Growth in North America propelled Gaming Realms (LON: GMR) during 2022 and it is continuing into this year. Newer markets are yet to make a significant contribution.
AIM-quoted Gaming Realms develops online real money-based and social games, which are licenced to partners around the world. The focus is slots and bingo games. The growth is coming from real-money games.
In 2022, revenues grew from £14.7m to £18.8m, while underlying pre-tax profit increased from £2.5m to £2.8m. Even though social gaming revenues were flat, the profit contribution increased because of lower marketing spending.
Cash generation is strong and more than covers capitalised development costs. Net cash is £2.92m.
North American revenues more than doubled last year. The North American online casino market is set to grow significantly, and Gaming Realms can also gain market share. Revenues are growing quarter on quarter. There is also plenty of growth to come from other countries.
It can take around three years for a new market to mature. Gaming Realms entered three new markets in Europe last year and it is set to enter even more markets this year – depending on the timing of regulatory approvals.
Future
This year has got off to a strong start with a 53% increase in revenues in the first two months. Peel Hunt is forecasting 22% growth in revenues for 2022, but it points out that the first half tends to be a weaker period. Even so, there could be scope for upgrades later in the year.
A 2023 pre-tax profit of £7.4m is forecast. At 26.9p, the shares are trading on less than eleven times prospective 2023 earnings and the multiple could fall to eight next year.
The cash pile will continue to build up – it could reach £15m by the end of 2024 – and acquisitions may be considered to enhance growth. For now, there is plenty of organic growth to go for. Good value.
