuch that its fantasy products have been the gold standard for decades and subsequently command a very loyal following. The business is bringing its products to a steadily-growing worldwide audience and now sells into around 70 countries. And it is taking steps like launching a Warhammer online store in China to ride the e-commerce boom, too. If you’re looking for hot growth shares to help you get rich and retire early you need to give Games Workshop serious attention
I bought a lot of Codemasters (CDM). At the recent online seminars we kept comparing
this to T17 and Frontier Dev, and this kept coming up as the cheapest.
So I have bought quite a few as they are very liquid and easy to buy and sell a lot.
It's releasing a new Fast and Furious game in August and it has just announced a likely
lucrative deal to produce FIA world rally championship games.
And today it has announced Cars 3 will be available from August. I'd be
targetting up to a fiver in time on these shares.
Analysts at Berenberg raised their target price on video games developer Codemasters from 340.0p to 400.0p on Wednesday, stating the group had added "an extra gear" as a result of a new multi-year licence deal.
Berenberg highlighted Codemasters newly signed multi-year licence deal with the FIA World Rally Championship as why it views it as a "solid, but underappreciated" video games company.
The German bank stated the agreement added a further licensed franchise to Codemasters' "rapidly expanding" content pool, supported its medium-term earnings growth and poised the company for a valuation rerating.
"In our view, Codemasters' increasing revenue diversification, potential to benefit from the shifts towards digital sales and continuing high levels of execution are undeserving of its 20% discount to peers," said the analysts.
In addition to upping its target price on Codemasters, Berenberg also reiterated its 'buy' rating on the firm's stock.
Can anybody access full article?
Continued from below...... On one measure margins are 33pc and, as we point out ad nauseam, high margins tend to mean high returns on capital and good cash generation, two key advantages that enable a company to grow without the need to borrow and compound returns over the long term. But in Games Workshop’s case the returns are truly extraordinary: the return on invested capital last year was 100pc, the highest figure that to Questor’s knowledge any of its stocks has achieved. Cash conversion was 88pc last year.
The company also has net cash of £29.2m on its balance sheet. “When you make such high returns there’s no need to try to amplify them by using borrowed money,” Mr Dawes said. He also likes companies in which managers have significant stakes and Tom Kirby, the former chairman who was instrumental in the firm’s growth, has 4.8pc of the shares. We might expect Games Workshop’s huge returns to attract a stratospheric valuation but the multiple of 30 times this year’s expected earnings is attractive for a fast-growing company.Games Workshop is one to buy and hold for the long term – certainly for long enough to see the fruits of the collaboration with Frontier, which is expected to release its Warhammer Age of Sigmar game in late 2022 or shortly afterwards.
Games Workshop makes a return on capital of 100pc a year, the highest figure that this column has come across. “Good things tend to happen to good companies. Bad things tend to happen to bad companies.”
This is how one fund manager explained his preference for “quality” stocks as opposed to the cheap ones that appeal to “value” investors.
One company to which good things seem to be happening is Games Workshop, which sells figurines based on characters from fantasy stories such as Lord of the Rings.
Earlier this month investors heard details of a new partnership with Frontier Developments, another “quality” company, whose shares have gained 47pc since we tipped them in March. Frontier will develop a video game based on Games Workshop’s Warhammer Age of Sigmar franchise.
Benji Dawes, whose Premier UK Growth fund owns a stake in Games Workshop, said the agreement with Frontier could give a “very material” boost to the former’s profits.
“While Games Workshop is known as a retailer, it has a lot of intellectual property that it could make more of. This deal is a step in the right direction,” he said. “Recent video games from the Warhammer series have sold up to six million units so there is reason to think the Frontier game could achieve at least three million. "They may sell for around £40 each and if Games Workshop’s royalty rate is in double figures you are talking about its share being at least £12m and potentially much more. That money is effectively pure profit. In the context of current earnings of £87m before interest and tax, that is a lot.” Many other opportunities exist to turn the firm’s intellectual property into an income stream, although Mr Dawes said it was keen not to alienate its fan base by striking the wrong deals and tended to move slowly. However, since it increased its dialogue with customers over social media a couple of years ago, the fund manager said it had a much better idea of what they wanted from future projects.
One promising possibility is the firm’s agreement with Marvel, which could result in a comic book series based on the Warhammer franchise. Details could come later this year, Mr Dawes said.
He added: “Lots of media companies want to form partnerships with Games Workshop and we think it has reached an inflection point as far as the exploitation of its intellectual property is concerned.” However, sales of physical products such as figurines and board games still account for 90pc of sales, although here too there are opportunities for growth.
About half of this business is already carried out online or via third parties and these relatively low-risk approaches can be used to sell more in markets such as China and Korea, where games are popular but penetration is low. The firm already has a significant presence in America and is growing in Germany. Overall, sales grew by 44pc, 40pc and 16pc in 2017, 2018 and last year respectively. Profit growth was even stronger.
Frontier Developments plc (AIM: FDEV, "Frontier", the "Company") , a leading developer and publisher of videogames based in Cambridge, announces an exclusive IP licence (the "Licence") with Games Workshop to develop and publish a real-time strategy game within the rich and extensive world of Warhammer Age of Sigmar. Warhammer Age of Sigmar is Games Workshop's most recent iteration of the globally renowned fantasy setting in which the four Grand Alliances of Order, Chaos, Death and Destruction vie for control of the Mortal Realms. Unique and distinct in style, and endless in scope, this ever growing universe sits alongside the far future dystopia of Warhammer 40,000 as the most successful tabletop miniatures games in the world. Under the terms of the Licence, Frontier has the exclusive rights to develop and publish a real-time strategy game worldwide on PC and console platforms, together with the rights for streaming services. The game is planned for release in Frontier's financial year ending 31 May 2023 ("FY23").