Best game in town?
Elys Game Technology has big ambitions in the growing global gaming markets but has been under the radar of most investors. Elys has hired industry veteran Matteo Monteverdi as CEO to lead the charge, with an initial focus on expanding in the newly regulated US sports betting market. Having grown quickly in its traditional Italian gaming market, Elys combines twenty years of in-depth domain knowledge and risk management expertise along with its innovative and potentially disruptive Elys Gameboard software platform. The initial plan is to target food and beverages establishments (eg, sports bars) in Washington DC, operating on a B2B2C revenue share basis, and the first deal is planned with the Grand Central sports bar. Elys and Grand Central have filed a joint application for management service provider (MSP) and Class B sports betting licenses in DC. Meanwhile, Elys is rolling out a new automated teller kiosk, Enjoy, in the Italian market that enables online players to set up new gaming accounts and perform wallet transactions. Enjoy has the potential to drive substantial revenue growth, and could also be deployed in other markets. The outlook is supported by a favorable regulatory backdrop, strong underlying market growth and hence significant growth opportunities. Following the recent stock rally, the company has an enterprise value of around US$84m and trades on around 2.4x sales. We believe the shares have substantial upside if management can successfully scale the Elys Gameboard platform in the US and beyond.
Shares represent an option on a significant opportunity
Elys has generated compound annual revenue growth of 83% over the last five years, which includes the impact of acquisitions. However, profitability has been erratic as management has sought to ramp up investment and scale the business. The group had a strong Q1, with 11% operating margins but swung to losses in Q2 due to the closure of sports events in wake of the pandemic, followed by a strong revenue recovery in Q3. We note that the COVID-19 pandemic pushed back the sports betting industry by approximately three months. However, Elys still recorded a loss in Q3, partly due to customer acquisition costs as well as some one-off items. While the coronavirus pandemic set the US expansion plan back a little, the group now has a healthy financial position following a US$10mln fundraising in August and therefore is well placed to implement its growth plans.
Quick facts: Elys Game Technology
Price: 5.94 USD
Market Cap: $101.04 m
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