By Richard Gill, CFA
Gaming Realms (GMR), the developer and licensor of mobile focused gaming content, has announced a brief but highly encouraging update covering trading in the six months to June 2020. Following on from the last update on 2nd June, the company has continued to trade ahead of market expectations, with revenues for the first half amounting to £5 million. This was ahead of £3.1 million in H1 2019, with adjusted EBITDA of c.£1.2 million up from a comparative loss of £0.1 million.
Growth in the period was driven by the further expansion of the company’s international partners and the release of new “Slingo” games, which are said to have had increased take up by consumers. Unlike many companies, revenue growth was in fact helped by the impact of COVID-19, with trading during the 7 weeks following the period end (post the most harsh lockdown restrictions) said to have been maintained at similar levels.
Overall, revenue and EBITDA for the full year to 31st December 2020 are now expected to be “materially ahead of current market expectations”, with interim results to be announced on 8th September.
With this update Gaming Realms has demonstrated that it can deliver consistently strong trading, with the statement following on from a number of positive announcements earlier this year. This is yet further vindication of last year’s decision to focus on the high margin Licensing division. In our audio interview with Finance Director Mark Segal back in April we speculated that the company could be a beneficiary of the lockdown situation, with people staying in their homes having more time to play games, so it is good to see a positive outcome on that front.
For the full year to December 2020 our current forecasts are for maiden adjusted EBITDA of just under £1.5 million. However, given that today’s update confirmed that £1.2 million has been delivered in the first half alone we will be updating our forecasts following the upcoming release of the interim results. Numbers for the next two years are also subject to review but we continue to expect strong growth in 2021 and 2022 as the benefit of operational gearing and the addition of further licensing partners comes through.
Gaming Realms shares currently trade at 21.3p, up from a recent low of 4.45p seen in March this year and at a 4 year high. Our target price on our current forecasts is 25.37p, implying further upside potential even before we revise our numbers to consider the better than expected trading. Our stance remains at Conviction Buy.
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