By Richard Gill, CFA

Gaming Realms (GMR), the developer and licensor of mobile focused gaming content, has announced it has been awarded a provisional iGaming supplier licence by the Michigan Gaming Control Board. This will allow the company to provide its Slingo Originals game content to Michigan’s licensed online casino operators once iGaming is approved to go live by the State’s Gaming Control Board.

ASSESSMENT

Gaming Realms has been focussing on expanding its operations in the US market as individual states begin to legalise online gambling. The licence in Michigan adds to an existing licence in New Jersey, with a licence having also been applied for in Pennsylvania. iGaming is expected to go live in Michigan imminently following approval by the State’s Gaming Control Board, with Gaming Realms having already signed deals with a number of licensed operators.

Michigan represents a large opportunity for the firm, with gaming website Gaming Sharp estimating that the 10 million population state could become one of the biggest markets for sports betting and legal online gambling in the US. It is looking for a total market size of $650 million in the first year, with the online casino and online poker segment estimated to be worth $250 million in revenue. We note that in the more mature New Jersey market, which has a slightly lower population than Michigan (8.9 million), total gaming revenues in the 11 months to November 2020 were $870.89 million, meaning the Michigan forecasts could prove to be conservative in the longer term.

Gaming Realms had an excellent 2020, with the shares having risen from a low of 4.5p in March to 22p by the year end following a string of positive trading updates. We note that the company previously benefitted from the lockdown situation in the UK so the next few weeks/months could again see a boost to trading, as people stay at home and spend more time gambling online. The shares currently trade at 25.3p, below our peer derived valuation of  39.4p. As such, we are happy to retain our stance of Conviction Buy.

DISCLOSURE & RISK WARNING

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

This is a marketing communication and cannot be considered independent research nor is it subject to any prohibition on dealing ahead of its dissemination. Nothing in this report should be construed as advice, an offer, or the solicitation of an offer to buy or sell securities by us. As we have no knowledge of your individual situation and circumstances the investment(s) covered may not be suitable for you. You should not make any investment decision without consulting a fully qualified financial advisor.

Your capital is at risk by investing in securities and the income from them may fluctuate. Past performance is not necessarily a guide to future performance and forecasts are not a reliable indicator of future results. The marketability of some of the companies we cover is limited and you may have difficulty buying or selling in volume. Additionally, given the smaller capitalisation bias of our coverage, the companies we cover should be considered as high risk

This financial promotion has been approved by Align Research Limited

• Gaming Realms