Gaming Realms Share Discussion Threads

[nobull] 19/4/2024 11:00

Doc Martens, many thanks for that info on the director stakes. I will report back when I have researched what average price the directors paid for their stakes - it will take me months to understand remuneration reports, share option incentive schemes, etc. and some of the information may not even be publicly available for all I know - especially founder member stakes obtained pre-IPO, I wonder. Yes it is easy to read RNSs on director stake purchases, but a thorough understanding of just how incentivised they are requires quite a bit of work. Yes, I knew about Mark Blandford's purchases at around 35p, a contributory reason to my purchase.

High operational gearing (a synonym for the "build once, sell many times" business model, perhaps because of the high proportion of fixed costs arising from the annual amortisation charge), high forward PE (about 20 at the time of my purchase, which was before the latest results) and the speculative risk rating are all good reasons to expect share price volatility (no excuse to grumble about it - goes with the territory) even if the general share price trend turns out to be broadly sideways for the next few months or even year, perhaps until the 2027 forecasts come out. AIMO. DYOR.

Thank you, Epicsurf. All your posts are informative. It is a very interesting business, albeit a new departure for me from the sort of businesses I normally invest in. It will be a great learning experience, and if I am lucky, a profitable one. We will see.

[epicsurf] 18/4/2024 18:41

April 4, 2024, 2:31 PM BST

An online gambling company has sued two former members of staff and its rival for allegedly plagiarizing copyrighted source code for its "Slingo" online betting game to produce several competing products
Haven't got access to Full article
And yes great post nobull

[doc martens] 18/4/2024 12:20

Hello nobull,

Great post. Just my 2 pence worth regarding managements holdings.

Michael Buckley Executive Chairman – 25,700,000 – 8.75%
Mark Blandford - Non-Executive Director – 12,598,738 – 4.29%

Between July - August 2023 Mark Blandford purchased 869,738 shares £303,194.04 at a total average price of around £0.35p (obviously higher than todays price).
Although given his total holdings its probably not a huge amount to him, but I'm sure its not an amount he would want to lose. He must have some faith in the future of the business to have made those purchases.
It was one of the reasons I invested, although I only have a tiny holding. Happy to hold to see what the next 12 months bring.

[nobull] 18/4/2024 09:01

New consensus analysts' forecast for FY2026, a period for which there was no forecast before.
Figures from Factset:


Growth is slowing, but an FY2026 PE of about 7.85 (EY 12.7%) seems reasonable IF the business becomes a zero growth business thereafter, given the risks of a management that does not have a big stake in the business (I presume they sold out on listing and are already multimillionaires and therefore have no need of making any more money and maybe could not give a toss about us, for all I know - I am a new shareholder and have never met them) a management who let idle cash just pile up, and where there has to be doubt whether they will deploy our cash profitably and where there has to be doubt whether we are becoming a lifestyle company.

I have boobed buying at 35.2p but I do not have a proper understanding of this business and continue to hold. Always interested in knowledgeable people's views, bullish or bearish.

I think one attraction must be the operational gearing - although gearing works both ways, right? - and another maybe is extracting value from tax losses that are off balance sheet, well the ones that are not already recognised in the deferred tax asset.

I guess the reason we have a "speculative" risk rating is the OG; for it is not because of having net debt; we are net cash.

What I like about this business is, unlike a traditional one-armed bandit machine in a fun fair, we are open for sales revenue 24/7, and not closed on Mondays and Tuesdays or whatever, and we are earning a decent amount of US$, not all £ that are likely to plummet in value when Rachel Reeves is in charge. JMV, with no expertise in the matter.

[epicsurf] 17/4/2024 17:43

Vox Markets Fund Manager Series: James Taylor of M&G Investments
Gaming realms gets a mention around the 42 min mark

[smalljobs] 11/4/2024 19:13

I agree with you Garmin1, but some things are very strange. After getting the results, which are very good, more than 12 million shares have been sold and the price dropped from 35+ to 29. Now we have someone playing funny games. After we had big lots sold for 31p, somebody is selling/buying many lots of 5 shares, 1 share, etc, for 29, disturbing the market price overall. You will excuse my lack of knowledge, but this is strange. Realistically looking, the company can’t produce better results than they have, and the shares are not going to go over 40. So management has 3 choices, to sell the company, to merge, or to buy another company. Otherwise, we are going to be snapped up by someone for barely over 40p. Not many shareholders are going to complain if they can walk out with over 40p per share. People are tired of this company, there’s simply no appetite.

