You can download our 13-page Company Update Report by clicking on the following link: Newgioco Update Report
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eResearch is pleased to publish an Update Equity Research Report on Newgioco Group, Inc. (OTCQB: NWGI).
We are maintaining a 1-year price target of $1.30.
COMPANY SUMMARY:
Newgioco is a vertically integrated organization engaged in the leisure gaming (gambling) industry, primarily in Italy but currently expanding worldwide.
Newgioco generates revenues from providing retail land-based and web-based gambling products and services in regulated countries and offers solutions for both the Business-to-Business (B2B) and Business-to-Consumers (B2C) markets. Newgioco’s forecasted double-digit growth over the next year, in the Italian retail gaming market, could be accelerated with tactical acquisitions. Over the next several years, Newgioco is poised to capture some of the recently deregulated, multibillion-dollar, U.S. sports betting market through the Company’s proprietary betting platform (ELYS™).
RECENT EVENTS & UPCOMING CATALYSTS:
- Newgioco announced that it grew its distribution network in Italy to 2,010 Web-shop locations, an increase in Q2/2019 of 509 new locations. In addition to the 501 new web-shop locations added in Q1/2019, year-to-date, Newgioco has added 1,010 total locations in Italy, doubling its existing base of 1,000 locations that was reported on December 31, 2018. Currently the Italian operations comprise almost all of Newgioco’s revenue, so location growth is a key performance indictor as it drives Handle (or Turnover) growth and positively correlates to Revenue growth.
- Newgioco announced that it launched the second-generation of its flagship mobile web platform for international deployment. Newgioco’s latest mobile platform builds upon their existing, modular ELYS™ sports betting engine and the Company believes that ELYS™ competes well against some of their largest competitors, which is important for a successful execution of their U.S. sports betting strategy.
- Recent Board changes refocuses Newgioco on U.S. expansion. New CFO hired and 3 new Independent Directors replace directors who resigned in June. Company now expected to refocus on capitalizing on the U.S. Sports Betting market and up-listing the Company to the senior NASDAQ exchange to attract long-term institutional investment.
FINANCIAL ANALYSIS & VALUATION:
- We have reduced our 2019 Y/Y revenue growth estimate to 25% from 29% with EBITDA margins at 7% from our previous estimate of 8%. Due to the recent CFO & Board of Directors distraction to Management and operations, we have reduced our revenue estimate in 2019 to $43.3M, slightly down from our previous estimate of $44.6M.
- Undervalued in the market – trading at a discount to peers. Based on our analysis, Newgioco trades at EV/Revenue of 0.7x for 2019 and 0.6x for 2020. This is well below the peer group range of 1.1x-3.1x for 2019 and 1.1x-2.8x for 2020. Our DCF model with a 10% WACC and a six-year terminal multiple of 9x EBITDA, yields a value of $2.11, well above the current price of $0.35.
- We are adding a “Buy” Rating and maintaining a One-year Target Price of $1.30.
You can download our 13-page Company Update Report by clicking on the following link: Newgioco Update Report
