Redeye Predicts Further Swedish Difficulties For Global Gaming

Redeye has forecast that it will take some time for Global Gaming to leave behind the impacts that the challenges of 2019 will continue to have on the organisation, with “major losses” being said to be likely in the short term.

The business saw SafeEnt, a subsidiary operating its flagship igaming agency Ninja Casino alongside, lose its Swedish online legal gambling licence and betting earlier this year due to “serious shortcomings.”

A number of appeals were launched later, the last of which saw an appeal against the revocation of the licence dismissed by the Administrative Court of the country.

Redeye expresses a perception that if more appeals are launched, this could be a pattern that could well continue: “The appeal of the licence revocation decision was rejected by the Administrative Court. This was, according to us, no surprise, and we believe that Global Gaming with take the appeal to higher courts. However, we don’t expect that higher courts will make a different decision.”

The third quarter of the year was the first without any income from Sweden for the Ninja Casino company, claiming that “adapting to a new reality where Finland and Estonia are Ninja’s main source of revenues will take time and is likely to bring major losses in the short-term”.

While marketing investment has declined over the period as well as a “substantial decline in revenue” in line with expectations, a cost-cutting exercise is expected to take full effect in the first half of 2020 to enable Global Gaming to concentrate on sustainable growth and expansion into new markets.

Looking back at the flagship agency of the group, Redeye added: “Ninja Casino is still one of the Swedish market’s best-known casino brands. If Global Gaming can get it back up and running, this would be a major game-changer. There is also a good chance that an external ‘saviour’ might find the brand attractive.

“If Global Gaming can restore Ninja Casino at home without losing too many players and with a good supplier deal, the case offers potential. If not, the company’s main asset is lost. Our DCF analysis shows a base case value of SEK 6 (6). As uncertainty is high, we maintain our stance that risk/reward is unappealing.”

Stressing that adaptation will take time and is likely to result in severe short-term losses, a description of valuation has also been given. Caution is, however, given the company’s current risk / reward nature: “We believe there currently are values in the company that motivates a value above SEK 6 per share. However, the many uncertainties and challenges for Global Gaming make it difficult to predict how much of the values that will erode during the coming 12 months.

“Moreover, we believe several larger operators view Global Gaming, with its Ninja Casino Brand, as an attractive acquisition target. With potential synergies and swift migration of the Ninja Casino brand, the acquirer can add additional value. Nevertheless, an acquirer wants to see a large upside to add value to its shareholders. Implying that potential bids would, most likely, come in below SEK 8 per share, if any.

“All in all, the Global Gaming share is for the risk-loving investor, and in our view the risk/reward is not appealing enough at the current state. We will, however, follow the development of the flagship brand, Ninja Casino, very closely going forward.”