Global Gaming to face further Swedish difficulties if appeals are launched

Equity research and investment banking organisation Redeye has predicted that it will take some time for Global Gaming to leave behind the impacts that 2019’s struggles will continue to have on the firm, with “major losses” said to be likely in the short term.

The firm saw subsidiary SafeEnt, which runs its flagship igaming entity Ninja Casino alongside, lose its Swedish licence for commercial online gambling and betting earlier in the year due to “serious deficiencies”.

A number of appeals have subsequently been launched, the most recent of which saw an appeal against the licence revocation rejected by the country’s Administrative Court.

Redeye outlines a belief that this could be a trend that could well continue if further appeals are launched: “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 year’s third quarter marked the first without any revenue from Sweden for the Ninja Casino brand, with it said 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”.

As marketing spend during the period dropped as well as a “substantial decline in revenue” being in line with expectations, a cost cutting exercise is expected to take full effect during the first half of 2020 to allow Global Gaming to focus on profitable growth and expansion into new markets.

Turning attention back to the company’s flagship entity, 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 adaption will take time and is likely to bring substantial losses in the short-term, a valuation summary was also offered. However, caution is issued due to the risk/reward nature of the firm at present: “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.”