Gaming Realms  

 


Refocusing into highly profitable licensing model and disposal of assets create significant value creation opportunities

Gaming Realms is a developer, publisher 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, which was sold to PartyGaming for just under £96 million in 2009.

- Strategy focused on exploiting valuable range of IP

Gaming Realms has developed and acquired a host of popular games, including the flagship “Slingo” brand. The focus is upon exploiting this IP across its real money gaming, social gaming and licensing divisions, with the strategy being to allocate capital towards the more profitable real money gaming and content licensing operations.

- Disposal of B2C brands provides significant cash inflow

Gaming Realms has recently sold a 70% stake in certain UK online casino B2C businesses to River UK Casino Limited (RUKC) for a total value of up to £23.1 million. The minimum payment is £8.4 million, along with a further maximum cash earn-out payment of £14.7 million. Providing significant further potential, the retained 30% stake is subject to a mutual put & call option based on an uncapped valuation of 5.5 times RUKC’s 2020 EBIT.

- Valuation suggests 148% upside

Our sum-of-the-parts based valuation is 14.55p per share, implying 148% upside from the current price of 5.875p. However, we use what we consider to be very conservative assumptions for each part of the valuation and as such believe there could be significant further upside potential. Conviction Buy. 

Table: Financial Overview

Year to Dec

2018E

2019E

2020E

2021E

Revenue (£m)

20.87

16.90

21.20

24.60

Adjusted EBITDA (£m)

(0.31)

0.82

4.10

7.50

EPS (p)

(0.09)

(1.62)

(0.50)

0.65

Source: Align Research forecasts

 

CONVICTION BUY - Price target 14.55p

 

Key data

Share price

7.875p

52 week high/low

12.25p/7.75p

Exchange

AIM

EPIC

GMR

Shares in issue

284,438,747

Market Cap

£16.7m

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.