Small Cap Value Report (Fri 14 Dec 2018) - GMD, FLK, MANO, CCS
Good morning!
Today we are covering:
- GAME Digital (LON:GMD)
- Fletcher King (LON:FLK)
- Manolete Partners (MANO)
- Crossword Cybersecurity (CCS)
GAME Digital (LON:GMD)
- Share price: 23.8p (-5%)
- No. of shares: 173 million
- Market cap: £41 million
Proposed admission to trading on AIM
A couple of readers have asked me about GAME Digital (LON:GMD) 's proposed move to AIM from the Main Market. This was announced yesterday, prompting a 5% fall in the share price.
The shares are down by another 5% today, hinting at a delayed reaction to the news from some shareholders.
Let's consider the pros and cons.
Pros
- Saving costs. Comments by BDO in 2015 (PDF) suggested that an AIM listing was £150k/year cheaper than the main market. For a company with a market cap of £40 million, it is sensible to make that kind of saving. In general, companies of that size will find that AIM is more appropriate for them.
- Saving time. On top of the external costs, there are also internal costs to satisfy the more complex corporate governance requirements of a main-market listing. Life will be simpler and easier for Game on AIM.
Cons
- Weaker governance. Some current or prospective shareholders might be unable or unwilling to hold a company listed on AIM, due to the weaker corporate governance requirements. This is hardly going to apply to Mike Ashley (£SPD) or Miton (LON:MGR), though, who are the top two shareholders.
- Signals a lack of ambition? I'm not sure if this is fair criticism, but perhaps the proposed move can be interpreted as a sign that management do not think that their shares are materially undervalued. That they have no ambition to appeal to mainstream and larger investors in the future. That they are content to save a little bit of money in the short-term, and don't expect to return the company to anything like its previous valuation.
My view
Personally, I would view it as a positive that Game is moving to the junior market, from a cost saving point of view.
The negatives wouldn't bother me, as I think that the corporate governance requirements on AIM are adequate for a company of Game's size.
So rather than viewing this news as being symptomatic of a management team that lacks the ambition to justify a main-market listing, I would view it as a realistic acceptance that AIM is a more appropriate venue for the company.
75% of votes will need to be cast in favour of the move, so ultimately it will be for shareholders to decide, and it will happen only if those in opposition represent a small minority.
It's true that changes like this can cause a drag on a share price, as those dissidents who are unhappy with the move can generate a lot of selling pressure in the short-term. But my own view is that the underlying value of the shares has probably increased! So I would view it as a buying opportunity, if Game Digital was on my watchlist.
Would I buy the shares, given the discount to net cash and the average lease length of 0.9 years for its UK business? It's a tempting trade. Indeed, it's one that I've previously made some money from.
The problem is that the company's overall outlook remains highly uncertain, in the face of increasing digital downloads and stiff competition. If I held these shares, I would again be looking for a quick bounce and a profitable exit. In other words, it's definitely not something I'd want to hold for the long-term!
Fletcher King (LON:FLK)
- Share price: 45.5p (-4%)
- No. of shares: 9 million
- Market cap: £4 million
We might reasonably ask why this company is listed, given its very small size.
It provides a range of property services and property fund management activities. Revenues (in £ millions) have never made it to double figures.
It has been possible to buy it as a "deep value" investment from time to time - see the work of Glen Arnold.
Some comments on the property market are worth noting:
- no end in sight for the decline of retail property
- online sales fueling demand for industrial space
- large offices in cities (incl. London) still in high demand
- on the other hand, the market for smaller offices is being severely disrupted by serviced office providers such as WeWorks.
This final point makes a lot of sense to me. I rent an office from such a provider and I love it! It's so convenient and it gives you nearly all the benefits of a large office from day one.
For small businesses and start-ups, the smart thing to do is use a serviced office provider, until you are so big that you need a traditional let.
Outlook
FLK is bearish on Brexit and its effect on the property market, saying that it will impact the company's ability to maintain turnover and profits.
My view
Market cap approximately matches up with FLK's book value, and this seems fair to me.
Manolete Partners (MANO)
- Share price: 211p (+20% vs. 175p placing price)
- No. of shares: 43.6 million
- Market cap: £92 million
This is "a leading UK insolvency litigation financing company", so perhaps we can consider it to be a cross between Burford Capital (LON:BUR) and Begbies Traynor (LON:BEG).
Shares have popped up on its first day of trading - a nice bonus for placing participants.
