Wednesday newspaper share tips: Games Workshop, PZ Cussons

27th Jul 2016 13:07

(ShareCast News) - Investors looking for a haven from sterling's post-Brexit vote nadirs could do worse than Games Workshop, which The Telegraph's Questor columns suggests as a potential 'Buy'.It said the "cheep and cheerful" outfit might have been overlooked by the market, noting revenues had recovered at the tabletop games maker since end-2015."Couple with strong cash generation and healthy overseas sales, Games Workshop is an enticing, if risky play," asserted the column.The outfit has pumped out figurines to a loyal customer base since the 1970s, and yet still received scant analyst coverage in the austere halls of the City.Games Workshop accrued about 72% of its sales overseas, and had a domestically focused cost base."A weaker pound could boost profits beyond the expectation-busting £16.9m achieved in the year to May 29," wrote Questor."The company appears to be making good progress in selling its intellectual property to video-game developers, boosting royalty income from £1.5m to £5.9m in its most recent results."The column noted that this revenue stream would inevitably involve a certain amount of lumpiness, ultimately leading to volatility in share price.It further added that Games Workshop was wrestling with a secular threat -- it was reliant on a generation of loyalists who, as they have matured, have been able to absorb increasing prices forever."They will not be around forever," Questor said.Thus, Games Workshop's challenge was to recruit a new wave of younger, less affluent customers going forward."To overcome these hurdles, management must be careful not to get stuck in a fantasy world of their own," wrote the column, adding it believed the shares possessed upside potential.Meantime, the Financial Times' Lex column contended that longer term volatility surrounding Nigeria's just-floated currency, the naira, should suit soap-maker PZ Cussons.The outfit started back in 1879 as a Sierra Leone trading post, which meant it knew a thing or two about riding through good times, and bad.But, the UK-based company still collected about two-fifths of its sales from Nigeria, which meant shifting product along rough roads to open-air markets.Nigeria's currency floated in June against the US dollar -- it was previously pegged -- and promptly dived by about half, which dented PZ Cussons' profits."The company has seen such volatility before," lathered Lex."It reacted by massaging prises up slowly, prioritising higher-value products form scarce imported materials," the column noted.The maker of Imperial Leather soap also kept an eye firmly on the main prize at stake -- Africa's burgeoning population and its reliable demand for consumer products.Lex noted that floating a currency ultimately lessened the risk of shortages, in exchange for a little more price volatility."Long term, that suits Nigeria and PZ Cussons."