Gaming Realms - Update 

 


Refocus into highly profitable licensing model complete

Gaming Realms is a creator and licensor of real money and social games with operations in the UK, U.S. and Canada. The business was set up by the team behind Cashcade Ltd, creator of bingo brand Foxy Bingo and which was sold to PartyGaming for just under £96 million in 2009.

- Disposal of real money B2C assets complete and cash received

Gaming Realms has completed the disposal of its real money gaming business Bear Group Limited to a subsidiary of Oslo Bors listed River iGaming plc, as well its residual 30% stake in River UK Casino Limited. An initial cash sum of £7.35 million has been received, with an additional £1.5 million due on or before 31st December 2020. River has also assumed £2.65 million of liabilities associated with Bear Group.

- Strategy now focused on highly profitable licensing model

The transaction close marks the company’s exit from being a direct supplier of games to the challenging UK real money gaming B2C market. The focus is now upon expanding the high margin licensing division, which grew revenues by 167% in 2018. Two recently signed distribution deals, with Relax Gaming and Scientific Games, provide the opportunity for a marked acceleration of growth from H2 this year and beyond.

- Valuation suggests 360% upside

With costs reduced significantly following the transaction close and the licensing model having very high margins, Gaming Realms looks well placed to grow profits significantly in the coming years. Our discounted peer based EV/EBITDA valuation suggests a target price of 26.79p, 360% upside from the current price. We update coverage with a stance of Conviction Buy.

Table: Financial Overviev

Year to Dec

2019E

2020E

2021E

2022E

Revenue (£m)

9.84

6.62

8.94

11.87

Adjusted EBITDA (£m)

(0.92)

1.04

3.47

6.15

Pre-tax (p)

2.87*

(3.63)

0.20

1.31

Source: Align Research *including gain on disposal

 

CONVICTION BUY - Price target 26.79p

 

Key data

Share price

5.825p

52 week high/low

9.3p/4.05p

Exchange

AIM

EPIC

GMR

Shares in issue

284,428,747

Market Cap

£16.57m

Sector

Travel & Leisure

IMPORTANT: Gaming Realms (GMR) is a research client of Align Research. Align Research and a director of Align Research own shares in GMR. For full disclaimer information please refer to the last page of the full document.

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