Gaming Realms
Written by
Gaming Realms |
Maiden profits |
Trading update |
Travel & leisure |
3 November 2016 |
Share price performance
Business description
Next events
Analysts
Gaming Realms is a research client of Edison Investment Research Limited |
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Gaming Realms has released a positive Q316 trading update. Real money and social/licensing revenue more than doubled and the group moved into profit, with EBITDA of almost £1m. The Slingo brand is ideal for mobile and has successfully crossed over from social to real money gaming, as well as attracting blue-chip licensing partners. We expect Gaming Realms to broadly break even at the EBITDA level for 2016 and to move into solid profitability in 2017. The group has passed a tipping point in its development, yet the 2017 EV/EBITDA is only 8.0x.
Year end |
Revenue (£m) |
EBITDA* |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14** |
11.2 |
(7.8) |
(8.4) |
(5.0) |
0.0 |
N/A |
N/A |
12/15 |
21.2 |
(4.1) |
(5.0) |
(2.1) |
0.0 |
N/A |
N/A |
12/16e |
35.5 |
0.0 |
(2.0) |
(0.7) |
0.0 |
N/A |
N/A |
12/17e |
54.3 |
6.0 |
4.0 |
1.3 |
0.0 |
14.2 |
N/A |
Note: *Normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **15 months.
Positive trading update: Maiden profits
Q316 real money gaming (RMG) revenue grew by 113% to £5.9m (Q315: £2.8m), with Slingo and new licensed brands such as Britain’s Got Talent (bgtgames.com) doing well. Social gaming and licensing revenue grew by 189% to £2.5m (Q315: £0.9m), with a range of licensing deals beginning to contribute (including Zynga and Scientific Games) although the main uplift from these will come in 2017. Q316 EBITDA was a profit of £0.96m (no comparative available, the H215 EBITDA loss was £1.7m).
Building momentum through H216
The ‘Grizzly’ platform is scaling well and Gaming Realms continues to attract blue-chip licensing partners including, recently, Express Newspapers (a three-year deal for Gaming Realms to be the platform provider for Express Wins and Star Wins). A target of break-even for 2016 implies over £2m of EBITDA in Q416, which is very strong quarter-on-quarter progress, especially since recent £/$ depreciation is unhelpful for US development costs. We have reviewed our revenue mix for 2017, with more emphasis now on RMG (which is trending very positively but faces the extension of POC gaming taxes for free play from mid-2017). Taking these factors into account, we have trimmed our EBITDA forecasts from £0.3m to break-even in 2016 and £6.9m to £6.0m in 2017. The group is still relatively early stage and on a strongly upward trajectory, albeit that the precise shape is still hard to forecast.
Valuation: At a tipping point
Gaming Realms has just moved into profit, with encouraging RMG KPIs and high-quality new licensing partners coming on board. The 2017e EV/EVITDA of 8.0x is broadly in line with the gaming peer group, yet Gaming Realms has significant potential once it can demonstrate that profitable growth momentum is established.
