Good morning!

Once again, there is no shortage of news today.

I will choose some of these to write about (editing this list as the day goes along):

GAME Digital (LON:GMD)

  • Share price: 24.5p (+2%)
  • No. of shares: 173 million
  • Market cap: £42 million

Interim Results

Disclosure: I own shares in Game Digital.

Many of you will be familiar with this high street games and video console retailer, operating in the UK and Spain. It has appeared regularly in this report over the last year.

And what a volatile period it has been for shareholders. The share price bottomed out at 19p last year, rallied to over 60p in December, and is now 24p.


It's Cheap!

When I covered it last, I rather pessimistically said that the shares might represent "value" if they were priced at a discount to tangible book value. My rationale was that resources would be needed to pay for the next wave of store closures, and that future profitability was highly uncertain. So to compensate for this, a discount to tangible book value is what I'd be looking for.

We are there now. According to today's results, tangible book was sitting at £86 million at the end of January, i.e. more than double the current market cap.

Within this, the balance sheet is dominated by £85 million of cash.

On top of the cash pile, the company has undrawn banking facilities of up to £75 million, which can be extended by £25 million during peak season.

It also has a Spanish working capital facility and a £55 million borrowing facility from its major shareholder and partner, Sports Direct (LON:SPD).

In other words, this is now a company with very deep pockets. I reckon that its total spending power in cash and undrawn borrowing is in the order of a quarter of a billion pounds, more than 6x its current market cap.…

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