Picture supply: Getty Pictures
Baillie Gifford UK Development Belief (LSE: BGUK) isn’t a standard UK-focused funding belief full of the standard FTSE 100 shares. Certainly, with a 6.7% weighting, its high holding at present is Video games Workshop (LSE: GAW).
The corporate solely joined the FTSE 100 again in December, so it’s truthful to say it is a daring decide from Baillie Gifford UK Development Belief. It has been a fruitful one, although, because the inventory has rocketed 51% over the previous 12 months.
Underappreciated enterprise
Video games Workshop designs, manufactures, and sells fantasy miniatures and tabletop video games, most famously Warhammer 40,000 and Warhammer Age of Sigmar. It sells them by way of tons of of its personal branded shops globally, in addition to on-line and by way of third-party retailers.
For a lot of followers, portray the figures is probably the most fulfilling a part of the pastime. The corporate has additionally given its kits to colleges. In keeping with the belief’s supervisor Iain McCombie, portray the miniatures helped enhance youngsters’s focus, even those who have been hyperactive.
Regardless of the robust share worth efficiency, the belief thinks that Video games Workshop remains to be underappreciated by many buyers.
Lots of people nonetheless don’t take it significantly. They suppose it’s a little bit of a joke. It’s a sort of hobbyist. It’s for what children play. You understand, how can that be a critical enterprise?
Iain McCombie
Nonetheless, the financials inform us that that is very a lot a critical enterprise. Income has jumped from £257m in FY2019 to an anticipated £600m in FY2026 (which started in June). Earnings, free money movement, and dividends have all grown strongly, whereas worldwide enlargement continues apace.
Revenue margins are distinctive and the stability sheet is immaculate. The inventory additionally gives a 2.7% dividend yield.
Priceless IP
Video games Workshop is sitting on 30+ years of wealthy mental property (IP). It has signed a take care of Amazon to show a few of that into Warhammer TV content material. This has the potential to draw numerous new followers to the model and pastime.
What’s attention-grabbing, nonetheless, is that it took the agency about one 12 months to settle the phrases with Amazon. As McCombie factors out: “[T]hat negotiation took a very long time as a result of the Video games Workshop administration mentioned…We actually care about our IP, we don’t need this to be ruined by Amazon, and we wish to ensure that the script and so forth goes to suit very a lot into our heritage.”
This demonstrates how the corporate makes choices primarily based on the long-term success of the pastime, somewhat than chasing short-term income.
Trying forward
The inventory’s ahead price-to-earnings ratio is 31, which is a chunky premium to the broader FTSE 100. This valuation danger is heightened as a result of many customers are nonetheless battling the price of dwelling. Whereas addictive, the Warhammer pastime isn’t low cost, so there’s an opportunity that gross sales sluggish within the close to time period.
Long term although, I stay optimistic. There appears to be ample room to develop in Asia, the place fantasy video games stay very talked-about. I believe the inventory is price contemplating.
I additionally suppose Baillie Gifford UK Development Belief is price a glance, particularly because it’s buying and selling at a ten% low cost to web asset worth. Whereas there’s all the time a danger that the low cost might widen, the portfolio seems robust. Different high holdings embody Auto Dealer, Experian, Smart, and AJ Bell.
