Generally, we asses that the market has significantly underestimated the signficantly unexpected development of Yggdrasil single slot "Joker millions" which most likely has contributed in the range of 3-3.5 MSEK. We will not go in details in the other approximately 10x slots but one should be aware of that before the quarter end we saw an extremely rapid rise in Holmes Jackpot slot led most likely by Betsson's client base which provides a decent cushion to our estimates. Our estimate was 4.0 MSEK in total for Yggdrasil and thus we now comfortably expect that the company can surpass these. Perhaps the market is now rational enough to consider the high-quality of games that Yggdrasil is able to produce. Yggdrasil is and will not be a follower; there is a decent likelihood of it being the followed. Not to say the least that is breaking ground in creativity - in-game dynamics - features and game-experience wise.
By Q2 2016 the company could produce 10 MSEK per quarter(with risk of significantly underestimating this estimate) by its slot or even more meaning this segment alone should be traded at approximately 240 MSEK(sustainable earnings multiple of 30X(Expect Growth rate +100 YOY)). The market at that point should however discount the future potential and accurately develops an intrinsic value range of 500-1B sek for Yggdrasil alone - though one must be aware that the market is highly irrational especially in the short term but over-time it should converge to its intrinsic value. Thus, the market accounts for the online casino but not the substantial potential in Yggdrasil at an market cap of 800 MSEK. We think the market will start discounting this potential when it becomes obvious for the general market that the growth is real and only beginning. Cherry is quickly evolving to become a large scale-operator with a highly agile platform, the fragrance of adaptation is distinct to other operators. It is clearly a operator which stands out of the crowd at the current market place and still deeply misunderstood by the market.
Please read our full analysis here. Investors has several catalysts to look forward for some being close and some stretched over time: Pivotal turn to profitability - Yggdrasil growth momentum - Small cap listing - Possible B2B solution sales - Continued M&A. What are the key underlying drivers of these catalysts? - a truly rare trait to find - a shareholder, business-wise and dynamic orientated management team with majority shareholder Morten Klein being active in the daily activities himself.
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