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I've been invested here for years and the share price has always seemed to be confusingly low. I think it's just because it's a boring company that doesn't get the press coverage or public interest so it flies under the radar. I've been adding to this since 2017 and even as the share price has risen it has been paying around 8% in dividends and special dividends most years. With zero debt and plenty of growth. I don't get it. Steady growth and reliable dividends just doesn't do it for today's investor.
To be fair, I didn't say no divi until we got to Ā£1, just not yet. It could well be part of the mix before then. But the US market in particular still has a lot of room to grow and in the short term I think we would be better off focusing on that.
A divi at some point over the next 4 years if and when growth slows to single digits sounds fine. I can't see growth slowing to single digits any time soon though, certainly not within the next 2 years. Currently only around 13% of Americans can legally access an online casino(according to eilers and Krejcik), a number that will continue to grow as more states legalise. From the same report the market grew 30% in 2023, so 25% growth rate for GMR over the next 4 years doesn't seem crazy to me. From Gaming realms 2022 annual report North American Rev grew 122%, and 2021 North American Rev was more than all previous years combined. We are waiting to go live in Virginia this year as well as Greece (and probably more I'm forgetting) so 2024 already has some growth guaranteed. Not to mention the new partners we've gone live with in jurisdictions we are already up and running in or new games we have added to existing partners.
It is a lot of cash to be sitting on, and that cash pile will only grow if they have nothing else to spend it on so a divi in April could well be what they decide. But my guess is that is still a year or 2 away. But it's just my guess.
Also been here since 2017, traded in and out to bank some profit but mostly sitting on 350,000 shares at an average price of around 20p. I agree with your view of the business track record and growth but I don't think a divi is the best thing for us just yet.
My theory, completely made up based on what I would do if I was running the company, is that they will continue to grow to a value of around Ā£1 per share before selling. The revenue growth is impressive, and the future looks good but they do struggle with integrations. From when they sign a deal to when the games go live on a website and start making revenue is still way too long. And they don't seem to be able to work on too many integrations at the same time. As America continues to legalize online gaming and the board signs more and more deals getting our games in front of more players in more jurisdictions this is going to continue to be a bottleneck for us. I think now is the time for grabbing market share by investing in their own capabilities. A divi would obviously help get us to that Ā£1 target but I think there is still some more juice to be squeezed before they make that call.
It is a lot of cash to be sitting on though so who knows. Just my opinion anyway.
https://www.finsmes.com/2023/04/after-a-decade-of-acquisitions-gaming-realms-doubles-profit.html
Really can't see anything I don't like in that report. p/e ~22 now, no debt, well positioned to take advantage of the growth in the US market while still expanding steadily into the more mature markets in Europe. If I had to nitpick it's still taking them a long time to integrate with new operators and aggregators but at least that gives us pretty much guarantied growth as we work through the backlog. 4ThePlayer finally getting going is really great news as they already have a lot of reach.
Social still making money is also really positive since it's essentially just an acquisition tool. Ebita still growing faster than revenue. Ops expenses growing but this is to be expected as revenue grows since a major cost is just license fees.
Personally I don't see a dividend coming for at least a year or 2. There's still a lot of land to grab and if they can continue to grow the games portfolio while growing earnings and managing costs they might get bought by Flutter, if not a game dev like Evolution gaming. Either way, reinvesting these earnings should super charge growth and I can see the P/E getting back into the 40-60 range without the valuation getting too out of hand.
Did anyone see anything concerning in the report? As it stands I can't see myself ever selling these shares.
Yeah agreed. It's a strange one to RNS in my opinion. It's interesting as it shows they are making good partnerships with recognizable brands but games are always going to take a long time to develop and developers will have to be moved from other projects or have it added to a backlog.
It's also commercially sensitive info from the operators side. An online casino isn't going to want to provide numbers on how much they make from each individual slot game supplier they work with or the commercial terms of each agreement. Even if this was discussed with GMR there is no way they can publicize it. So revenue projections for a new supplier are going to be difficult, especially with slingo being a new game format as operators don't know how their customers are going to react.
You're going to have to infer it from the size of the company, or the reach they have with customers (if talking about an aggregator).
The tetris deal is different again though. The Tetris company own that game, and are now licensing GMR to use their brand. So ALL of the previous deals we have signed with operators will benefit from this. Similar to the previous agreements with monopoly for example.
This is the real growth potential of GMR. If we sign with an operator we have a new cohort of players who can access an ever growing list of games. If we launch a new game, we are launching it on an ever growing list of online casinos because we keep signing new operators. While largely keeping the cost base fixed
Yeah I take your point re slingo. Like Turbo said it wasn't always their main focus and they do produce a limited number of other slots, blackjack, roulette etc and it would be good to see them round that side out a bit. But I think the majority of their growth is going to come from slingo, with the other games as sort of an added bonus for operators who sign with us.
