By Richard Gill, CFA

A good statement from Gaming Realms this morning, which has announced that results for 2021 are expected to be in line with market expectations. The creator and licensor of innovative games for mobile expects revenues up by 27% at c.£14.5 million for the year, along with adjusted EBITDA up by 70% at c.£5.6 million. The performance was driven by continued growth in the core licensing business, which during the year launched in the newly regulated iGaming markets of Michigan and Pennsylvania and with thirty-five new partners internationally. Results for the year are due out in the week commencing 25^th April.

In terms of new markets, in November 2021 Gaming Realms entered the regulated Romanian iGaming market through a partnership agreement with Superbet, the largest digital and retail betting operator in Romania, which will publish the company’s Slingo content in the country.

In December the company went live with JVH gaming and entertainment group in the newly regulated Dutch market under the Jack’s Casino and Sports brand. Jack’s Casino will initially offer 15 Slingo games to its Dutch player base, with further agreements with other licensed operators agreed and scheduled through Q1 2022.

This year, Gaming Realms has entered the regulated Spanish market with long-term strategic partner Gamesys under its Monopoly and Botamania brands. An initial 14 games have been approved for launch in this market. Following a short exclusivity period with Gamesys, Gaming Realms will also launch its Slingo portfolio with Rank Group’s YoBingo and YoCasino brands in Spain.

Finally, in September last year Gaming realms announced a third-party distribution agreement with 4ThePlayer.com, a developer of innovative mobile-first gambling games, to integrate its content onto Gaming Realms’ platform for distribution in the U.S. The first 4ThePlayer.com slot game, 9K Yeti, has now been released with Paddy Power Betfair and Gamesys. The content will initially be targeted at EU operators, with the North American markets to follow.

While no numbers were given on current trading, the outlook was positive with Michael Buckley, Executive Chairman, commenting, “We believe that the strong momentum of last year will continue into 2022 which is demonstrated by entry into regulated markets announced today.”

ASSESSMENT

This is another positive trading statement from Gaming Realms, which has now developed a reputation for consistently good announcements following the move to a licencing focussed strategy a couple of years ago. While revenues for 2021 are slightly short of our forecast of £14.9 million, adjusted EBITDA is £0.2 million ahead of our £5.4 million forecast. For 2022 we are currently looking for revenues to grow to £20.8 million and EBITDA to £8 million but will review them on the announcement of the full year results in a few months time.

Despite the positive news Gaming Realms shares have slipped to a three month low of just 29p, well off last April’s high of c.47p. We currently have a peer EV/EBITDA multiple based target price of 53.13p for the shares, implying 83% upside. We are happy to retain our target for now and also flag that we continue to believe Gaming Realms could be on the radar as a potential target for a larger player looking to expand its games portfolio and improve margins. Corporate activity in the sector remains high, with three of the companies in our peer analysis now having been acquired in recent months – Activision Blizzard recently agreed a $68.7 billion all-cash takeover with Microsoft.

We retain our target price of 53.13p and stance of Conviction Buy.

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