By Richard Gill, CFA

Gaming Realms (GMR), the developer and licensor of mobile focused gaming content, has announced a brief trading update covering the full year to December 2020.  Revenues for the year are expected to be c.£11.2 million with an adjusted EBITDA of c.£3.1 million. December was said to have been a record month on the back of continued growth in the content licensing business, which grew by over 100% in the year as a whole. The division launched with 26 new partners in the period including the likes of Sky Betting and Gaming and PaddyPower Betfair. The positive momentum is said to have continued into 2021, with the company recently announcing the launch of its Slingo content in Italy with both Goldbet and Sisal.

Elsewhere this year, in the US a number of key contracts have been signed, including a multi-state contract with BetMGM to provide content through a direct integration. Gaming Realms has been granted a provisional supplier licence by the Michigan Gaming Control Board, which will allow all Slingo Originals content to be provided to Michigan’s licenced online casino operators. The application process for a licence in Pennsylvania is ongoing.

Assessment

Last year was the first when Gaming Realms really started to show that its strategy of focussing on the high margin licensing business could deliver. The expected revenues for the full year are slightly ahead of our expectations of £11 million, with adjusted EBITDA well ahead of our forecast of £2.47 million. We will provide a more detailed update and review our forecasts when the results are released in the week commencing 19th April.

The shares have reacted well to the news, rising to 34.8p, just short of the recent 6 year high of 37.25p. Ahead of the results release we note that further news could be announced on the company’s US expansion, which could be a further share price catalyst. We expect trading to continue to be strong as further new partners settle in and contribute to earnings, with the company also previously benefitting from the lockdown situation in the UK  as people stay at home and spend more time gambling online. With the shares trading below our peer derived valuation of  39.4p, which has scope to be increased on the results announcement, we are happy to retain our stance of Conviction Buy.

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