Business Overview
Gfinity Plc (LON: GFIN) is an AIM-listed leading global esports business group. The group utilizes its expertise to outline, create and deliver exceptional experiences and to offer consultancy services and winning approach for sports right holders, media companies, game publishers, and commercial partners.

Trading Update
On 23rd January 2020, Gfinity released an update for the 6 months trading period ending 31st December 2019. In the first half of the financial year 2020, the company’s performance was in line with the expectations of the management. The revenue is expected to be around GBP 3.5 million in H1 FY2020 versus GBP 4.4 million in H1 FY2019. Driven by growth inrevenue streamswith a higher marginfor the period, the gross profit went up by around 300 per cent to GBP 2.1 million in H1 FY2020versus GBP 0.5 million in H1 FY2019. The company expects its adjusted operating lossto decline to GBP 2.4 million in H1 FY2020 versus an adjusted operating lossof GBP 4.4 million in H1 FY2019, due to cost discipline.

The company has shifted its focus to the Strategic Client Management modelwhile entering the financial year 2020, as a result of which it had a strong pipeline of opportunities. The company is making constant efforts to improve revenue mixand margin.The company expects its revenue for full-year 2020 to be in line with the financial year 2019 and based on current market expectations,margins are also expected to improve. The company is in discussions with strategic investorsbased out of Europe and the US, which would help in effective exploitation of esports sector’s opportunitiesand will create new opportunitiesas well.The company expects Esports and competitive gamingto grow and will reach USD 1.8 billion by the year 2022.

Share Price Performance

Daily Chart as of  January 31^st, 2020, before the market close (Source: Thomson Reuters)

Gfinity Plc shares were trading at GBX 2.275 at the time of writing before the market close (at 8:17 AM GMT) on 31^st January 2020 and were same versus the previous day closing price. Stock's 52 weeks High is GBX 7.00 and Low is GBX 2.17.

Conclusion
Some risk that could impact the company's financial performance includes financial risk, interest rate risk, currency risk, credit risk and liquidity risk. Gfinity has a scalable business model backed by the company’s value creation. The group is aiming to be at break-even within 2021 and estimating a gross margin of 30-40% and EBITDA margin of 15-25% by the end of 2021. The group recorded stellar top-line growth and secured several good contracts, during the FY19.

The company has refocused the business on a "Strategic Client Management model" that has enabled them to build a robust pipeline of new commercial prospects and bolster the current strategic partnerships. The esports market is increasing quickly, and the company is on the epicentre of the ecosystem.

The company is focussed on working closely with the partners to deliver distinctive esports solutions and to assist them in connecting with young gamers around the globe. The new CEO, Graham Wallace, has vast experience in several related industries and has all the qualities as required to accelerate and lead the performance of the group. The three-year strategic plan is set, and the company has a robust financial position.

Over the course of 4 years (FY15 - FY19), the company’s revenue surged from GBP 0.56 million in FY15 to GBP 7.87 million in FY19. Compounded annual growth rate (CAGR) stood at 93.62 per cent.

Therefore, based on the above rationale, we have given a "Speculative Buy" recommendation on the stock, at the current price of GBX 2.25 (as on 31^st January 2020, before the market close).

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