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.
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|Year to Dec||2019E||2020E||2021E||2022E|
|Adjusted EBITDA (£m)||(0.92)||1.04||3.47||6.15|