Small Cap Value Report (8 Jun 2015) - GAW, IDOX

8th Jun '15 by Paul Scott

9 comments 14538 reads

Good morning!

(Apologies, but today's article corrupted, so I've had to remove all the graphics to get the text back)

Games Workshop (LON:GAW)

Share price: 504p
No. shares: 32.1m
Market Cap: £161.8m

Trading update - for the year to 31 May 2015. The key sentence says;

"We expect... profit... to be broadly in line with market expectations"

So a bit below then. There seems to be only one broker forecasting for this company, a retailer of bizarre fantasy gaming products, an example of which is below (from their website).

(had to remove picture as it was corrupting the article)

So if you always wondered where the Horned Rat procured its servants, now you know!

The additional commentary today sounds a little negative - mentioning "continued difficult trading" in Continental Europe, and a negative impact from exchange rates.

Valuation - the broker expects EPS of 39.1p for y/e 31 May 2015. The last time I looked at this share was on 8 Dec 2014, where I reckoned it was probably heading for 30-35p EPS. Today's broadly in line statement probably means they're within 10% of broker forecast, so probably 36-38p at a guesstimate.

The shares are currently at 504p, so that's a PER of between 13.3 and 14.0, which looks about right to me, given that the company has a strong, debt-free Balance Sheet.

Dividends - of particular note are the generous divis, although they are only just covered by earnings. The forecast yield for the year recently ended is almost 7%, clearly a very appealing number. Although when a divi yield is stretched on the upside, there is always the risk that it could be cut, and knock the share price down in the process.

My opinion - as you can see from the Stockopedia graphs below, turnover and profits go up and down, but the trend is essentially sideways. So this seems to be a mature business which is holding its own (for now). That's probably not going to attract a premium rating for the shares, so it looks priced about right to me, around the 500p level.

I can see the appeal for income seekers though, from that 7% divi, providing it is maintained.

Idox (LON:IDOX)

Share price: 37.6p
No. shares: 355.7m
Market Cap: £133.7m

(at the time of writing I hold a long position in this share)

Interim results to 30…

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kenobi

8th Jun '15

Games Workshops business has for the last, well 10 years or so been boosted by the lord of the rings films, and then later by the hobbit films, all promoting the stuff they sell, doubtless there will be products specifically for them. Having run out of Tolkien specific material for the forseeable future, perhaps expecting them to out perform historic figures is a bit optimistic ?

Not sure what is on the horizon with fantasy films in the future, but there's so much else for kids to play with these days, that they might struggle a bit ? These things come in and out of fashion a bit as well. I would be concerned that there's a few tough years ahead and that there might be a better entry point in the next few years. Not sure what their profile is these days do they still have a significant amount of shops ?, are they owned or franchised ?

K

TheWatchmaker

I think that your assumption that these things are for 'kids to play with' may be a bit restrictive. I believe that there is a significant proportion of their users who you would not classify physically as kids (although mentally is a matter of opinion) - these items tend to get rather a cult following, often for life.
Having personally given up this kind of thing at the age of 15, on discovering music, girls and beer, I can state that my older brother (50+) is still enchanted by this kind of item and most probably has at least 1 Verminlord in his collection.

drvodkaquickstep

Paul - be interesting to get your commentary on Red24 (REDT) FY results from today.

Cheers

paperking

My 14 yo grandson visits us when he can at weekends as we take him to Warhammer (re branded from GW) in the High Street Edinburgh where he spends hours either learning modelling or playing their weird and wonderful army games. There is a wide range of age groups visiting, playing and buying from the shop so I agree I'e spoken to many adults of different ages about their liking/addiction for this game. My grandson and a couple of friendsalso talked his school into starting and running a Warhammer club. Not a shareholder though.

Paul Scott

Sorry, today's report has corrupted, grrrrrrr.
I'm on the case, fixing it now.

P.

AnonymousUser37567

55759daae3d3c99810101067_LegionoftheDamn

Paul, the IMF and EU off to Greece for a jolly?

http://www.games-workshop.com/en-GB/Space-Marine-L...

FREng

Paul

you have discussed Red24 (LON:REDT) in the past. What do you think of today's results?

FREng

Beginner

9th Jun '15

Have a look at Paul's Twitter/YouTube account.

Thanks - I forgot to check YouTube. A positive report but Paul says that £10m market cap is too small to spend much time on. I'm impressed (as Paul says he is too) with the way Red24 (LON:REDT) recovered from losing a major client.

The world isn't about to become a safer place, in my opinion, so their market won't disappear. I think they may become big enough for Paul to spend more time on in the future!

I have held the shares for a few years.

Small Cap Value Report (8 Jun 2015) - GAW, IDOX

Games Workshop (LON:GAW)

Idox (LON:IDOX)

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Paul Scott

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