[garmin1] 11/4/2024 12:51

No issue with the accounting aspects of the company but the possible red flag for me was the answer provided by the CEO to the drop in New Jersey revenue. The answer was really vague, in my view. It seemed to imply we had been unable to launch new products in the state due to platform issues. Why is this not being communicated within the reports? The CEO implied this was temporary and that he expected revenue to increase following resolution of this issue. I’d have liked a more detailed description of situation.

I also found the answer to the utilisation of cash unconvincing. Surely they have plans for this? I don’t believe buy backs or a dividend is realistic for this company, so I’m amazed the CEO suggested this as a possibility.

I’ll hold just now until the mid year update but the management team aren’t inspiring me at this time. This company should be looking to grow quickly and be leveraging the strength of a fantastic product.

[pj84] 10/4/2024 23:36

This was from the auditor's report from the Annual report and Accounts 2022 and I would expect it to be the same when the Annual report and Accounts for 2023 are published.

"Capitalisation of development costs (with reference to notes 1 and 14)

The Group incurs material expenditure on the internal development of intangible
software assets. Such expenditure should only be capitalised when it meets the criteria of applicable accounting standards.

Due to judgement being required by management in determining costs that meet the criteria for capitalisation, this was considered to be an area of focus for our audit, and hence a Key Audit Matter.

Capitalised development costs in the year were £4.0m (2021: £3.4m).

Our procedures included the following:

- We assessed whether the capitalisation policies adopted by the Group comply with applicable accounting standards.
- We challenged management’s project analysis to check that the projects capitalised met the criteria of applicable accounting standards. This included:
• Agreeing a sample of costs capitalised in the year to source documentation;
• Agreeing the accuracy of time capitalised to related timecards and payroll
records; and
• Inspecting evidence of the projects subsequent launch or intention to launch.

Key observations
Based on the work performed, we consider management’s judgements to be appropriate and adequate."

[pj84] 10/4/2024 23:15

I should add that I didn't mention EBITDA in my post and focussed on revenues, PBT and cash. Having said that I didn't notice anything of concern unless you are also referring to the amortisation of development costs being recognised after EBITDA but before PBT.

[pj84] 10/4/2024 23:02

Yes, if it was a company using opaque accounting practices to create profits but cash was always reducing, then I would be concerned but clearly they increased cash by £4.6m in the period.

They are treating the development costs of games as an asset which they are expensing over 5 years and as they clearly showed the revenues from those games start to rise over a number of years and continue to generate revenues even after the costs have been fully expensed after 5 years.

[swiss paul] 10/4/2024 19:59

PJ - where you happy with how the EBITDA was explained - or the way they capitalise items?

[pj84] 09/4/2024 22:31

Revenue grew 26%, PBT grew 47% and cash increased from £2.9m to £7.5m. So the profit is generating real cash, always a positive for me.

There is nothing to suggest the growth won't continue and for a growing business that is profitable and generating cash a PE of 16 doesn't appear to be demanding.

They are aware the cash is growing and said they will consider all options including investing in the business, share buybacks and dividends but haven't made any decisions. I expect them to try and find profitable opportunities to deploy the cash rather than return it to shareholders.

It takes differing views to make a market and whilst the share price reaction has been negative I am more than happy to continue to hold.

[swiss paul] 09/4/2024 10:45

Yawner of a presentation - so I have decided after all these years to exit.

As above I did not get any feeling that they had serious plans for the future.

Good luck all

[smalljobs] 03/4/2024 19:54

No new states in the USA will issue licensing for 2024, so no growth there. Regulations are going to be tougher and tougher every year. Acquisition of 4ThePlayers is nonsense and I don’t know where you’re coming from with these kind of statements. Simply too small to buy any other company. Let’s wait and see, but if the company is not sold, I repeat again, 2025 is not going to be fun.

