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AI hit a big milestone last month.

I’m not exactly sure it’s a good one.

Basically, a bunch of AI agents broke free of a test environment without internet access, crawled the open web, and hacked the systems of Hugging Face, all without the knowledge or permission of its human operators.

These AI agents also displayed a new ability.

They were able to communicate and co-operate to complete a task.

They created a new internal message board where they left messages for each other, sharing code vulnerabilities, and organising their escape.

As a layperson, this sounds reasonably alarming.

In fact, more than a dozen experts interviewed by the FT said that these breaches signal a turning point in global cyber security.

This makes the world seem an even scarier place, with war in Europe, and algorithms used to manipulate entire populations.

But when has it ever not been scary?

The world changes, and we must change with it.

Otherwise you end up talking to anyone who’ll listen about ‘the good old days’.

The good old days are happening right now.

If your family is healthy, you see your friends, you’ve got a job that pays your bills and allows you to enjoy yourself, then you’re literally one of the wealthiest people ever to have even walked this planet.

Let’s not pretend things are perfect, of course. They’re not. And the UK is a poor country.

But things can always be worse, and they’re never quite as bad as they seem.

Unlike other market commentators, I do not accept payments to talk positively about stocks. The below is purely my own opinion, which can also be wrong. It is not financial advice, please do your own research. I always disclose if I hold a position.

Rank has been parting Britons from their money in the most entertaining way possible since 1937.

Today that means Grosvenor Casinos, which is the market leader in UK land-based casinos.

The engine is gaming machines.

Personally, I hate gambling. I think it’s a waste of money and unfortunately can lead to addictions. But I also accept that some people enjoy it and it’s their money, the same way people enjoy the occasional pint without becoming alcoholics.

But the Gambling Act reforms landed, and Rank grew machine numbers by 65% to 850 extra machines.

Grosvenor is growing fast, exiting Q4 at £2.37 million a week with a goal of £3 million plus.

There’s capacity for another 650 machines but this will come with a capex cost of £25-£27 million. Management has decided to hold off on this until the current cohort matures, as apparently machines take 2-3 years to get to their optimum levels.

According to Rank’s CEO - the £100 million profit target doesn’t require a “material number of machines”.

Rank upgraded its underlying operating profit to at least £76 million in July against a £68.2 million consensus. This came in at £78.6 million.

However, that’s underlying. Statutory is what actually counts.

This fell 7% £55.7 million because of hits to the business that include fraud and a regulator bill.

But as I said in my YouTube video..

Revenue is vanity, profit is sanity, but cash is reality.

And the cash at Rank is real.

Operations generated £142.9 million after £50.2 million of capex, £48.3 million of lease payments, and the one-offs.

June's refinancing put a four-year £120m facility in place for further liquidity.

There are some negatives though.

Remote Gaming Duty at 40% is going to smash digital profits by around £15 million in FY27.

And the fraud and regulator settlements aren’t exactly great news.

The Chair, CEO, and CFO have all changed within the last year.. though that’s not always a bad thing.

People are also calling for Machine Games Duty to be raised, which is basically the machines driving the growth.

So it’s not all perfect, but then I’ve found that when everything is perfect much of the stock’s upside is priced in. There’s no low hanging fruit.

Shares are currently trading just above 12x forward earnings which isn’t exactly lofty.

But earnings are set to go backwards in FY27 as a result of RGD.

They will then annualise (assuming no hikes) and FY28 builds towards £54.4 million.

If you believe that’s achievable, then the stock starts to look cheap.

The chart is looking like an early stage 2.

The stock shot up in April as profit was upgraded. That appears to have stopped it from going lower.

Profits were upgraded again last month, only for the stock to sell off and test the 90p support zone again.

This was rejected and now the stock is looking for third time lucky for a break through 110p.

This would put the stock into new highs for in 2026 and show more signs of an early stage 2 uptrend.

If the stock was to break down below 90p, that would tell me my trade is wrong.

Stocks can be great and cheap, but I don’t argue with prices.

Speak soon!
Michael