Valuation
According to Jeremy Grime's note this morning, the company's NAV following the placing is £24 million, and it has an HSBC facility to help fund its activities.
As such, today's share price is approximately 3.8x Manolete's book value. For comparison, Burford is trading at 4.1x book value (my own calculations).
Checking last year's annual report, Manolete generated operating profit of £4.1 million, earning a massive return on equity. If it remains highly profitable now that it has a much larger asset base, then I would expect it to trade at a Burford-like multiple of book value. But Burford, as the vastly larger entity, with many years under its belt as a public company, should probably command a premium.
My view
It seems magical to me that litigation financing can generate such high returns.
For example, according to Manolete, it has "achieved IRRs of over 200% on completed cases, on a consistent annual basis, over each of the last seven years".
Perhaps I should suspend my disbelief that such returns are sustainable, and get on board with one of these companies?
Crossword Cybersecurity (CCS)
- Share price: 270p (-15%)
- No. of shares: 4.7 million
- Market cap: £13 million
A new entrant to AIM, although it has been promoted from NEX rather than demoted from the Main Market.
It aims to commercialise academic research into new cybersecurity products, and also provides a range of consulting services.
So far, it is still very small and unprofitable: revenues of £540k in H1 of this year, and a pre-tax loss of £820k.
It's too early-stage for me. Perhaps someone else will find it to be of interest.
There's nothing else in the RNS that's worth writing about, so I'll leave it there.
Since this SCVR is shorter than usual, let me tell you a story.
On Sunday morning, my dog Frank was suffering. He was flinching in pain, he was walking funny, and he didn't want to eat. One of his eyes was bloodshot. He was trembling. In a word, he was miserable. He had been fine the day before.
(Similar to my dog.)
The vet initially thought it sounded like he was having a vestibular episode. He immediately received a heavy dose of morphine, to ease the pain.
The next day, he received a general anaesthetic so that his mouth could be inspected properly and he could be operated upon, if necessary (he doesn't let anyone inspect his mouth while he's awake!)
Well, it turns out that the answer was very simple. If you're squeamish, you should probably stop reading now.
Poor Frank had tried to eat a sharp sewing needle.
Thankfully, he hadn't swallowed it. Almost as bad as swallowing it, however, was that he had chewed it, and it had become lodged in his head. It had gone vertically upwards, through his mouth behind his back teeth, nearly reaching the top of his skull. It had pierced the fatty tissue behind his eyeball, causing the bloodshot appearance.
No wonder he was unhappy!
While he was unconscious, the vet removed the needle and also performed an operation on his mouth. It took a day or so for the drugs to wear off but I'm pleased to report that he is already back to his usual self.
There's no SCVR-related point to this story, except that you can imagine it caused me quite a lot of worry over the past few days. He has been a good friend of mine for the past 13 years and I'm glad we'll have another Christmas together. It could have been so much worse.
Ok, that's it for now. Have a good weekend, everyone!
Graham
Disclaimer
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38 comments
Evening SCVR readers,
Three (sorry, now five) points that I have come to note recently (in order of importance !):
1) Frank (the owner of Graham) - Sorry to hear of your ailment, but elated to hear of the outcome :o) - When you're fully recovered, perhaps you can get your worker (Graham) to take a picture of you in all your glory :o) ... btw, I have just bought a friend's dog his Xmas pressie - A bottle of beer ! (Paul's ears may prick up now ! lol) ... Beer specifically for dogs though, so non-alcoholic - Bottom Sniffer from B&M at £3 for 2 I think ! ...If there's any left, then it may be getting a 'human' taste-test on New Year's Eve - The beer that is, not the bottom sniffing ! lol
2) Re GAME Digital (LON:GMD) - will the move from the main market to AIM not mean that certain fund(s) will HAVE to sell ? Does anyone know who, if any of the Insti's may/would need to sell?
I've bought and sold GMD in the past (luckily at a profit), and have a <25p (hit this week) and <20p target on my watchlist. It's getting close(r) now, but I'm near fully committed on other limit-buys at present.
3) In light of 2) above, a number of shares are dropping into my target-zone - in no particular order - I have just noted that there are more shares in my watchlist than in my actual folio ! - Lack of funds ? Anticipation of further drops ? Lack of conviction ? I have no idea, but more than pleased to end this year building larger positions in fewer shares, as opposed to numerous (too many) 'just-in-case' punts !
