Investment: Game's plan is short of value

GAME, the computer games retailer, is a well-run business, but since it came to the market in June its shares have had all the appeal of a video nasty. Floated at 200p, they jumped to 230p in their first day but have been careering downhill ever since.

Yesterday they shed another 3p to 178p in spite of maiden full-year results which showed a jump in pre-tax profits from pounds 406,000 to pounds 7.2m.

This fall is less about the business itself and owes more to the hammering second-line stocks have been taking. Electronics Boutique, Game's main rival, has also suffered, and the high street is not exactly flavour of the month with investors.

Game's figures certainly look encouraging, though. Like-for-like sales soared by 46 per cent during the year, boosted by Sony Playstation and the launch of the rival Nintendo 64 games console at the beginning of 1997.

In current trading, same-store sales are still up by 11 per cent and the new 120-bit Sega machine is due out later this year or early next.

Store openings are continuing, with nine added in the year to take the total to 66. Game's plan is still to have 120 by May 2001.

On current-year forecasts of pounds 10m the shares trade on a forward rating of 19. That looks a bit high even after recent weakness. There's better value elsewhere in the retail sector.