You can download our 12-page Update Report by clicking on the following link: 2020-02-14 NWGI-UR-Q319-FINAL
//
eResearch is pleased to publish an update Equity Research Report on Newgioco Group, Inc. (NASDAQ: NWGI) pertaining to NWGI’s recent corporate events and Q3/2019 financials.
We are maintaining our “Buy” recommendation but reducing our 1-year price target to $9.50, after a one-for-eight share consolidation
RECENT EVENTS & CATALYSTS:
- Newgioco signed two deals for its sports betting platform (ELYS™) in the U.S. Newgioco announced agreements with Handle 19 and Grand Central in Washington, D.C., to provide Newgioco’s ELYS™ online and land-based sports betting platform. These deals represent Newgioco’s continued growth in the U.S. regulated sports betting market.
- Newgioco partnered with Northern Winz casino to launch second Tribal Sports betting product. The customization for the Tribal Sports betting market shows the flexibility of Newgioco’s ELYS™ betting platform in a market similar in size to the U.S. Commercial Casino market.
- Newgioco’s Virtual Generation (VG) expands Latin America operations. Newgioco has Partnered with HBG group for distribution of the VG virtual games in Central America. This new business relationship will leverage HBG’s network in Colombia and across South America to grow VG’s existing retail distribution and customer base across the region.
- Recent NASDAQ listing should improve visibility and liquidity. A reverse stock split was completed (8-for-1) in advance of the planned NASDAQ listing to allow Newgioco to meet the NASDAQ Capital Market’s listing requirements.
- Recent merger pegs Newgioco value at over $300 million. DraftKings and SBTech deal values SBTech, a direct competitor of Newgioco, at approximately $655.9 million or 8.5x revenue. An 8.5x revenue multiple on Newgioco’s 2019E revenue of $36.5 million would value Newgioco at approximately $310 million. Currently, Newgioco’s Enterprise Value is only $47 million.
FINANCIAL ANALYSIS & VALUATION:
- Newgioco released its Q3/2019 financial results with gambling turnover up 32% Y/Y, however revenue declined 13.6% Y/Y due to higher payout ratios. Q3/2019 revenue of $6.8M was lower than our estimate of $8.8M and EBITDA of $0.6M was higher than our estimate of $0.1M, due to a sharp decrease in Sales & Marketing costs.
- Based on our analysis, Newgioco trades at EV/Revenue of 1.3x for 2019 and 0.9x for 2020. This is well below the peer group range of 2.1x-2.4x for 2019 and 2.0x-2.1x for 2020. Our DCF model with a 10% WACC and a six-year terminal multiple of 9x EBITDA yields a value of $17.07, well above the current price of $3.87.
We are maintaining a “Buy” Rating, but reducing our One-year Target Price to $9.50 from $10.00.
//
You can download our 12-page Update Report by clicking on the following link: 2020-02-14 NWGI-UR-Q319-FINAL
