Gaming Realms (GMR:AIM) 53.4p

Gain to date: 66.9%

It has been 15-months since we first flagged AIM-listed games distributer Gaming Realms (GMR:AIM) as an underappreciated growth story. Pleasingly the market appears to be catching up with the story, with the shares gaining around two-thirds in just over a year.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

In a pre-close trading update the board said it anticipates reporting 18% year-on-year revenue growth and a 30% increase in adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) to £7.5 million for the six months to June.

This reflects continued growth in the group’s licensing business and ongoing international expansion.

The company successfully launched six new Slingo (mash-up of slots and bingo) games and added 19 new distribution partners. The group said its strong pipeline of content and operator integrations continued to support its scalable, high margin business model.

With first-half trading in line with expectations, the board believes the company can continue along this trajectory for the remainder of the financial year to 31 December.

As a reminder, the engine of the group’s growth is its ability to launch new Slingo games, increase the penetration of games across existing operators and territories and sign-up new operators.

As the company scales, the large fixed costs of the business mean profit and cash flow margins grow faster than revenues, leading to increasing shareholder value.

WHAT SHOULD INVESTORS DO NOW?

The seasoned management team continues to execute on a clear growth strategy. The business appears well on track to generate circa £30 million of free cash flow between 2023 to 2026, suggesting scope for enhanced shareholder returns.

Investors should stick with this niche growth story for the long run. 

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