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Stride Gaming

Looking beyond the UK

Update | Travel & Leisure | 23 May 2018

The entire UK gaming sector has been stung by recent regulatory changes and, like other operators, Stride's strategy is to diversify its UK-centric model into international markets. In the UK, the company is gaining market share, with H118 adjusted revenues increasing 14% to £44.9m, driven by 25% growth in the proprietary platform. However, we have lowered our total FY18 and FY19 EBITDA forecasts by 16.6% and 28.7% to reflect increased costs associated with regulatory compliance and international expansion. The stock has fallen 18% year to date and trades at 8.3x EV/EBITDA and 13.4x P/E for CY18e.

Stride Gaming

(Bin)going strong

Update | Media | 23 May 2016

Stride Gaming's interim results for the six months to end February 2016 show that it continues to execute well. L-f-l revenue was up 21%, led by its online bingo and slots offering (up 31%, well ahead of the wider market). Its social gaming business increased profit and margins on flattish revenues as management dialled down marketing while it invested in product improvements. We increased our FY16 EBITDA estimate by £0.5m to £11.8m. An inaugural interim dividend of 1.1p per share was announced, a year earlier than we had expected, in recognition of the cash-generative nature of Stride's business and management's positive outlook.

Stride Gaming

Strong cash flow and special dividend

Update | Travel & Leisure | 21 Nov 2018

Stride’s FY18 results statement was dominated by the impact of recent regulatory news, as well as by the decision to significantly increase cash payouts. Our FY19 estimates now reflect a GBP 7.1m fine for procedural failings (vs GBP 4m previously), as well an additional five months of higher remote gaming duty (RGD), which equates to a one-off hit of GBP 2.5m. None of this affects FY20 and, given Stride’s competitive positioning, we believe it should achieve market share gains and we raise our FY20 EBITDA from GBP 14.5m to GBP 16.0m. A special dividend of 8p has been announced, and going forward, Stride intends to pay out at least 50% of adjusted net earnings. The stock has bounced from its lows, but still trades at 5.0x EV/EBITDA and 8.0x P/E for CY19e.

Stride Gaming

RGD marginally higher than expected

Update | Travel & Leisure | 30 Oct 2018

The UK government has raised remote gaming duty (RGD) from 15% to 21%. This was better than recent rumours of 25%, but 1% higher than market expectations of 20%. With implementation from October 2019 (rather than April), we raise our FY19e EBITDA by 5%. However, assuming no mitigation, we lower our FY20e EBITDA by GBP 3m to GBP 14.5m. While regulatory pressures are likely to remain a feature of the UK gaming sector, Stride is the number three online bingo-led operator and should benefit from its strong market position. The balance sheet is robust (GBP 20m net cash) and, despite the increased taxes, we expect strong cash flow through synergies and strategic growth. The stock has fallen 58% this year and trades at depressed levels of 3.6x EV/EBITDA and 5.8x P/E for CY19e.

Stride Gaming

Focusing on synergies and strategic growth

Update | Travel & Leisure | 26 Sep 2018

Stride’s FY18 trading update confirms the widely reported headwinds facing the UK bingo-led market, with a c 3% decline in real money gaming (RMG) in H218. More positively, FY18 RMG EBITDA appears to be in line (or slightly better) than our recently reduced estimate. Importantly, Stride’s high-margin proprietary platform is a key differentiator and the company remains well placed to gain market share. The balance sheet is strong and we expect strong cash flow through synergies and strategic growth. The stock has fallen 60% this year on the back of downgrades and a UKGC fine (which appears to be c GBP 4m) and now trades at depressed levels of 5.8x P/E and 3.3x EV/EBITDA for CY19e.

Rank Group

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Sector report: | Travel & Leisure | 17 May 2018

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Stride Gaming

On track for underlying margin expansion

Update | Travel & Leisure | 01 Feb 2018

Stride’s AGM trading update confirmed the continued momentum in its core real money gaming (RMG) vertical. The Aspers Casino partnership has had an encouraging start and Stride is well positioned to keep gaining market share. Its key differentiating factor is the high-performing proprietary platform and we expect underlying margin expansion as customers migrate from acquired businesses. We believe that visibility into the social gaming vertical (5% of revenues) remains limited and we have lowered our future revenue forecasts by c GBP 2m per year. Our profit forecasts are unchanged. At 7.4x EV/EBITDA and 10.8x P/E for CY18, Stride trades at a meaningful discount to peers.

Stride Gaming

Scale drives core growth

Update | Travel & Leisure | 22 Nov 2017

Stride reported net gaming revenue (NGR) growth of 18% to GBP 89.9m in FY17, driven by an impressive 39% organic growth in the core real money gaming (RMG). Adjusted EBITDA of GBP 20.2m was slightly above our recently raised estimates. Stride has invested heavily in technology and operational leverage should kick in as acquired customers migrate to the higher-margin proprietary platform. A small investment into the Indian rummy market could also lead to diversified revenue growth. Strong cash flow and GBP 17.4m net cash leaves the company well positioned to pay the final Tarco earnout. The stock trades at CY18e 8.2x EV/EBITDA and 12.0x P/E, slightly below peer group averages. Profitability in the core business should offset potential investment losses and our estimates remain largely unchanged.

Stride Gaming

Strong trading - nudging up EBITDA

Update | Travel & Leisure | 19 Sep 2017

Stride is gaining market share with strong organic growth in real money gaming (RMG). In its FY17 pre-close trading update, the company expects to meet the upper end of consensus and we have increased our FY17 and FY18 EBITDA forecasts by c 2.5%. The 8Ball earnout is now complete, with the Tarco earnout period ending in December. Stride has invested heavily in technology and operational leverage should kick in as acquired customers migrate to the higher-margin proprietary platform. The stock trades at 7.0x CY18e EV/EBITDA, a meaningful discount to peers.

Stride Gaming

Robust growth in real money gaming

Update | Travel & Leisure | 30 May 2017

Stride Gaming's H117 pro forma net gaming revenues (NGR) grew 21% to £44.0m, driven by strong organic growth in the real money gaming (RMG) vertical. In a continuation of previous trends, the social gaming vertical has weakened, with a 24% decline in revenues to £4.7m, and Stride has recognised a £10.2m impairment on its InfiApps assets. However, the core RMG business is gaining market share, trading has been robust in Q317 and management has reiterated its FY17 outlook. Our headline FY17 revenue and EBITDA figures remain unchanged. Stride trades at 7.5x calendar 2017e EV/EBITDA, a meaningful discount to its peers.

Stride Gaming

Winning market share

Update | Travel & Leisure | 02 Feb 2017

Stride's AGM statement reports strong organic growth in real money gaming and we believe it is continuing to win market share. Our forecasts are unchanged although we have slightly adjusted the mix. We forecast 11% normalised EPS growth in FY17 and strong cash generation. The FY17 multiples look very low: the P/E is only 10.2x and EV/EBITDA is 7.3x (versus 8.0x for the peer group) despite Stride's fully regulated status and above average growth.

Stride Gaming

Successfully engaging players

Outlook | Travel & Leisure | 06 Dec 2016

Stride has a clear focus on online bingo and soft gaming and is growing rapidly, with FY16 l-f-l revenue up 22%. The acquisitions of Tarco and 8Ball at the end of FY16 doubled its share of the UK bingo-led market from 5% to 10% and should deliver material synergies from FY17. Our unchanged FY17 estimates are for 11% EPS growth and strong cash generation. We expect organic growth to be augmented by further accretive acquisitions in due course. Stride’s FY17 P/E is 10.3x and the calendarised EV/EBITDA is only 7.1x, implying considerable share price upside potential.