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Mercia Technologies

UK video games - Heterogeneous not homogeneous

Sector Commentary: | Consumer Support Services | 26 Feb 2019


Game Digital

Resilience over the peak trading period

Update | Consumer Support Services | 17 Jan 2019

Against a challenging retail landscape, Game Digital (GMD) delivered a solid sales performance and growth in higher-margin categories over the peak trading period, alongside ongoing cost efficiencies, which continue to counter trading pressures. Momentum in the BELONG roll-out, which accounts for a significant part of our 67p valuation, remains crucial.

Game Digital

Game on for BELONG

Update | Consumer Support Services | 08 Nov 2018

In a challenging market Game Digital (GMD) continues to make ground, meeting our 26% EBITDA growth forecast after achieving planned cost savings, despite the intensified swing to digital. In FY19 we expect the roll-out of BELONG to gather pace, as well as a continued fightback backed by the console industry. The value in our 67p valuation, other than cash of 33p, is in the BELONG roll-out, where continued momentum is crucial.

Game Digital

Part of the retail answer

Outlook | Consumer Support Services | 12 Sep 2018

Even as Game Digital (GMD) faces short-term trading pressure, its developing BELONG gaming arena concept is arguably part of the answer of what to do with the UK’s high streets and shopping centres. The first BELONG sites under the February 2018 agreement with Sports Direct are now opening. With GMD’s share price still less than net cash of 32p, neither the existing business, which currently contributes GBP 10m of EBITDA, nor BELONG which we value at 23p, are attributed any value by the market. Our total valuation is 75p.


Executive Interview – Boku

Edison TV: | Technology | 04 Sep 2018

Boku, the largest independent direct carrier billing (DCB) company, listed on AIM in November 2017. Boku operates a billing platform that connects digital content merchants with mobile network operators (MNOs) in more than 50 countries. Supporting merchants to offer DCB helps them to acquire customers and convert them to loyal, paying customers. Boku has signed up the leading merchants in key digital content categories (music, app stores, games) and, after a period of investment to connect merchants and MNOs to its platform, is seeing strong volume growth. Boku has c 150 employees, with its main offices in the US, UK, Germany and India.

Game Digital

Pressures countered: BELONG moves ahead

Update | Consumer Support Services | 21 Aug 2018

Game Digital (GMD) has finished its year with cost measures countering trading pressures and with BELONG moving into action as the first, larger, sites open. The clearer future represented by BELONG is not reflected in the share price, which remains less than cash.

Game Digital

The (BE)long game

Update | Consumer Support Services | 27 Mar 2018

A year ago we titled our initiation note ‘The long game'. But growth is now more closely tied to the transformative expansion of BELONG, as well as retail formats under the recent collaboration agreement with Sports Direct. These plans represent a direct path to Game Digital's future identity as a service-based business providing gaming experiences.

Game Digital

Agreement accelerates experiential strategy

Flash note | Consumer Support Services | 12 Feb 2018

The agreement to roll out BELONG gaming arenas and retail concessions in Sports Direct’s (SD) nationwide estate accelerates Game Digital’s (GMD) strategy to move from a seller of games to a provider of gaming services. This capitalises on the move in consumer spend from products towards experiences and positions the company more strongly in the high-growth e-sports market. A high level of control retained by GMD indicates that the relationship should be positive for all shareholders.

Game Digital

Good seasonal trading

Update | Consumer Support Services | 11 Jan 2018

Game Digital (GMD) has posted good sales growth over its first 23 weeks and even better results over the Christmas peak. While sales have been led by hardware, management is confident of covering any mix issue through cost savings, and we retain our forecast. With net cash at 35p, the market is valuing this business at 3.5x FY18e EBITDA, which looks misplaced.

GVC Holdings

A gaming powerhouse

Update | Technology | 02 Jan 2018

GVC’s proposed acquisition of Ladbrokes Coral (LCL) will create a leading global multi-brand gaming business, with revenues of c GBP 3.3bn. Completion is expected in late Q1/early Q218. 90% of the enlarged group’s revenues will be derived from locally regulated and/or taxed markets. As witnessed by the successful integration of bwin, GVC is well positioned to deliver material synergies and, regardless of the outcome of the triennial review, the company expects double-digit EPS accretion after the first year. GVC has reported consistently impressive results throughout 2017 and its shares trade appropriately towards the top end of the peer group, at 12.8x EV/EBITDA and 16.4x P/E for 2018e. We introduce new forecasts to reflect the disposal of the Turkish business.

Game Digital

Disposal of Multiplay Digital

Flash note | Consumer Support Services | 28 Nov 2017

Game Digital (GMD) has announced the sale of Multiplay (UK), which operates an online game server-hosting business. The disposal reflects a tightening of GMD’s strategy, announced in August, to focus on customers’ gaming interests. We do not expect a material effect on forecasts, but the immediate cash receipt reduces the FY18e EV/EBITDA multiple to only 1.8x.

Game Digital

Sales recovery sees strategy on track

Update | Consumer Support Services | 15 Nov 2017

Results confirm that the sales recovery signalled in August has been fully realised in terms of profit delivery. The business transformation strategy is on track, and Game Digital is successfully developing future growth areas such as digital content, virtual reality, BELONG arenas, and tournaments. With significant euro exposure, and buoyant retail growth in Q1 of the current year, an FY18e EV/EBITDA valuation of 2.1x looks misplaced.