Game Digital

LN: GMD

£45.7m market cap

26.3p last close

Game Digital is the leading multichannel specialist retailer of video games in the UK and Spain, with 274 stores in the UK, 265 stores in Spain and over 30% market share.

Investment summary

Despite UK retail headwinds, GMD delivered a solid H119 performance. GTV reduced by 1.4% while like-for-like GTV and the gross margin remained broadly flat. This, combined with further material operating cost savings, drove EBITDA growth of 21.7% to £25.8m. We reduce FY19e and FY20e EBITDA by c 8%, primarily reflecting current market headwinds and the slower near-term roll-out of BELONG. Compared with our expectation for 20 new arenas in FY19, only two were opened in H1. The market values GMD’s shares at less than net cash of 54p per share, while we value them at 69p.

Y/E Jul
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (fd) (p)
P/E (x)
P/CF (x)
2017A 782.9 8.0 (4.3) (3.7) N/A 1.0
2018A 782.3 10.1 (3.5) (3.7) N/A 15.0
2019E 767.4 11.1 (2.9) (3.2) N/A 5.1
2020E 791.1 15.3 (1.4) (2.4) N/A 5.7
Last updated on 17/04/2019
Industry outlook

The UK and Spanish console markets (hardware, software, accessories and console digital) are worth c US$2.2bn and US$1.2bn, respectively. The traditional cycle that has peaked every six years since 2000 seems to be moving to shorter intervals. This could signal structural changes analogous to the mobile and PC markets. In addition, the global esports market, currently US$1.1bn, is forecast to grow to US$1.8bn by 2022.

Last updated on 17/04/2019
Sector
Consumer
Share price graph
Balance sheet
Forecast net cash (£m) 62.8
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual 1.0 (3.8) (17.0)
Relative* (2.8) (11.8) (17.2)
52-week high/low 39.5p/21.9p
*% relative to local index
Key management
John E. Jackson Chairman
Martyn Gibbs CEO

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