Financial summary
Exhibit 1: Financial summary
£m |
2014* |
2015 |
2016e |
2017e |
||
Year end December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
11.23 |
21.21 |
35.50 |
54.30 |
EBITDA |
|
|
(7.82) |
(4.11) |
0.00 |
6.00 |
Operating Profit (before amort. and except.) |
|
(8.33) |
(4.94) |
(2.00) |
4.00 |
|
Amortisation of acquired intangibles* |
(0.80) |
(1.46) |
(1.50) |
(1.00) |
||
Exceptional items |
(0.23) |
(0.32) |
0.27 |
0.00 |
||
Share based payments |
(0.44) |
(1.05) |
(1.70) |
0.00 |
||
Operating Profit |
(9.80) |
(7.76) |
(4.93) |
3.00 |
||
Net Interest |
(0.04) |
(0.01) |
0.00 |
0.00 |
||
Mov't in deferred consideration |
0.00 |
(0.37) |
(1.00) |
0.00 |
||
Profit Before Tax (norm) |
|
|
(8.38) |
(4.95) |
(2.00) |
4.00 |
Profit Before Tax (FRS 3) |
|
|
(9.85) |
(7.78) |
(4.93) |
3.00 |
Tax |
0.09 |
0.34 |
0.15 |
(0.24) |
||
Profit After Tax (norm) |
(8.28) |
(4.62) |
(1.85) |
3.76 |
||
Profit After Tax (FRS 3) |
(9.75) |
(7.44) |
(4.78) |
2.76 |
||
Average Number of Shares Outstanding (m) |
165.2 |
215.7 |
263.0 |
274.1 |
||
EPS - normalised (p) |
|
|
(5.0) |
(2.1) |
(0.7) |
1.4 |
EPS - normalised fully diluted (p) |
|
|
(5.0) |
(2.1) |
(0.7) |
1.3 |
EPS - (IFRS) (p) |
|
|
(5.9) |
(3.4) |
(1.8) |
1.0 |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
||
EBITDA Margin (%) |
-69.6 |
-19.4 |
0.0 |
11.0 |
||
Operating Margin (before GW and except.) (%) |
-74.2 |
-23.3 |
-5.6 |
7.4 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
17.06 |
29.27 |
27.35 |
27.54 |
Intangible Assets |
16.76 |
28.93 |
27.01 |
27.00 |
||
Tangible Assets |
0.30 |
0.34 |
0.34 |
0.54 |
||
Investments |
0.00 |
0.00 |
0.00 |
0.00 |
||
Current Assets |
|
|
6.24 |
6.55 |
5.90 |
8.80 |
Stocks |
0.00 |
0.00 |
0.00 |
0.00 |
||
Debtors |
2.22 |
4.02 |
4.50 |
5.00 |
||
Cash |
3.99 |
2.20 |
1.00 |
3.30 |
||
Other including player balances |
0.02 |
0.34 |
0.40 |
0.50 |
||
Current Liabilities |
|
|
(5.26) |
(9.32) |
(8.10) |
(8.50) |
Creditors |
(5.25) |
(9.32) |
(8.10) |
(8.50) |
||
Short term borrowings |
(0.01) |
0.00 |
0.00 |
0.00 |
||
Long Term Liabilities |
|
|
(2.43) |
(3.71) |
0.00 |
0.00 |
Long term borrowings |
0.00 |
0.00 |
0.00 |
0.00 |
||
Other long term liabilities |
(2.43) |
(3.71) |
0.00 |
0.00 |
||
Net Assets |
|
|
15.61 |
22.80 |
25.15 |
27.84 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(8.02) |
(3.83) |
(0.80) |
4.50 |
Net Interest |
(0.04) |
(0.21) |
(0.21) |
0.00 |
||
Tax |
0.05 |
0.34 |
0.00 |
0.00 |
||
Capex |
(0.69) |
(1.87) |
(2.00) |
(2.20) |
||
Acquisitions/disposals |
(4.12) |
(7.66) |
(1.90) |
0.00 |
||
Financing |
11.81 |
12.00 |
3.60 |
0.00 |
||
Dividends |
0.00 |
0.00 |
0.00 |
0.00 |
||
Net Cash Flow |
(1.01) |
(1.23) |
(1.31) |
2.30 |
||
Opening net debt/(cash) |
|
|
(5.02) |
(3.98) |
(2.34) |
(1.00) |
HP finance leases initiated |
0.00 |
0.00 |
0.00 |
0.00 |
||
Other |
(0.03) |
(0.41) |
(0.03) |
0.00 |
||
Closing net debt/(cash) |
|
|
(3.98) |
(2.34) |
(1.00) |
(3.30) |
Source: Gaming Realms accounts, Edison Investment Research. Note: *15 months.
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