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Deal with Microsoft, but growth and funding questions remain
Thursday 20 Apr 2017 Author: Steven Frazer

AIM-quoted eSports minnow Gfinity (GFIN:AIM) will run the Forza Racing Championship Xbox competition for technology giant Microsoft under an exclusive partnership deal.

Shares in Gfinity, which promotes ‘live’ computer gaming tournaments around the world, jumped more than 10% on the news to 21.25p. The business is now valued by the market at £33.5m.

We believe investors should watch from the side lines given the company’s unproven growth model and funding requirements.

Revenue for the first half to 31 December 2016 jumped 45% year-on-year yet it remained minuscule at barely more than £0.9m.

Analysts forecast £2.7m revenue in the full year to 30 June 2017.

Cash used in the first half topped £1.7m, eating a large whole in net cash balances which fell to £2.7m. That’s despite raising £3.7m of new funding last July.

It implies further cash will be needed from investors if Gfinity is to hit analysts’ £0.8m pre-tax profit breakthrough target in 2019.

Gfinity has already worked with Microsoft, organising an Xbox programme of events to coincide with the October 2016 launch of the Gears of War 4 game.

The Forza Racing deal is the latest of several partnerships with global gaming and technology brands, including Hewlett Packard and Activision Blizzard, the developer behind the Call of Duty game.

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