Gaming Realms - Update
Gaming Realms is a creator and licensor of real money and social games with operations in the UK, U.S. and Canada. The business was set up by the team behind Cashcade Ltd, creator of bingo brand Foxy Bingo and which was sold to PartyGaming for just under £96 million in 2009.
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Disposal of real money B2C assets complete and cash received
Gaming Realms has completed the disposal of its real money gaming business Bear Group Limited to a subsidiary of Oslo Bors listed River iGaming plc, as well its residual 30% stake in River UK Casino Limited. An initial cash sum of £7.35 million has been received, with an additional £1.5 million due on or before 31st December 2020. River has also assumed £2.65 million of liabilities associated with Bear Group.
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Strategy now focused on highly profitable licensing model
The transaction close marks the company’s exit from being a direct supplier of games to the challenging UK real money gaming B2C market. The focus is now upon expanding the high margin licensing division, which grew revenues by 167% in 2018. Two recently signed distribution deals, with Relax Gaming and Scientific Games, provide the opportunity for a marked acceleration of growth from H2 this year and beyond.
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Valuation suggests 360% upside
With costs reduced significantly following the transaction close and the licensing model having very high margins, Gaming Realms looks well placed to grow profits significantly in the coming years. Our discounted peer based EV/EBITDA valuation suggests a target price of 26.79p, 360% upside from the current price. We update coverage with a stance of Conviction Buy.
Gaming Realms is a developer, publisher and licensor of mobile games. Co.'s principal activities is that of an online bingo and casino operator, the provision and marketing of interactive bingo and casino services to customers in the U.K. and social gaming on Facebook and mobile to customers in the U.S. and Europe. Co. has three reportable segment. The social publishing provides freemium games to the U.S. and Europe. Licensing includes IP brand and content licensing to partners in the U.S. and Europe. The real money gaming products and marketing services operates Co.'s brands and provides other digital marketing services to both gaming and non-gaming clients in the U.K.
Align Research is a commissioned research company founded in November 2015 in order to provide the under-served smaller company space with high quality analysis. We have an initial focus on the natural resources sector, in which we see significant opportunities given the current once in a generation bear market, however all undervalued small caps (sub £100m) are considered by our team. Align was founded by industry professionals with decades of experience in the stock markets, headed up by highly qualified individuals from both fund management and analytical backgrounds.
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