Company Overview
Games Workshop Group Plc (GAW) is a miniature wargaming product manufacturing company. The company is engaged in designing, manufacturing and distribution fantasy miniatures, metal soldiers and rulebooks. The company offers its products through its chain of hobby centres, independent toy and hobby shops; independent retailers; and through Internet and mail orders. Investec Asset Management Ltd., Schroder Investment Management Ltd. and JPMorgan Asset Management (UK) Ltd. are the major institutional investors in the company. (Source: TR)

Financial Highlights – (FY19, £m)

Source: Company filing

During the period under consideration in FY19, the company's reported revenue surged by 15.94 per cent to £256.57m against £221.30m in FY18. On a constant currency basis, sales rose by 15.36 per cent from £221.30m in FY18 to £255.29m in FY19; split by channel this comprises of retail £87.6m, trade £120.6m and online £47.1 million. Operating profit before royalty income surged by £5.1m to £69.83m versus the last year data in FY18. The company's total operating profit increased by £6.88m to £81.19m in FY19 against the £74.31m in FY18. Profit before tax stood at GBP 81.29m in FY2019. Cash generated from operations expanded from £82.33m in FY18 to £88.77m in FY19. Earnings per share surged by 18.6 pence to 202.9 pence per share in FY2019 against 184.3 pence recorded in FY18. Total dividend declared in FY2019 cited at 155 pence per share.

Share Price Performance of Games Workshop Group Plc

Daily price chart (as on August 09, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (before the market close, at 03:50 PM GMT), shares of the LSE: GAW were quoting at GBX 4,606.0 and declined 118 points or 2.51 per cent in day's session. In the year-ago period, it has registered a 52w high price of GBX 5,160.0 and a 52w low of GBX 2,760 respectively. On a YoY basis, the stock was up by approximately 51 per cent; however, it is in a downtrend since the last one-month. Stock’s average traded volume for 5 days was 92,948.80; 30 days – 83,585.07 and 90 days – 100,075.16. The average traded volume for 5 days was up by 11.20 per cent as compared to 30 days average traded volume. The company’s stock beta was 1.13, reflecting higher volatility as compared to the benchmark index. The outstanding market capitalization was around GBP 1.50 billion, with a dividend yield of 3.48 per cent.

Conclusion
Games Workshop Group Plc has a decent and scalable business model. Also, the company has a consistent track record of paying decent dividend, and at the current market price, the dividend yield of the company was at 3.48 per cent, which is a decent fundamental indicator from an income investor's point of view.

However, from the valuation standpoint, we believe the price has already hived the growth catalysts as the Price-to-Cash flow per share multiple of the company stood at 22x, whereas the industry average stood at 16x and also in terms of Price-to-Book value ratio, the company's P/BV multiple stood at 14.4x whereas the industry average stood at 7.84 per cent.

Also, from the technical standpoint, the stock has hit its red cross-level as on July 23, 2019, a technical measure which indicates a strong downtrend in the stock price and since then the price was falling. GBX 4,712 is a crucial resistance level for the stock.

Therefore, on the basis above discussion, we have given a "Watch" recommendation at the closing price of GBX 4,718 (as on August 08, 2019), while we look for any upcoming catalysts in the near term.

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