Sunday share tips: GVC Holdings, Findel, Codemasters

GVC Holdings was a 'buy' for the Sunday Times' Inside the City column, with the shares trading on an undemanding multiple of 8.8 times forecast earnings and the business appearing "well placed" to cope with the prospect of an online gambling tax and a ban on TV advertising.

This week the shares, which are down 22% over the past 12 months, received a boost this week, thanks to a canny clause inserted in the takeover of Ladbrokes Coral earlier this year. When MPs vote on Monday to enact legislation to reduce the maximum stake allowed on fixed-odds betting machines from £100 to £2, it will result in the group's bettings shops being a lot less profitable. As part of the takeover, GVC offered to pay another £676m to Ladbrokes former shareholders if the law did not change before the end of March. But this deadline now looks almost certain not to be missed, meaning GVC can keep that cash.

For 2018, the group is targeting £3.5m of sales and underlying profits of almost £740m. While the future UK business will be hit by the FOBT changes, across the pond the company has been one of the first movers in taking advantage of the legalisation of sports betting via a tie-up with MGM Casinos. Some analysts forecast GVC could have sewn up around a quarter of the US market by 2023.

Value retailer Findel was tipped as a 'buy' by Midas in the Mail on Sunday. Despite its online and catalogue sales rising 13% over the past 12 weeks, the shares are down more than 40% from July's near-five-year high amid the wider stock market sell-off and worries about the retail sector. Midas feels the does not reflect the company’s performance or prospects, with sales of £506m and profits of £28.5m forecast for the year to March, rising to £537m and £31m in 2020.

Having dealt with legacy issues, including losing more than 99% if its value in the four years after the financial crisis and a bout of PPI misselling compensation, management now aim to double the group's £400m retail sales to £1bn over the next five years. With two divisions, the Studio retail brand and the Findel Education school supplies arm, the focus has moved from catalogue sales to online, with more than 70% of customers now buying from its websites.

The Studio arm, which sells clothing, kitchenware, furniture, household goods, Christmas paraphernalia and children’s toys, generates the majority of sales and profits, with customer numbers having grown by 40% to 1.9m over the past two and a half years and with directors aiming to more than double in the medium-term. More than half of customer buy on credit, generating extra profit for the company. The education business "will probably be sold", allowing Findel to focus solely on the retail offer.

Codemasters is "still in the driving seat" for Questor in the Sunday Telegraph and "it is worth investing" in the video games maker, which has not had an entirely smooth ride.

Codemasters floated on AIM back in June and swung to a first-half loss of £7.6m from the previous year's £1.4m profit recorded a year earlier, as revenues dropped 19.64% to £39.7m as it released two games in the half compared to three in the comparable period. Management was confident of seeing improved trading over the remainder of the year as it launches two more games in the second half: F1 Mobile Racing and DiRT Rally 2.0.

There has been some other encouraging news of late with Valve, the owner of PC gaming distribution platform Steam, announcing they will cut their revenue share on AAA games from the current 30% to 25% once revenue hits $10m, and then again to 20% for sales over $50m. Analysts at Liberum said the run-rate earnings benefit to Codemasters could be around 5% of profits, given that around 25% of revenues come from PC games. Talk in the industry that all distribution deals could go to down to 25% could imply upgrades of between 15% and 20% to operating profits Liberum said.

Broker Shore Capital recent suggested Codemasters said recent ventures into mobile market have made a slower start in revenue terms than initially anticipated, but have had a huge impact within the app market. But the company "looks to be in a strong position to capitalise on the substantial growth being forecast for the esports market as illustrated by its recent F1 series event which had 66,000 entries and a prize fund of $200,000". The company is also looking into more technology to support future developments in streaming within the cloud to allow more players to compete against each other across multiple platforms.

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