Financial Analysis - Game Group Plc

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Financial Analysis
— Game Group plc

Du

Xiaoshi Te n g Zhuo Li

6502042 6502091 6502216 6502144 6502334 6501543 6502740
1

Liang Pei Ta o

Xuemei Yo n g y u Wu Yi Kuan

Xu

Executive Summary
Recommendation: Do not invest in the equity of GAME Group at current stage Share Price Range Forecast
Scenario Free Cash Flow to Equity Aggressive Neutral Conservati ve Expected return Neutral Prob. 0.25 0.5 0.25 1 N/A Predicted price £ 0.99 0.90 0.83 0.91 1.30 1/31/2010: £ 092 underpriced overpriced overpriced overpriced  

Company Features Highlight


Specialize in the retailing of video games and related products Wide product range and large customer base Operate in cyclical game retail industry Market leadership in the UK At the stage of strategic transformation from offline stores to online and digital delivery

Residual Income EV/ EBITDA

underpriced


N/A

N/A

N/A

underpriced


Tight cash flow in the year 2009 Strong profitability in Preowned Business High concentration on domestic UK business and low profitability in international business

FCF prediction region 
£ 0.83 £ 0.90 £ 0.99 £ 1.30


£ 0.92 (1/31/2010)

Broker recommendations: Neutral Strong Buy Buy Neutral Sell Strong Sell Total Key Risks 

3 4 2 1 4 14

Financial Summary and Ratios
2006 £’000 Net Sales Growth EBITDA Margin EBIT Margin 19,816 3.1% 8,223 1.3% 645,118 2007 £’000 801,306 24.2% 45,778 5.7% 32,965 4.1% 2008 £’000 1,491,914 86.2% 95,779 6.4% 75,192 5.0% 2009 £’000 1,968,604 32.0% 153,194 7.8% 124,293 6.3% 83,650 4.2% 29.22% 1.32 2010 £’000 1,772,358 -10.0% 121,488 6.9% 88,590 5.0% 60,467 3.4% 18.24% 1.3

Unclear prospect in GAME’s future strategic focus (digital and online business) Severe competition in GAME’s Preowned business Uncertainty about GAME’s future supplier relationship

Financial Summary21,140 Ratios and 2,737 47,179 Net Income
Margin 0.4% 1.89% 0.98 2.6% 13.44% 1.51 3.2% 23.40% 2.14 ROE Debt to Equity





Share Price Movement

2

CONTENTS 1. Introduction ................................................................................................................................... 1 1.1 Pension Fund Analysis ........................................................................................................... 1 2. Company Overview....................................................................................................................... 1 3. Sector Analysis............................................................................................................................... 1 3.1 Sector Breakdown .................................................................................................................. 1 3.2 Macro-environment Scanning ................................................................................................ 3 3.3 Attractiveness of Game Retailing .......................................................................................... 6 4. Strategy Position Review and Analysis ....................................................................................... 8 4.1 SWOT Analysis ...................................................................................................................... 8 4.2 Corporate strategy overview ................................................................................................ 10 4.3 Business Strategy Analysis .................................................................................................. 11 5. Financial Statement Analysis ..................................................................................................... 12 5.1 Profitability .......................................................................................................................... 12 5.2 Corporate Finance ................................................................................................................ 17 5.3 Activity...
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