French Connection (LON:FCCN) - despite not wanting to get into high street retailers - possible sale aspect tempting
Sosandar (LON:SOS) - for the opposite of French Connection (LON:FCCN) and as a possible mini Boohoo (LON:BOO) Mk2 for the increasing online awareness of the silver-surfers :o)
Revolution Bars (LON:RBG) - previously held and sold, but has it dropped too far now, and therefore ripe for a turnaround or takeover
accesso Technology (LON:ACSO) - A 'wished I had bought' share, but at the now bombed-out price, could this be my chance?
Also considering pure punts on:
Immotion (LON:IMMO) - the VR aspect fascinates me - VR Education Holdings (LON:VRE) is also a contender. Very interested in EVR Holdings (LON:EVRH) not from an investment view (been there, multi-bagged) but purely from the ADVFN banter ! lol
Toople (LON:TOOP) - Even after the 'warning' signs mentioned in the SCRV - this would be purely a day/week play and then forget
4) It appears Paul and Graham are getting busier, so it's it about time they posted a 'B-word excuse', and explained that due to the Europeans (I mean Brexit ! ), the SCVR will now be concentrating on shares with a market cap between £250 and £250m - At the moment, more companies are dropping down into the SCVR realm - Superdry (LON:SDRY) being one Paul recently commented "Good grief, I didn't expect this fashion brand to come back within my small cap remit again - its market cap was over £1.6bn at the start of this year, and is now just over £300m."
5) As an exercise, I wonder if anyone would provide thoughts to this - a 6 share portfolio, mainly looking for income (divi's to re-invest), spread of sectors, non-punts, so basically a secure-ish income growth, but much less shares than a fund.
My (today only) thoughts are (thanks in advance to any replies):
Duke Royalty (LON:DUKE) (financial?) - I hold already, so a bit biased ! lol
O&G (BP or Shell?) - No knowledge of sector, but think should be included !
Next (LON:NXT) (Retail) - A divi-paying retailer maybe hard to find in a few years, until online (Boohoo (LON:BOO) etc. ) peaks
Home Building sector - one from Persimmon (LON:PSN) Bovis Homes (LON:BVS) Barratt Developments (LON:BDEV) etc
Vodafone (LON:VOD) - telecoms
Playtech (LON:PTEC) - Software/IT - Already hold, and think now could be the time to buy (not when I did, years ago!)
Lloyds Banking (LON:LLOY) - banks, but fingers-burned from 2008. Should be combined with Duke Royalty (LON:DUKE) for the 6 sector limit?
Hi DJCP
Lovely post, and especially relevant to me in its latter parts as I am rapidly shuffling towards retirement. For income I too have taken on board Lloyds Banking (LON:LLOY) and Playtech (LON:PTEC) . I have not selected any builders though, as they seem far too cyclical to me. Additionally they seem now to be too dependent on government subsidies. Perhaps a REIT should be included? Tritax Big Box Reit (LON:BBOX) seems priced very generously, and has a well covered dividend (which is not the case at Empiric Student Property (LON:ESP) , Regional REIT (LON:RGL) and others). Is Tritax EuroBox (LON:EBOX) a potential pick given political events?
I hold Royal Dutch Shell (LON:RDSB) , but think the oil sector may be headed for less than glorious times, so now is not really the time to buy here.
My retail/leisure pick is Marston's (LON:MARS) . It is classed here as a 'value trap' which sees a reasonable assessment, but the yield is generous and well covered, even if there is too much debt. A rights issue could be on the offing soon, but there is continual growth by prudent acquisition as well.
Insurance seems to offer steadier dividends than many, and as JTG says Aviva (LON:AV.) seems modestly priced (though I do not think we will see much growth here, given the recent record of management).
Utilities were formerly the dividend hunter's favourite, but regulation and competition have dulled their appeal. Perhaps infrastructure can replace it. HICL Infrastructure (LON:HICL) has further to fall and should soon be a bargain for a dependable return.
Anyway, picking six for dividends I would plump for:
Marston's (LON:MARS)
Playtech (LON:PTEC)
Aviva (LON:AV.)
Lloyds Banking (LON:LLOY)
Tritax Big Box Reit (LON:BBOX)
HICL Infrastructure (LON:HICL)
BUT the way things are going we might be presented with some great bargains amongst growth stocks if this market downturn continues.
Good luck. B
Forget the shares Graham, I'm just happy to hear your dog's going to be OK. Best of luck.
Graham
Lots of good wishes to Frank for a speedy recovery.