On the new contracts dropping to the bottom line, I do think they could do a better job providing context and the expected impact each deal is having on revenue targets as it can be hard to compare an operator to a new territory to an aggregator. But more importantly they could be clearer on the timing. After a deal is signed it is likely taking 6 months to a year before that translates into revenue as there is integration work needed, and they don't do a good job of explaining that. We're a bottleneck in that regard as the devs in GMR can only work on a certain number of integrations at a time. 6 months from signing a deal to a player being able to access a game of slingo would actually be pretty quick. There's then at least 1 month lag before we get any commission from their play, and there are likely terms to offer cheaper or even 0 commission for the first 1 to 3 months to encourage the operator to push the games.
They do regularly mention the benefit of their current strategy being that new contracts add to the bottom line while costs remain fixed. EBITA growing faster than revenue with a 40% margin.
"Total revenue grew 10% from Ā£7.7m in H1'21 to Ā£8.5m in H1'22. Group EBITDA grew 12% to Ā£3.5m2 (H1'21: Ā£3.1m), representing a 41% EBITDA margin (H1'21: 40%)." -interim report
The market rates GMR at a 40+ p/e which I wouldn't say is cheap, but with profit before tax increasing 60% YoY in H1 it's justified. The growth will come from the US market, with 55% of revenue already coming from the US and only a handful of states currently regulated.
As for slingo being a risk I can't see how. Slingo is proving to be very popular with casino operators and is seen as premium content, meaning GMR can charge a higher commission than other slots providers. Without slingo we're just a run of the mill slots company and the 40 P/E starts looking very punchy
The article does a good job of highlighting a benefit of how the board have handled slingo from the start. By working with the big slots companies instead of against them they have been able to release some huge titles. Starburst, Rainbow riches, fluffy favorites'. These are all massive slots titles and to have a slingo version is a pretty big deal. Without slingo, if we were just a slots company with 60 or so well performing games, I can't see NetEnt agreeing to us to make a gaming realms version of their most successful slot game ever (starburst).
Not to mention the media brand partnerships which they have very well from the start. Shark week, deal or no deal, xfactor, Britain's got talent, etc. Which obviously comes from the founders history of launching foxy bingo.
"Here is the number of games in the top 25 by manufacturer representation: Light & Wonder, seven games; Everi, five games; Evolution, three games; Inspired, Gaming Realms and High 5 Games, two games each; Design Works Gaming, IGT, AGS and Ainsworth, one game each."
https://www.topuscasinos.com/news/ranking-the-top-performing-mobile-slots-this-month
They were asked on the last investor call about the potential to squeeze more out of margin as their games became more popular and without getting into specifics they claimed they were considered "premium content" and so already charged a high margin compared with other game providers.
Thanks for posting that.
Great results. Between the pipeline of new operators and the multi state deals in the US, growth is pretty much gtd. His guess of 3 or 4% the total UK slots is also a very good sign as more states regulate gaming.
"2021 fiscal year, iSoftBet generated revenue of approximately 30 million euros and EBITDA of around 8 million euros. The company has approximately 350 employees and contractors." from https://www.nasdaq.com/articles/international-game-technology-to-acquire-isoftbet-in-eur-160-mln-cash-deal
GMR has 6.7m euro in ebita and revenue of 17.30 Euro, from only 57 games (I think isoftbet is around 125) and 62 full time staff.
Even ignoring the popularity of the slingo game format, just comparing them as 2 slots providers I think GMR looks very good against the isoftbet valuation.
Yeah I think your maths are right. Value of the deal has dropped to about 842p.
1 Share gets you 690p + 0.0359 gxo shares ($52.90 is the current sp, so Ā£42.39*.0359 = 152p) total is 842p.
Although if the court date is today is it not too late to elect to take the all-cash offer?
I would be disappointed with a sale in 2022. We have guaranteed growth this year with all of last years deals starting to drop to revenue. We grow revenue by releasing more games and signing more distribution deals. This gives us a relatively stable cost base and pretty much guarantees improved margin as revenue grows.
Looking across the homepages for all the major gambling companies covering the UK/IRL, European and Scandinavian markets, slingo is becoming more and more prominent showing the gambling companies are backing it. Blueprint, one of the major slots providers, even tried copying the format with 'Prize Lines' which hasn't really landed. If imitation is the greatest form of flattery then that's high praise indeed.
As far as I'm concerned the new business model has been proven but a couple of years of backing that up with profits while the American market matures and I think we could sell for multiples of today's price. I think the market is still pricing us as a regular slots company, without pricing in the uniqueness and popularity of the slingo format.
This is on it's way to the moon. I don't think the previously signed deals are even reflected in the numbers yet. And 100% agree that it's IF not WHEN for the rest of the states. Most are in the process of figuring it out now, and the rest will jump on the tax revenue ASAP so as not to be left behind.
The game is really successful in the UK/I market but it's actually an American game so should do as well or better over there. I'm literally never selling this share.
Fair. I've traded in and out a little to keep myself sane but mainly buying long term. And long term I think this is still a steal at current price.
Although it's "in a rut" for 3 months having more than doubled in price in the previous 3 months, and the 3 months before that.