Bragg Gaming’s core asset is Oryx Gaming, a fast growing online B2B gaming solution provider. We forecast C$38.4m revenues in FY19, with continued double-digit revenue growth until FY22. The underlying Oryx business is cash generative and we estimate that group EBITDA margin will expand from break-even at H119 to 7.6% next year. Investment risk is high, largely due to the need for financing, but Bragg is strategically well positioned to make accretive M&A. Key milestones will be the development of positive cash flow, as well as the successful payment of the C$32.6m contingent cash consideration for Oryx. Bragg is still an early-stage business and trades at 15.3x EV/EBITDA and 11.2x P/E for FY20e.
Bragg Gaming is an online gaming technology holding company, formerly known as Breaking Data Corp. The business was fully rebranded with new management in December 2018, after the C$51m acquisition of Oryx, a high-growth, predominantly European online B2B gaming solution provider. Bragg’s strategy is to expand its B2B gaming business, both organically and through complementary acquisitions, as well as through strategic partnerships. At H119, management announced a strategic review of its online sports media outlet, the sale of which could provide meaningful upside to our cash forecast.
Bragg’s continuing operations are now fully derived from Oryx, which grew at 240% in FY18 and 48% in H119. Oryx has an encouraging pipeline of new customers and, with c 80% of revenues derived from content aggregation, we forecast 31% revenue growth in FY19 and 23% in FY20. For FY19, we estimate 15.2% EBITDA for the Oryx business, leading to a group margin of 4.3%. Including the C$32.6m of contingent cash consideration (due in H120 and H121), net debt was C$32.7m at H119. Our estimates assume that the consideration will be satisfied equally via equity and debt and our adjusted net debt forecast declines to C$24.2m at FY20.
Bragg Gaming has a limited reporting history and has yet to generate net profit or positive net cash. The group trades at 15.3x EV/EBITDA and 11.2x P/E for FY20e, which compares to Oryx’s purchase price of 7.8x EBITDA for FY20e. Investment risk is high, due to the need for financing (both for the earnouts and for M&A), but the group’s structure is simplifying and Bragg is strategically well positioned to make accretive acquisitions. Our core DCF valuation is C$0.36/share.