Redeye, an equity analysis and investment banking company, has reported that the sales of Global Gaming fell behind their estimates due to a lower consumer spending in the first quarter.
Revenue from Global Gaming came in at SEK 58 m below the projected SEK 66 m, with the gross margin viewed as better than anticipated, primarily due to lower affiliation costs. Redeye said the ‘more economical marketing spend has a significant negative impact on revenues.’
Cost reductions in OPEX hadn’t hit the anticipated rates, but it’s assumed it would arrive in 2020. Positive currency effects improved results, with EBITDA coming in at SEK 1.4 m, beyond SEK 0.9 m forecasts.
Despite the below-par sales, Redeye stressed that a good output in the Euro improved profits and the efforts of the group to reduce their costs are beginning to show as Global Gaming seeks to take advantage of growth opportunities.
Global Gaming, whose portfolio includes the Ninja Casino brand, is currently in a legal dispute against the Swedish Gambling Authority after it denied Ninjacasino.se ‘s application to the Virtual Interactive Limited licence.
Redeye indicated that the odds of winning the legal case are ‘slim,’ as the result of divesting the brand in Sweden appears to be a possible outcome, saying ‘we are convinced that the NinjaCasino brand is still has good brand awareness in Sweden.’
In the short term, with the sales of Global Gaming coming entirely from the vertical online casino, due to a multitude of internationally imposed self-isolation initiatives, the company profits from coronavirus – with Redeye expecting to see ‘a clear positive impact on the company.’ Yet it also expressed that due to a coming recession, it expects to see lower player prices in the long term.
With Global Gaming announcing it would reach many new markets by the end of 2020, it is assumed that this would lead to ‘significant growth beyond’ in the following year with the business still in a good financial position which, according to Redeye, should be held well above SEK 80m after the dividend, with SEK 0.4 per share also indicating confidence in the financial positive of the company.
Moving forward, Global Gaming aims to reach new markets and retain its attention on Pay’N’Play, with Redeye claiming that if the company can launch ahead of rivals and achieve a first-mover advantage in a new market, it will be immensely beneficial.
Redeye continued to state that the company assumed it would reach ‘at least two new markets before the end of 2020.’ According to equity research and investment banking firm, the expansion is expected to drive growth throughout 2021 and could potentially be a game-changer for the group.
It is expected that the business will expand in line with the demand for the Finish and Estonian industries, which will be between five and ten percent per annum with the figures possibly boosted during the second quarter due to the current pandemic.
Redeye believes that, like the rest of the gambling industry, Global Gaming has been negatively affected by regulatory worries and uncertainties linked to the European market , in particular Sweden.
Redeye commented: “After the regulation and the problematic start, all the Swedish based operators have seen a significant drop in sales and earnings. This has continued to pressure the multiples. However, since Global Gaming lost its Swedish license it is more about understanding how Global Gaming can adapt and what values there are left in the company.
“In our view, the Ninja Casino brand, with its brand awareness in Sweden and Finland, would be an attractive acquisition. We believe the Ninja Casino brand would work well in several other markets and is a perfect Pay’n’Play brand.
“Meaning, that for a larger operator that likes to have a Pay’n’Play focused brand to roll out on all markets, this is a perfect match. Moreover, product improvements and cost synergies will also add additional value to the taker.”