Gfinity Plc

Gfinity Plc (LON: GFIN) is an AIM-listed 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.

Recent News
On 5 August 2020, Gfinity launched V10 R-League, a new digital motorsport competition. The new competition is a part of Racing Series globally and the first stage of 5-year agreement between Gfinity and ADMM on 4 June 2020.

On 13 July 2020, Gfinity announced Gfinity Plus a rewards programme for online community and will offer exclusive gamification, forums and content from August.

Financial Highlights – Increased Operational Performance for H1 FY2020 (31st December 2019)

In the first half of the financial year 2020, the revenue declined by 20 per cent to £3.5 million (H1 FY2019: £4.4 million). The gross profit surged by 300 per cent to £2 million in H1 FY2020 (H1 FY2019: £0.5 million). Driven by lower adjusted administrative expenses for the period, the adjusted operating loss declined by 45 per cent to £2.4 million in H1 FY2020 (H1 FY2019: loss of £4.4 million). The net loss for H1 FY2020 stood at £3.6 million (H1 FY2019: loss of £5.7 million).The cash balance as on 31 December 2019 stood at GBP 2.4 million.

Share Price Performance


Daily Chart as of August 6, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Gfinity Plc shares were trading at GBX 3.05 at the time of writing before the market close (at 12:27 PM GMT+1) on 6 August 2020 and up by 3.39% versus the previous day closing price. Stock 52 week High and Low were GBX 4.90 and GBX 0.3025, respectively.

From the technical standpoint, 14-day RSI is currently in an overbought zone, which means the stock price could decline in the short term.

Key Risks

Political changes and regulatory changes could negatively impact the trading performance for the Company. With the outbreak of covid-19 pandemic, has resulted in postponement or cancellation of esports events globally, which impacted the financial performance of the Company.

Conclusion

The Group’s operations were impacted by the outbreak of covid-19, which resulted in postpone of various live sporting and esports events globally. Despite the uncertain environment, the Company managed to improve financial performance. The top-line performance has declined, and the bottom-line performance has improved, but profitability margin remained in the negative zone. At present, GFIN is not able to quantify the impact of covid-19 on business performance and has withdrawn full-year guidance. Moreover, the Company’s share price is trading near its 52-week high, which raises doubt over its upside potential. The Company’s Price/Book and EV/Sales multiples are significantly higher as compared to the industry multiple, reflecting overstretched valuations.

Based on the risks associated and uncertain business environment, we have given a “Sell” recommendation at the current price of GBX 3.05 (as on 6 August 2020, before the market close at 12:27 PM GMT+1).

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