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Broker tips: GB Group, Gaming Realms

Mon 29 November 2021 15:00 | A A A

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(Sharecast News) - Barclays upgraded GB Group to 'overweight' from 'equalweight' on Monday, hiking the price target to 1,000.0p from 865.0p following the company's acquisition of US identity identification business Acuant.

"Following the deal, we have connected with competitors, customers and channel partners in an effort to contextualise the strategic rationale presented and have come away reassured," the bank said.

"The deal transitions GBG from low- to high-teens organic earnings growth, increases the likelihood of incremental margin expansion from operational leverage and improves the group's capability to enter new markets."

Barclays said this deserves a re-rating not the de-rating that has occurred. It added that the new price target implies more than 30% upside as it upgraded its outer year estimates following the acquisition.

"In our upside case we see organic earnings growth reaching the mid-20s per annum," it said.

Analysts at Canaccord Genuity initiated coverage on mobile gaming content developer Gaming Realms at 'buy' on Monday, stating it was now reaping the benefits from two important strategic decisions taken by management.

Canaccord Genuity said Gaming Realms' decision to acquire "the highly popular and successful Slingo brand in 2015" and its subsequent decision to divest its business-to-consumer division in 2017 in order to focus on "the less capital intensive but highly profitable and scalable" brand and content licensing model was now paying off.

The Canadian bank highlighted that after having achieved positive underlying earnings in its 2020 trading year, Gaming Realms was "primed for further rapid revenue and profit growth" as the Slingo format looks set to gain further traction with consumers.

"A growing number of licensing relationships with large global operators alongside an expanding proprietary portfolio of games and content leaves Gaming Realms particularly well-placed to take advantage of the significant forecast growth in iGaming, especially in the rapidly expanding North American market post-legislative changes," said the analysts.

Canaccord, which also issued the stock with a 50.0p target price, also pointed out that it sees scope for "further significant international expansion opportunities" for Gaming Realms.

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