Gaming Realms is a developer, publisher and licensor of mobile and web based real money and social games. The business was set up by the team behind Cashcade Limited, creator of bingo brand Foxy Bingo, which was sold to PartyGaming for just under £96 million in 2009. 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, social gaming and licensing divisions, with the strategy being to allocate capital towards the more profitable real money gaming and content licensing operations. Following a 60% rise in revenues in the 2016 financial year, followed by positive trading in the first half of 2017, the business is on the cusp of profitability. Management expect the business to be significantly EBITDA positive for FY2017 and we expect an acceleration in profits after that. A recent £1.13 million subscription has provided funds for growth, with several directors taking part. Crucially, a deferred consideration payment of $4 million previously due in August this year has been deferred to December, with the company currently organising debt facilities to pay the now $4.5 million liability. Should Gaming Realms successfully meet our forecasts for 2018 and 2019 the shares would trade on very low multiples of EBITDA and, more importantly, cashflow. We set an end 2019 target price of 17.8p for the shares and initiate coverage with a Conviction Buy stance.
19 Sep 2017
Gaming Realms Initiation of Coverage - Conviction Buy
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Gaming Realms Initiation of Coverage - Conviction Buy
Gaming Realms PLC (GMR:LON) | 33.6 0.4 3.9% | Mkt Cap: 98.9m
- Published:
19 Sep 2017 -
Author:
Richard Gill, CFA -
Pages:
23
Gaming Realms is a developer, publisher and licensor of mobile and web based real money and social games. The business was set up by the team behind Cashcade Limited, creator of bingo brand Foxy Bingo, which was sold to PartyGaming for just under £96 million in 2009. 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, social gaming and licensing divisions, with the strategy being to allocate capital towards the more profitable real money gaming and content licensing operations. Following a 60% rise in revenues in the 2016 financial year, followed by positive trading in the first half of 2017, the business is on the cusp of profitability. Management expect the business to be significantly EBITDA positive for FY2017 and we expect an acceleration in profits after that. A recent £1.13 million subscription has provided funds for growth, with several directors taking part. Crucially, a deferred consideration payment of $4 million previously due in August this year has been deferred to December, with the company currently organising debt facilities to pay the now $4.5 million liability. Should Gaming Realms successfully meet our forecasts for 2018 and 2019 the shares would trade on very low multiples of EBITDA and, more importantly, cashflow. We set an end 2019 target price of 17.8p for the shares and initiate coverage with a Conviction Buy stance.