Bragg Gaming is a takeout target, says Haywood

Haywood Capital Markets analyst Gianluca Tucci likes the look of a new content material growth partnership introduced by Bragg Gaming Group (Bragg Gaming Group Stock Quote, Charts, News, Analysts, Financials TSX:BRAG) with on line casino and on-line gaming heavyweight Bally’s. Tucci reviewed the deal in a Wednesday analysis be aware to shoppers, saying the cope with considerably widen Bragg’s attain and add to the corporate’s momentum heading into 2023.

Toronto-based Bragg Gaming is a B2B iGaming firm with a on line casino content material platform working as a turnkey resolution for retail, on-line and cell iGaming. The firm additionally owns US-based content material growth studio Wild Streak Gaming. Bragg introduced on Wednesday that it has entered into an iGaming content material growth partnership with Bally’s Interactive, the digital arm of Bally’s Corp. 

The deal will contain Bally’s launching Bragg’s proprietary content material on an unique foundation through distant gaming server from a choose variety of Bally’s third occasion studios. Bragg stated the partnership will add extra of its content material to key regulated markets such because the UK and the US. 

“By bringing proprietary content material from our Atomic Slot Lab and Indigo Magic studios, in addition to video games from our unique third-party portfolio, to Bally’s Interactive on-line manufacturers in several jurisdictions world wide, we’re increasing the attain of our hottest video games that additionally provide us our greatest financial returns,” stated Bragg CEO Yaniv Sherman in a press launch.

“In addition, with this partnership we’re considerably rising our portfolio of high-quality, unique third-party titles which we count on will additional strengthen our profile in key regulated markets,” he stated.

Bragg has already made strikes this yr to broaden its enterprise by, particularly, the acquisition of Spin Games, a Nevada-based content material supplier in a US$30 million deal that gave Bragg a foothold within the US iGaming market.

Commenting on the Bally’s Interactive deal, Tucci stated Bally’s has over 20 years of on-line and retail on line casino working expertise, a nationwide database connecting clients throughout an omni-channel providing, with 17 casinos and resorts throughout 11 states. Bally’s has 500,000 retail clients and 750,000 month-to-month on-line gamers.

“Today’s announcement offers us added consolation in continued income progress and margin carry for BRAG. The path to larger margins is straight correlated with proprietary content material gross sales (9 per cent of [Bragg’s] whole income within the second quarter 2022,” Tucci stated.

Tucci additionally pointed to Bragg’s busy second quarter, which included: the launch of 17 new on-line on line casino video games with unique distribution rights, together with eight from its proprietary studios, the addition of over 500 distinctive titles from third occasion studios, the furthering of Wild Streak’s collaboration with International Game Technology (IGT), expanded operations within the Netherlands with a new turnkey buyer, the launch of content material within the UK, Portugal and the Netherlands and content material launched in Ontario with 888 and TalentOnWeb.

“BRAG continues to broaden its presence throughout its predominant geographies in Europe however has its eye on monetizing the profitable North American alternative,” Tucci stated. “States which it has its near-term deal with (Michigan, New Jersey, Connecticut and Pennsylvania) are multi-billion greenback markets in combination.”

With a market capitalization of C$135 million, Bragg Gaming shares had a large run-up over the again finish of 2020 and into 2021, rising from C$5 to as excessive as C$30 by February, 2021. But the following year-and-a-half have been largely downhill for the inventory, which has been buying and selling again on the C$6-C$7 degree for a lot of 2022. 

But Tucci is bullish on BRAG, reiterating in his report a “Buy” ranking and C$15.00 goal worth, which on the time of publication represented a projected one-year return of 149.6 per cent.

On Bragg’s potential to be concerned in future acquisitions, Tucci stated the iGaming sector stays extremely fragmented, and BRAG may very effectively be a takeout goal.

“We imagine M&A shall be a theme to observe as valuations stay typically compressed and consolidation alternatives come up. We imagine BRAG is buying and selling at severely undervalued ranges (1.0x 2023 EV/Revenue versus friends at 3.3x), making it a very engaging M&A goal,” Tucci stated.

By the numbers, Tucci is calling for Bragg Gaming to generate full 2022 income and adjusted EBITDA of €78.2 million and €10.9 million, respectively, and 2023 income EBITDA of €93.9 million and €15.6 million, respectively.

“We count on momentum to proceed into 2023 and use at the moment’s information as a prime instance. We search for the corporate to achieve a milestone in 2023, turning totally worthwhile on an after-tax foundation. We imagine it will function a revaluation alternative given the present financial backdrop,” Tucci stated.

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