Gaming Innovation Group - Solid Q1 sets the tone for a transformative ’22 - ABG

Strong growth momentum continued into Q2 A transformative year with platform ramp-up from April Share is trading at 7x EV/EBIT in ’23e Set to deliver a strong 2022 In addition to the solid numbers in the Q1 report, we highlight: 1) Growth momentum continued into the start of Q2; 2) Media FTDs were up 60% y-o-y; and 3) Multiple agreements were signed in Q1 or right after, including a Sky City contract extension, new brand launches, and partner signings. As such, coupled with the reiterated guidance of generating EUR 87-93m with an EBITDA of EUR 30-35m, we assess the start to 2022 is well on track to become one of the strongest in the sector. We cut ’23e-’24e opex due to synergies – EBIT up 11-12% The management seemed confident in the synergies ahead after incorporating Sportnco. As the company raised its annualised total savings target to EUR 8m a month after consolidating Sportnco, we cut our opex estimates slightly. Furthermore, we make limited revisions on normalised revenues, in total resulting in EBIT coming up 2% in 2022e, but being 11-12% higher in ‘23e-‘24e. Valuation – looking at affiliate and B2B software peers GiG is undergoing a transformation, incorporating Sportnco into the business, which adds an essential piece to its offering. Thus, GiG should now be compared to both affiliate companies, as media have constituted a majority of GiG’s revenues and EBITDA, but also B2B software companies in the iGaming sector following the ramp-up in the platform segment from Q2 onwards. Looking at Factset cons. EV/EBITDA for some peers with similar business models, we find that both software companies and affiliate companies are trading at mid-single digit multiples, e.g., Playtech or GAN at 6.6x and 6.8x ‘22e EV/EBITDA, respectively, and Raketech or Gambling.com at 4.5x and 8.4x ‘22e EV/EBITDA, respectively. Thus, GiG’s current ’22e EV/EBITDA of ~6.5x is largely in line with software peers, and largely in line with the average between several affiliate companies. Läs mer på ABG Sundal Collier