eResearch is pleased to publish an update Equity Research Report on Newgioco Group, Inc. (NASDAQ: NWGI) pertaining to NWGI’s recent new release about the impact on COVID-19 NWGI’s revenue.
You can download our 8-page Update Report by clicking on the following link: 2020-03-16 NWGI-UR-FINAL
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RECENT EVENTS & UPCOMING CATALYSTS:
- In response to the COVID-19 virus, the Italian government has imposed restrictions on public gatherings and closed certain non-essential businesses, including Italian betting shops and bingo halls. During the first three quarters of this year, approximately 59% of Newgioco’s Gross Gaming Revenue came from Land-based Wagering. NWGI still has online and mobile offerings, including casino and bingo games.
- Most professional sports have also been curtailed, which will have a direct negative impact on Newgioco’s sports betting handle and revenues. All major North American and European sports leagues have cancelled or postponed games until early April or “until further notice.”
- Newgioco continues to develop their U.S. betting platform and products with expected delivery in late 2020. In October 2019, Newgioco signed two deals for its online and land-based sports betting platform (ELYS™) in the U.S. with Handle 19 and Grand Central in Washington, D.C. Newgioco indicated that development will continue on these new products. These deals represent Newgioco’s continued growth in the U.S. regulated sports betting market and we expect the products to be released by the end of the year.
FINANCIAL ANALYSIS & VALUATION:
- We are reducing our Revenue and EBITDA estimates in 2020 to reflect the negative impact on Newgioco’s land-based revenue and the reduced sports betting revenue. Revenue estimate for 2020 of $35.8 million, down from $55.3 million; EBITDA of $5.4 million, down from $8.0 million. We are leaving 2021 revenue and EBITDA estimates unchanged at $65.8 million and $10.6 million, respectively.
- Valuation: We use three methods to calculate the price target for Newgioco:
- Due to multiple compressions after the recent market correction, we are decreasing our Terminal EBITDA multiple to 8.0x from 9.0x. Our DCF model with a 10% WACC and a six-year terminal multiple of 8x EBITDA now yields a value of $16.00, down from $17.07 in our previous report, but still well above the current price of $1.41.
- Using a revenue multiple of 2.0x and a Q1/2021 12-month Revenue target of $41.9 million (down from $57.5 million in our previous report), the one-year target share price estimate is $5.30.
- Using an EBITDA multiple of 8.0x EBITDA, and a Q1/2021 12-month EBITDA target of $6.5 million (down from $8.5 million in our previous), the one-year target share price estimate is $3.13.
- We calculate our 1-Year Target Price by Equally Weighting the three methods = ($16 + $5.30 + $3.13)/3 = $8.14
We are maintaining a “Buy” Rating, but reduced our One-year Target Price to $8.00 from $9.50.
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You can download our 8-page Update Report by clicking on the following link: 2020-03-16 NWGI-UR-FINAL
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