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.

  • RISK WARNING & DISCLAIMER

    Gaming Realms is a research client of Align Research. Align Research and a director of Align Research own shares in Gaming Realms. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/ 

    For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

Table: financial overview
Year to Dec 2019E 2020E 2021E 2022E
Revenues (£m) 9.84 6.62 8.94 11.87
Adjusted EBITDA (£m) (0.92) 1.04 3.47 6.15
Pre-tax (£m) 2.87* (3.63) 0.20 1.31
Source: Align Research .* including gain on disposal

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