Gaming Realms — Update 3 March 2016

Gaming Realms — Update 3 March 2016

Gaming Realms

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Gaming Realms

New funding to support growth plans

Proposed subscription

Travel & leisure

4 March 2016

Price

19.00p

Market cap

£49m

$1.39/€1.28/£

Net cash (£m) as at 30 June 2015

1.3

Shares in issue

256.9m

Free float

67%

Code

GMR

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(8.4)

(22.5)

(41.1)

Rel (local)

(12.8)

(20.4)

(35.0)

52-week high/low

34.50p

18.25p

Business description

Gaming Realms creates, develops and markets interactive next-generation online gambling and social games delivered via mobile, tablet and desktop computers. It listed on AIM via a reverse takeover (of Pursuit Dynamics) in August 2013.

Next event

Final results

End April

Analysts

Eric Opara

+44 (0)20 3681 2524

Jane Anscombe

+44 (0)20 3077 5740

Gaming Realms is a research client of Edison Investment Research Limited

Gaming Realms has announced it has conditionally raised c £1.55m (gross) of additional funding to support its product launches and platform development. Executive directors have taken 1.6m of the 7.7m new subscription shares (at 20p per share). The company also gave an update on its early-year trading, which showed continued positive momentum.

Year end

Revenue (£m)

EBITDA*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/14

11.2

(7.8)

(5.0)

0.0

N/A

N/A

12/15e

21.5

(4.0)

(2.2)

0.0

N/A

N/A

12/16e

42.5

1.4

0.1

0.0

N/A

N/A

12/17e

65.0

12.0

4.0

0.0

4.8

N/A

Note: *Normalised (and fully diluted EPS), excluding exceptional items, amortisation of acquired intangibles and share-based payments. **15-month period.

Continued positive KPI momentum on its platform

As discussed in our previous update, Gaming Realms achieves higher KPIs on its proprietary Grizzly platform compared to its previous white label offerings. Having sold its white label business to focus content delivered through its own platform, it is pleasing to see the platform continues to deliver improved results across a number of metrics. Average daily newly acquired funded players (+26%), average daily funded players (+9%) and average daily revenue (+9%) are all up q-o-q compared to Q415.

Use of proceeds: Funding further growth

Gaming Realms intends to use the proceeds of the fund raise to support its growth by launching more games on its Grizzly platform, including the Xfactorgames.com site as part of its previously announced partnership with Freemantle Media. It also expects to use part of the funds to provide additional marketing support to the recently launched Lucky Streak social casino game and for other working capital purposes. We expect that further launches will follow as the year progresses, including content related to its partnership with Endemol incorporating the Deal or No Deal brand within the Slingo game format, as well as additional game launches using new house brands. These launches will go a long way towards supporting our 2016 and 2017 revenue and profit forecasts, which we leave unchanged.

Valuation: Successful product launches are key

Gaming Realms trades on a 2017e EV/EBITDA multiple of c 4.0x, which represents compelling value if it can deliver on our profit forecasts and its valuation recognises the size of the growth gap that the company must bridge between now and the end of 2017. To achieve this growth Gaming Realms will need to continue to supplement its product line-up with new games. The board’s participation in the latest funding round is a clear sign of confidence. Confirmation that the recently acquired Slingo business has moved to profitability should be a strong catalyst for share price appreciation.

Exhibit 1: Financial summary

£'m

2013*

2014**

2015e

2016e

2017e

September/December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0.88

11.23

21.50

42.50

65.00

EBITDA

 

 

(2.32)

(7.82)

(4.02)

1.42

12.04

Operating Profit (before amort. and except.)

 

(2.44)

(8.33)

(4.82)

0.52

11.14

Amortisation of acquired intangibles*

(0.05)

(0.80)

(1.00)

(0.90)

(0.80)

Exceptional items

(0.87)

(0.23)

0.39

(0.40)

0.00

Share based payments

(0.04)

(0.44)

(0.50)

0.00

0.00

Operating Profit

(3.40)

(9.80)

(5.93)

(0.78)

10.34

Net Interest

(0.00)

(0.04)

(0.13)

0.00

0.00

Profit Before Tax (norm)

 

 

(2.44)

(8.38)

(4.95)

0.52

11.14

Profit Before Tax (FRS 3)

 

 

(3.40)

(9.85)

(6.06)

(0.78)

10.34

Tax

0.00

0.09

0.03

(0.20)

(0.52)

Profit After Tax (norm)

(2.44)

(8.28)

(4.92)

0.32

10.62

Profit After Tax (FRS 3)

(3.40)

(9.75)

(6.03)

(0.98)

9.82

Average Number of Shares Outstanding (m)

36.4

165.2

220.0

259.2

261.7

EPS - normalised (p)

 

 

(6.7)

(5.0)

(2.2)

0.1

4.1

EPS - normalised diluted (p)

 

 

(6.7)

(5.0)

(2.2)

0.1

4.0

EPS - (IFRS) (p)

 

 

(9.3)

(5.9)

(2.7)

(0.4)

3.8

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

EBITDA Margin (%)

-264.1

-69.6

-18.7

3.3

18.5

Operating Margin (before GW and except.) (%)

-277.7

-74.2

-22.4

1.2

17.1

BALANCE SHEET

Fixed Assets

 

 

6.03

17.06

30.20

26.90

28.00

Intangible Assets

5.92

16.76

28.00

24.60

24.60

Tangible Assets

0.12

0.30

2.20

2.30

3.40

Investments

0.00

0.00

0.00

0.00

0.00

Current Assets

 

 

6.53

6.24

4.20

5.41

15.45

Stocks

0.00

0.00

0.00

0.00

0.00

Debtors

1.34

2.22

2.60

3.50

5.50

Cash

5.06

3.99

1.40

1.71

9.75

Other

0.12

0.02

0.20

0.20

0.20

Current Liabilities

 

 

(1.80)

(5.26)

(9.30)

(6.10)

(7.00)

Creditors

(1.78)

(5.25)

(9.10)

(6.10)

(7.00)

Short term borrowings

(0.02)

(0.01)

(0.20)

0.00

0.00

Long Term Liabilities

 

 

(0.02)

(2.43)

(2.39)

0.00

0.00

Long term borrowings

(0.02)

0.00

0.00

0.00

0.00

Other long term liabilities

0.00

(2.43)

(2.39)

0.00

0.00

Net Assets

 

 

10.74

15.61

22.71

26.21

36.45

CASH FLOW

Operating Cash Flow

 

 

(3.90)

(8.02)

(7.22)

(0.98)

10.04

Net Interest

0.00

(0.04)

(0.10)

0.00

0.00

Tax

0.00

0.05

0.00

0.00

0.00

Capex

(0.44)

(0.69)

(0.50)

(1.00)

(2.00)

Acquisitions/disposals

3.42

(4.12)

(7.30)

1.70

0.00

Financing

5.91

11.81

11.90

1.30

0.00

Dividends

0.00

0.00

0.00

0.00

0.00

Net Cash Flow

4.99

(1.01)

(3.22)

1.02

8.04

Opening net debt/(cash)

 

 

0.00

(5.02)

(3.98)

(0.68)

(1.71)

HP finance leases initiated

0.00

0.00

0.00

0.00

0.00

Other

0.03

(0.03)

(0.08)

0.01

0.00

Closing net debt/(cash)

 

 

(5.02)

(3.98)

(0.68)

(1.71)

(9.75)

Source: Edison Investment Research, Gaming Realms. Note: * *Includes AlchemyBet and BeJig for two months. **15-month period.

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Germany

London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

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