Gaming Innovation Group: Q4 Preview – Impressive Momentum
Redeye Research Note 2021/02/19
Since the Q3 report, GIG has announced six new agreements or extensions of existing partnerships, which are expected to provide recurring revenues for years to come. However, a lot of the deals have launch dates later this year. Nevertheless, most online gambling companies have reported impressive numbers in the fourth quarter of 2020. Hence, we expect that GIG will also report significant growth in the quarter.
On a negative note, we expect that German Markets regulations will impact GIG in the short term but, in the long-term, create stronger barriers of entry for a platform provider in the German market. Therefore, provide GIG with growth opportunities with higher margins in the future. However, how big GIG´s business is in Germany is unclear, and we expect to be provided additional information on how big the impact is in the Q4 report.
In the last two weeks, after the agreement announcement with Playstar, GIG’s share has been trading strongly and reached far above our base case of 12 SEK per share. We assume that GIG has the same situation as Aspire had after their announcement with Rush Street that international investors have got their eye on GIG and recognize the valuation difference between GIG and American Online peers.
We expect the revenue to perform over our before-set estimates, and based on further information in the fourth-quarter results, we may adjust our estimates higher to reflect the higher revenue base and the new agreements.
GIG will release its Q4 report on Tuesday next week.