Julian
re Manolete Partners (LON:MANO), as I hold Burford Capital (LON:BUR), I am naturally interested here.
I haven't read the prospectus, but I have looked at the financials. (The obvious order of things?)
On issue price (175p), PER ex-cash 18.2x (on 2018 PAT) or 12.2x (on assumed 48% pa growth rate, last three years).
At about 200p, PERs are 21.6x and 14.5x.
Flat profits in 2017 due to doubling of admin. exps.
Dividends would be 1.5p or 2.2p respectively.
I wouldn't use 'book value' (especially as a comparison with Burford), as we just don't know what the principles are. We do know that Manolete turns over its investments in about one year, whilst Burford takes several.
Also, Manolete is a niche operator in which Burford doesn't much figure.
It will be a thin market - declared holders have 92% and won't be selling soon.
I think I'd have bought some at the 175p placing price, but can't face it at the current 195p.
Many thanks for your analysis of GAME Digital (LON:GMD) Graham, much appreciated. I agree that the SP is tempting at this level, given the discount to cash, so I couldn't resist adding a few more to my modest holding yesterday.
And great to hear your dog is better. A few years ago my Black Lab suddenly lost his appetite (unheard of for Labradors), was in pain and had foul smelling breath. I took him to the vet who discovered a piece of wood he had been chewing had lodged in the roof of his mouth. It had obviously been there for quite a while as tissue had started to grow over it but once removed, he was back to normal in no time.
Have a great weekend
cheers
Francis
PS: I'm sure I'll get thumbs down for talking about my dog when Barnetpeter got so many yesterday for talking politics (harshly, I thought) but I'll take my chances
On GAME Digital (LON:GMD) - held this for a little spin a couple of months ago as seems a compelling opportunity. However, exited flat as reading material, feeling a little inconsistency in comma, watching presentations, SPD partnership and seeing delays in execution I just feel that management are struggling to execute so much at once. SPD deal could be sensible but I took a negative turn to viewing it as I felt that a management struggling would reach for help like this...but obvs Big Mike isn’t helping that much.
Can see there’s great chance for upside as and when plan comes together but there’s a danger or negative surprise as it takes longer to turn round, costs more, delivers slower profit, bit of format rejig, etc. Then there’s the old shops and big working cap cycle they bring. Room for stressful slip up around this stuff. Plus we know Big Mike’s a beast and likes to pick up assets for free...the deal looks like a cheap way for him to test the idea. If he thinks it works maybe he drags his feet to cause GMD pain or renegotiated on them?
Been in my local Belong and it’s dingy and pokey. That’s alright as it’s about the game...but it means it’s not like a bowling alley where there’s space and time to spend valuable extra margin creating £ on food, drinks and other entertainment.
Altogether, I think GMD probably needs new management as well as new life.
If only the dogs in my portfolio would recover that quickly.
Re: Graham's comments on GAME Digitals. proposed move to AIM
I would suggest that the most important aspect of this move is the potential for GAME Digital to qualify for Inheritance Tax avoidance portfolios. This tends to have a significant positive impact on share prices of many AIM companies. You only need to look at how these professionally run portfolios have performed over the past 5 or so years to realise the potential impact of an AIM listing (either that or nearly all the managers of these portfolios are brilliant, which I doubt.). If GAME Digital's business does well over the next few years, its share price will be higher on AIM than if it remained on the main market so I would suggest a sensible move. However, this is not without risk as there is a chance that the tax advantages of these portfolios could be removed.
Good luck to Frank.Can be very dangerous things needles.My neighbours dog sat on one without them knowing.The old joke happened and he did do it through the eye.He recovered.
Thanks very much Graham and Paul for all your hard work through the year.
Poor Frank - he looks gorgeous. So pleased they found the cause. Wishing him a speedy full recovery.
Mello Company presentations
A quick note to say we've added Altitude (LON:ALT) and Shield Therapeutics (LON:STX) company presentations from Mello, there are now 11 companies here:
https://www.piworld.co.uk/2018/12/14/shield-therapeutics-stx-presentation-at-mello-london-november-2018/
Still more to follow.
That story about your dog was a bit of a nightmare, Graham. I'm sure everyone will agree that it was great that it had a happy ending.
