Paul Scott comments - Small Cap Value Report -12 Jun 2020 15:35
Games Workshop
Share price: 7845p (+10%)
No. of shares: 32.7 million
Market cap: £2.6 billion
Trading Statement
Please note that I have a long position in GAW.
This games manufacturer (and brand owner, retailer, etc.) is clearly far too big for this report.
But seeing as I own shares in it, and I think several of you do, too, let's check out the update.
The main points are that the factory is working "in a limited capacity", the warehouses are operational, over three hundred stores are open, and trade/online sales orders are being processed.
There are still over 200 stores which need to re-open, as local restrictions are lifted.
Financial impact of lockdown was huge in the company's Q4 (March to May). At one point, it had almost completely ceased trading.
The good news is that "our recovery since re-opening has been better than expected".
GAW is famous for under-promising and over-delivering. So let's not read too much into this snippet, shall we?
On April 28th, GAW said the PBT result for the year would be "no less than £70 million".
It today says the result will be "no less than £85 million" on sales of £270 million.
For context, sales last year were £257 million, and PBT was £81 million.
To get increased sales and profits in FY May 2020, despite shutting down almost completely at one point, is a remarkable result, in my view.
The result has been helped by the pure profit of royalties, which increased from £11.4 million to £16 million.
There is no guidance:
In relation to the future performance of the Group, the board feels that it is too early to know what the continuing impact of COVID-19 is likely to be.
My view
I bought a few of these last year, thinking that they were probably overpriced, but worried that I'd miss my chance if the company continued to perform outrageously well.
They have now become possibly even more overpriced. So I guess I was right?
It's a fantastic company - an IP owner, with a unique franchise, and has generated amazing profit growth from incremental sales and royalty income. Quality metrics are outstanding.
I can't defend the valuation, so I'm not going to try. But I am happier owning a few shares in it, rather than not being involved at all. If it ever becomes "cheap" some day, I hope that I'll have the conviction to back up the truck!
https://app.stockopedia.com/content/small-cap-value-report-12-june-2020-placeholder-620603?order=createdAt&sort=desc&mode=threaded
SUBSCRIPTION ONLY - HENCE MY COMPLETE REPRINT ABOVE
This TITAN company is unstoppable imo
GLA
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