City broker Peel Hunt has upgraded Games Workshop Group PLC (LON:GAW) to ‘Buy’ from ‘Hold’ following strong first numbers.
Analysts said the Warhammer maker had delivered “a healthy sales performance due to stronger/more regular product launches, greater use of social media/online activity and an increase in distribution (more trade accounts and new stores)”.
READ: Games Workshop shares on the up after solid first half trade
“The hobby is in good health and the company is doing a good job in engaging existing hobbyists, re-energising lapsed hobbyists and seeking out new ones. Importantly there is considerable opportunity ahead as the company expands its global footprint”.
In December, Games Workshop reported that it expected sales for the first half to be around £124mln in the first six months of 2018/19 with operating profit likely to come in at some £41mln – in line with its view.
The firm will also shortly complete a capacity expansion in Nottingham, taking its total capacity up to £350mln.
Peel Hunt added that as the firm owned the majority of its intellectual property, there was “a high barrier to entry and an opportunity to monetise its content”.
“Importantly the IP is varied and endless ensuring numerous potential partnerships”.
The broker also retained its 3,500p target price on the stock, saying the company remained “well capitalised alongside providing attractive returns to shareholders”.
“The rating is looking attractive at 18x PE and 4% dividend yield given the global growth opportunity, high returns and unique business model.”
In mid-morning trading Thursday, Games Workshop shares were up 3.6% at 3,120p.