By Richard Gill, CFA

In a short statement, the gambling games creator and licensor Gaming Realms (GMR) has announced the signing of a 3-year agreement with Scientific Games’ Digital Group for the distribution of its flagship Slingo Originals portfolio via SG Digital’s opening gaming system platform. Under the deal all 29 Slingo Originals games, with more expected to launch this year, will be distributed to over 200 operators globally via SG Digital’s platform, one of the industry’s largest content aggregation platforms.

Assessment

This is a brief but positive statement from Gaming Realms, with the shares rising by over 20% to 5.4p on the news. SG Digital is no stranger to Gaming Realms, with the companies having previously worked together on the development and distribution of games such as Slingo Rainbow Riches. SG is a significant player in the industry, currently valued at $2 billion on the NASDAQ and recently posting Q1 revenues of $837 million.

The news follows March’s AGM where shareholders approved the sale of real money gaming subsidiary Bear Group to River Game Operations Limited, licensing of the real money gaming platform and the sale of the residual interest in River UK Casino Limited. As we pointed out at the time, with the cash consideration for these transactions being a total of £11.5 million there could be the potential for a special distribution of cash to shareholders.

We are currently forecasting net cash of £11.6 million for the end of 2020. With a current market cap of £15.4 million that means, less net cash, the remaining licensing focused operations are being valued by the market at just £3.8 million, a multiple of 1.27 times our 2020 forecast for £3 million of EBITDA. Taking another view, valuing the remaining business on a conservative multiple of 5 times 2021 forecast EBITDA equates to £25 million, which added to net cash suggests an end 2020 value for the business of £36.6 million. With 284,428,747 shares in issue this results in a price per share of c.12.9p.

We look forward to the full year results for 2018, which should be released in the coming weeks. For now, our stance remains at Conviction Buy.

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