Shares digital

Retail firm Game Group (GMG) issued an upbeat trading update less than a week after chief executive Lisa Morgan and deputy chief exec David Thomas sold just over 2.4 million shares between them, leading the stock price to slump 18%.

Yet the update showed profits for last year will be at least £74 million compared with recent guidance of £73 million. More importantly the group believes like-for-like growth will be between 5% and 10% this year. Gross margin should grow by 50 to 100 basis points. The company now believes synergies from acquiring gamestation this year will be £9 million, slightly more than previously suggested.

Andy Wade of Seymour Pierce believes the group has an advantage over others such as Woolworth (WLW) and HMV (HMV) seeking to enter the growing games market because of a greater ‘speed to market’, which enables Game to benefit from the strong initial demand. It is also increasing the market for pre-owned, or second-hand games.

Wade has now increased his current-year pre-tax profit forecast to £92 million, implying EPS of 18.6p, which places the shares on a PE of 10.3 at 191p. He is a ‘buyer for choice’.

The company will be announcing results on 29 April, shortly after the UK launch of Wii Fit which has been spectacularly successful in Japan since its launch in December.

Shares says: Although the sector is likely to remain under pressure, the group’s fundamentals are attractive.