Thank you Graham for your thoughts. They will go usefully into the cooking pot. This is to my mind one of the great advantages of a discussion page like this one, in that one can put a thought out there and get soundings. This is one of the huge advantages people working in an investment house have, you just cover more of the angles. For what it is worth I have been a medium term holder and they have cost me money and I just sense things are moving against them. That said I stood for half an hour in the Cambridge store last week and they were doing good business.The store is right opposite a Sports Direct store.
You're welcome camtab. Good luck. G
Hmmm i wander what a chartist would say about the chart
As the great poet Catherine Tate would ask: "Am I bothered?" :-)
All the best, Si
simoan
Somero Enterprises Inc (LON:SOM)
Thanks for flagging this one up - i have had Som semi on my radar for quite a while now - looking at the Stocky numbers the p/e has now dropped below 9.5 (9.49 to be precise) and the future EPS forecasts have remained trending level or up for the last 12 months so all looks ok. At 300p now that's 25% off the price it was a couple of months ago. Seems to me like this is relatively speaking, the cheapest this stock has been in 18 months or so bearing in mind the uptick in earnings over the period.
I only missed out on buying a couple of years back as i didn't have the relevant tax form in place with my broker.
Hmmm i wander what a chartist would say about the chart - looks like its firmly downwards - but 300 is a nice round number perhaps that will stop the decline.
I think a chartist would be waiting to see the price stabilise. It is obviously not good and I would be wondering why it is shown to have a prospective yield of over 7%.
I've been following Somero Enterprises Inc (LON:SOM) for a while too, but never triggered a buy. The main reason, me being too lazy to complete the W8-BEN form my broker requires.
On a PE basis, it does seem to be the "cheapest" it has been for a while. However, historically being a cyclical company, these are often most expensive when they seem cheap and vice versa. It might seem odd, but I'd rather be paying a higher PE.
Somero is a great story and i have held in the past but there is good reason why its so cheap at this stage, and although back in June Somero said..
"it felt "comfortable" with the positive trading environment across its footprint, and the growth opportunities visible in North America, Europe, China, Middle East, Latin America and its Rest of World territories".
I think there are a few red flags flying with their growth in Europe, China and Latin America and I know I am not supposed to talk about politics near but i think its playing a bigger part in holding back Somero's obvious potential for what is a great product. But it could still be a good buying opportunity if you are happy with the above.
For those who are Bothered. SOM being cyclical & in a Winter season + Global negativity ; there is reason to expect the price to go lower. The next major Support level is 270p . I shall look again at that price to consider buying myself.
Would there be any prospect at all of interest rates being raised to defend the pound?
They tried it before (probably more than once) but the notable one that I remember didn't end well.
"Would there be any prospect at all of interest rates being raised to defend the pound?"
We seem to be achieving what most other countries would like to achieve with their currency!
Reach (LON:RCH)
Good update from my guilty pleasure this morning - love having a share on a PER of less than 2.
Cash flow remains impressive - enough for me to think it will come out of the other side. Synergies from the Express acquisition buys it more time. I expect macro events to shrink its pension deficit. Dividends at 11% (covered 6x) are very worth having in the meantime. But not for widows and orphans methinks.
Time will tell.
Phil
pound and dollar getting close to parity, some tourist rates they already are and you get less than a euro for a pound.
https://www.bbc.co.uk/news/business-46555314
This is pretty close to fake news from the Beeb - the market rate is 1.26 and you have to go to the rip-off merchants at airports to get anywhere close to parity which I suspect none here would do.
Yes the pound is falling against the dollar, but this is giving opportunities in dollar earning small caps - Somero Enterprises Inc (LON:SOM) being one IMO. Every cloud has a sliver lining .... hopefully.
Phil
This is pretty close to fake news from the Beeb - the market rate is 1.26 and you have to go to the rip-off merchants at airports to get anywhere close to parity which I suspect none here would do.
I couldn't agree more. You'd have to be monumentally stupid to exchange currency at the rate in that BBC news article. But then again the BBC News website has morphed into a cross between the Daily Express and OK Magazine. The level of their journalism has fallen to all time lows and it will likely only get worse because there is no sign the level of dumbing down has bottomed out yet!
Yes the pound is falling against the dollar, but this is giving opportunities in dollar earning small caps -Somero Enterprises Inc (LON:SOM) being one IMO. Every cloud has a sliver lining .... hopefully.
I think you have to hedge your bets but I'm happy to have a large slug of USD earners and dividend payers like Somero Enterprises Inc (LON:SOM) to be honest. I calculated the other day that 28% of my dividend income is paid in a currency other than GBP, and I'm pretty happy with that weighting.