[epicsurf] 03/4/2024 19:40

Disappointing share price reaction to Full year results considering they were already known from year end trading update.content licensing for first 2 months up 20% up on last year, a runway for 2024 In the second half of 2023 the Group was granted supplier licenses in both West Virginia, USA and Greece. Along with other planned new markets for the business such as Switzerland and South Africa, the Group is well placed to take advantage of further growth opportunities in 2024
I suspect Brazil will be on the cards as well
Happy with cash pile ,absolute disaster at the moment if you have to raise money.4theplayer would make a good bolt on acquisition and a differential.

Peel Hunt has reiterated its ‘buy’ recommendation for Gaming Realms, as it forecasts the company’s already healthy cash pile to grow during the financial year 2024.

Peel Hunt analyst Ivor Jones said: “We expect the market to catch up with how undervalued we believe the shares are and reiterate our Buy recommendation and 60p target price.

[smalljobs] 03/4/2024 19:23

Someone is desperate to undervalue these shares. Regardless of how good the results we have are, we will never be stabilising in the 40s, so this company has a short window to be sold so we can all walk out with our money, because otherwise this saga will go on forever and the 80 year old chairman can still have his handsome payouts every year. 7.5 Million in the bank is sitting there, at least they were supposed to buy shares back. P.S I hope that whoever is selling daily and trying to undervalue the shares is finished with his lot .

[swiss paul] 03/4/2024 17:50

Garmin, no - I want money - that's all.

If that is via a t/o then so be it. They have been milking this company for ages now.

So either they step up and increase my wealth or sell it to someone.

Not worried how they do it.

[garmin1] 02/4/2024 18:20

Sailorsam1 - I don’t want a takeover. It would be a real shame to see a company with such fantastic cash generation removed from the U.K. market.

I want the directors to be more aggressive in their strategy. I want them to release more information to the market about future direction for the business. Lets’s hear what the plans are for the cash the business is generating. How will they diversify revenue streams so that we’re not solely relying on the Slingo brand forever?

[sailorsam1] 02/4/2024 16:50

Agreed. The Directors are over rewarded. A Takeover is best outcome here

[pandaball] 02/4/2024 13:58

Haven’t seen Peel Hunt today - just Canaccord.

Bottom line from them:
“GMR trades on a CY24E/25E EV/EBITDA multiple of 7.0x/5.4x, which feels too low given the forecast growth and increasing North American exposure (43% of content licencing revenues / 35% of Group). We believe that Gaming Realms has a number of attractive attributes. These include: 1) significant growth potential; 2) exposure to regulated markets; 3) proprietary and differentiated content and a leading distribution platform; 4) a highly scalable and profitable capital-light licensing model; 5) an experienced senior leadership team and Board; and 6) strong profit margins with scope for further growth. We retain our BUY rating and 50p TP (c.10x CY24E EV/EBITDA).”

Garmin, I agree that they should be pushing for new growth and that the cash gives them the opportunity to do that - but I also agree with the above from canaccord that the current price doesn’t reflect CURRENT growth potential. Adding on the opportunity you are talking about, this stock has plenty to justify a step up in pricing.

[garmin1] 02/4/2024 13:37

WJCCGHCC

You’re correct that GMR will be entering West Virginia later this year. I meant that there are no new states authorising online gambling this year. Maryland was the only real hope but that’s now highly unlikely.

I don’t think the market is going to accept GMR patiently waiting years for further state legislation. The company needs to show real growth ambitions in the more immediate term. It has plenty cash, let’s see it being reinvested in the business.

[napoleon 14th] 02/4/2024 12:18

PeelHunt has published a new research note apparently.
Anypne has access?

[swiss paul] 02/4/2024 11:52

For such a small businesss, the admin costs seem inordinately high.

Also Execs paying themselevs handsomley and rewarding themselves with share options.

Methinks this could be gravitating to a 'lifestyle company'

[napoleon 14th] 02/4/2024 11:05

Bought in here some 4 years ago, sold half on the double.
It's a good business but a boring share, treading water since 2021,
The reason being its' P/E ratio, which I estimate at c. 20 as per today's figures.

While that has come down from higher, my finger's still itching on the sell button...