By Richard Gill, CFA

In a brief statement, Gaming Realms (GMR), the developer and licensor of mobile focused gaming content, has announced it has extended its licensing and revenue share agreement with 888 Holdings plc.

 Under the terms of the partnership, Gaming Realms’ existing agreement with 888, announced on 15th  January 2018, has been extended to include 888casino.com. 888, which hosts Gaming Realms’ Slingo games on its Dragonfish B2B platform, has now also launched the entire Slingo Originals portfolio, distributed via Gaming Realms’ aggregation partner SG Digital, on its leading B2C site 888casino.com.

ASSESSMENT

It is good to see Gaming Realms continue the good momentum from Q1 2020 into Q2, with 888 being one of the world’s leading gaming brands with an established global user base. This extension not only provides the opportunity for an additional revenues but also confirms that big name gaming brands are continuing to be attracted to Gaming Realms’ portfolio of unique content. The news has also added further momentum to the share price, which at 9.5p has more than doubled from lows seen in mid-March following the COVID-19 inspired slump.

For 2020 we are currently looking for maiden annual EBITDA at the group level of just under £1.5 million. However, given the strong trading recently announced for Q1 we may look to increase our expectations in due course. For 2021, as licensing revenues rise and the operational gearing kicks in, we are currently looking for EBITDA of £3.3 million, and £5 million in 2022. We point out that our current forecasts could be considered conservative as we assume no further significant distribution deals, in addition to those already announced, are signed over the forecast period.

Our peer derived target price remains at 25.37p, implying upside of 167% from the current price. Assuming management continue to deliver on expectations over time, we would expect a significant re-rating in the shares from current levels. Our stance remains at Conviction Buy.

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