All the best, Si
Couldn't agree more. More selective & misleading repirting from the BBC.
Rather than trying to talk the economy down in line with their particular political agenda, perhaps the BBC could point out that mid-market rates are 1.255 and the idea is to target a loss of under 0.5% on forex transactions (accepting nearer 1.2% in certain circumstances).
Therefore providing a service & helping some people not to get ripped off.
Incidentally, why do the authorities permit monopolies on foreign exchange within airports ?
Manila airport does it the right way with at least half a dozen competing forex companies & some of the best rates in the city. We seem to have forgotten where the competition authorities should intervene.
Not just forex at airports that are ripoffs - have a look at this burger from SSP (LON:SSPG) . No wonder it is on a forward p/e of 24 - I don't think any High St. restaurant would get that.
It's a captive market, airports all around the world are expensive with a few exceptions. It's one reason why I bought the shares although I don't hold any currently. Rents in airports are no doubt high. You don't need to order anything like that, you can get a sandwich for a £1. Yes rates for forex are bad in some airports.
Had to buy a few USD this morning for spending; miffed at getting only 1.2295 to £1 (would have been better if $1000). Use it to extract local cash from ATMs fee-free. Why does anyone buy from airports or high-street banks any more? Well, some people still buy clothes, I suppose, but at least clothes aren't all the same. But I still can't tell one $ from another!
From over here the UK train crash is paralysing my share-trading. Not small cap, but why is Aviva (LON:AV.) sub 380P for 8.5% committed div. Or in small-cap territory, Braemar Shipping Services (LON:BMS), now plodding along, not dying, 8% div., earning mostly in $, BDI in mid-range for the year, and the rest of the world not grinding to a halt?
I would beware of Braemar Shipping Services (LON:BMS) . They have just branched out into new areas of business, so they are in untested ground. Also the balance sheet is loaded down with goodwill. Aviva (LON:AV.) has stagnated for the last half decade, where competitors have streaked ahead.
Graham
SThree (LON:STHR) please. Q4 trading update wrapping up a good year for the company. My back of the envelope calculations suggest that EPS of 30p might be achieved once full results are out and hopefully hike in divi It's one of those companies which for those with Brexitanxiety might like I.e revenue mainly outside UK
Hi merlotman, I admire SThree (LON:STHR), it's probably my favourite recruitment share and it appears to be firing on all cylinders. But I don't actively follow it any more so haven't got anything of substance to add versus my previous comments, sorry about that. All the best. Graham
My morning smallcap tweet:
Science (LON:SAG), Low & Bonar (LON:LWB)
Science Group (SAG) ends Formal Sale Process due to falling stock market. Buy-back resumed. Trading in line.
Low & Bonar (LWB) FY trading - "Tough market and trading conditions largely unchanged during fourth quarter". Guides U/L profit before taxation and amortisation of ~£17m. F/C £13.1m but that includes amortisation. May have share issue to cut debt. Will cut final div.
Graham, I would be interested in your thoughts re GMD (Game Digital). They announced that they are going to cancel their main listing and list on AIM. I have to say very limited information on the whys and wherefores. If I am right it shows a rather gungho attitude from the Management team. I appreciate there still is a public listing so all is not lost and they are probably trying to reduce costs and reporting requirements but they have a £40m mkt cap and I am not sure I see real impact from such a move. Given they are a play on rolling out a new strategy with all the risks implied in that and their old business is treading water to shrinking it seems to me this is probably becoming a sell, despite their negative enterprise value. I never really believe Mike Ashley is slightly interested in share holders and of course he is sitting behind the company with I believe a 30% holding.
Hi camtab - got around to looking at GAME Digital (LON:GMD) today, thanks for your comment. G
I figured the move to AIM was about cost savings, and I doubt AIM is considered a lesser market these days, not since it has giants such as Fevertree on it. Its no longer the squalid penny share market even if might still have a touch of that reputation about it.
But as for the long-term, I think the business is less concerned about sales and more about its move to an entertainment establishment - offering its gaming "experiences", ie venues where kids will go to play games, like a modern cross between an old amusement arcade and a sports club, further developing eSports. So forget the retail part - that's going to be an add-on 'gift shop' next to the real business that is an entertainment complex.
Whether that can support the share price or not is debatable, and whether Ashley buys it out and rolls out the Belong venues to his clothing retail stores is an interesting suggestion too, possibly with a tie-in to game branded clothing.