Peel Hunt reiterated a 'buy' rating and 60p target on Gaming Realms after a pre-close trading update showing ~10% YoY revenue growth and ~15% adjusted EBITDA growth for the last financial year, driven by a 23% rise in US revenues (now 61% of group sales). UK revenues fell due to April 2025 staking limits but the drag is easing; a £0.4m FX-related EBITDA hit prompted a £0.5m downgrade to FY25 estimates and a 5% cut to FY25 EPS, while FY26 forecasts are unchanged. Peel views UK exposure as increasingly marginal (forecasting ~16% of core revenue by FY27), highlights geographic diversification (content live in 30 regulated markets) and expanding Slingo licensees, supporting the broker's positive stance.
Market structure: Gaming Realms (GMR.L / OTCQX:PSDMF) is a clear winner as US revenues now ~61% of group and grew ~23% YoY (constant FX), giving the company greater pricing leverage in regulated US states while UK-focused operators lose share after 2025 staking limits. Demand for differentiated content (Slingo portfolio) in 30 regulated markets suggests constrained high-quality supply, supporting higher ASPs for top suppliers and fatter margins versus commoditised operators. Cross-asset: stronger USD vs GBP is a tailwind to reported GBP results (note a recent £0.4m FX hit was immaterial), likely compressing implied volatility in equity option markets while leaving credit spreads broadly unchanged for IG-rated gaming names. Risk assessment: Tail risks include renewed UK regulatory tightening, adverse US state-level rules or taxation, or a major licensee contract loss; any one could erase current double-digit growth. Time horizons: immediate (days) — stock reaction to update already digested; short-term (weeks–months) — FY25 EPS is trimmed 5% and catalysts will drive volatility; long-term (FY27) — Peel expects UK revenue down to ~16%, concentrating US regulatory exposure. Hidden dependencies include licensee concentration, platform integration risk and FX swings; catalysts: new US market go-lives, FY25 results, or material license wins/losses. Trade implications: Favor long exposure to GMR (content supplier with US momentum) and rotate away from UK-centric operators over 3–12 months; use relative value to isolate execution. Consider options to express directional view while limiting downside — buy 6–9 month call spreads or sell short-dated puts to finance calls if comfortable with assignment. Sector rotation: increase weight in B2B content suppliers and US-regulated gaming names, reduce allocation to UK retail/online operators exposed to staking/duty risk. Contrarian angles: The market may underprice execution and contract concentration risk — 61% US revenue concentration is strength but creates single-region regulatory vulnerability; the broker’s unchanged 60p PT may understate potential volatility from FX reversal (a 5–10% USD weakening could meaningfully dent GBP EBITDA) or a major licensee churn. Historical parallels show suppliers can re-rate quickly on sustained US rollouts but also gap lower on sudden regulatory shifts; therefore size positions to survive >30% drawdowns and use option structures to control tail risk.
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Request a DemoOverall Sentiment
moderately positive
Sentiment Score
0.40
