Equity research and investment banking company Redeye has revealed that Global Gaming’s revenues came in ‘below its expectations’, due to a lower market spend in the first quarter.

Global Gaming’s revenue came in at SEK 58m, below the estimated SEK 66m, with the gross margin seen as better than expected, mainly due to lower affiliation costs. Redeye stated that the ‘more economical marketing spend has a significant negative impact on revenues’.

The cost cuts in OPEX had not reached the levels expected, however, it is believed that it will come during 2020. The positive currency effects boosted earnings, and EBITDA came in at SEK 1.4m, above estimates of SEK 0.9m.

Despite the below-par revenues, Redeye emphasised that a strong Euro performance boosted the earnings and the company’s efforts in lowering its costs are beginning to show as Global Gaming looks to take advantage of growth opportunities.

Global Gaming, whose portfolio contains the Ninja Casino brand, is currently in a legal fight against the Swedish Gambling Authority after it rejected the addition of Ninjacasino.se to the Virtual Interactive Limited’s license.

Redeye confirmed that the chances of winning the legal dispute are ‘slim’ as the outcome to divest the brand in Sweden appears to be a likely outcome, with it stated ‘we are convinced that the NinjaCasino brand still has good brand awareness in Sweden’.

In the short-term, with Global Gaming’s revenues coming fully from the online casino vertical, the company is benefiting from coronavirus due to a multitude of globally mandated self-isolation measures – with Redeye expecting to see ‘a clear positive impact on the company’. Yet it also expressed that it expects to see lower player values in the long-term due to a coming recession.

With Global Gaming stating that it will enter several new markets by the end of 2020, it is believed this will contribute to ‘significant growth beyond’ in the following year with the company still in a strong financial position which, according to Redeye, should be maintained well above SEK 80m after the dividend, with SEK 0.4 per share also signaling confidence in the company’s financial position, yet due to the uncertainty remaining high, it maintains its fair at SEK 5.5m.

Moving forward, Global Gaming wants to enter new markets and maintain its focus on Pay’N’Play, with Redeye believing that, if the group is able to launch before competitors and gain a first-mover advantage in a new markets, it would be hugely beneficial.

Redeye continued to state that it believed the company will enter ‘at least two new markets before the end of 2020’. It’s expected that the expansion should drive growth during 2021 and could potentially be a game-changer for the company, according to the equity research and investment banking company.

For the Finish and Estonian markets, it’s expected that the company will grow in line with the markets, which would be between five to ten per cent annually with the numbers potentially boosted during the second quarter due to the current pandemic.

Redeye believes that Global Gaming has, like the rest of the gambling industry, been negatively affected by the regulatory worries and uncertainties connected to the European market, especially Sweden. 

Redeye stated: “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.”