Don’t be spooked by the former chairman of fantasy miniature specialist Games Workshop (GAW) selling £20.3m worth of stock.

Tom Kirby’s disposal may have caused the shares to fall by nearly 5% to £37.67 after a spectacular run, yet he is no longer involved in the business so we don’t believe he has any insight into day-to-day trading which may have influenced his decision to sell.

The stake represents 1.7% of Games Workshop, although Kirby still owns 4.8% of the business and is subject to a 180 day lock-up on the remaining shares. He sold 556,301 shares at £36.50 each which is 7.6% lower than last night’s market closing price of £39.50.

This disposal isn’t a similar scenario to when current management are big sellers of a stock. In those circumstances the selling party or parties have full insight into the trading and, crucially, prospects for the business, potentially raising serious concerns for investors.

Kirby retired more than a year ago and could be forgiven for cashing in on shares which have increased more than seven-fold in two years. However, his action does put the spotlight on a share which trades on 24.5 times Peel Hunt’s forecast earnings for the year to 31 May 2019.

Peel Hunt analyst Charles Hall upgraded his forecasts after 19 September trading update which revealed trading was in line with expectations with strong cash generation and a special dividend of 35p per share.

He remains at ‘hold’ on the shares although he did bump his price target from £27 to £32.50. He comments: ‘The company has stated that trading year to date is in line with expectations. This is important as Q1 is the toughest comp given the successful 40k (Warhammer gam) launch last summer.

‘As a result, we are increasing our sales forecast by 5% to £215m and pre-tax profit by 7% to £62m. We continue to expect profits to be lower than last year due to lower gross margin (mix and capacity expansion) and higher operating costs (new openings, investment and higher wages).’


Issue Date: 28 Sep 2018