There's a well-known phenomenon in investment circles: stocks relating to drinking, smoking, gambling, and sex perform well no matter how well the economy does. What do you do during the good times: drink more, smoke more, maybe hit the casino before ending the night at a club. And during the bad times? Drink, smoke, shag, and gamble.
As part of a balanced portfolio, especially on the cusp of a recession, it's a good idea to have exposure to "sin stocks".
That brings us to the recommendation of the day. LSE:GMR (Gaming realms) develop online games for long-term customers with 100+ Leading Brands. Big names such as Skybet, 888, Ceasars, Paddy power, draft Kings & more.
Recently Gaming Realms has been breaking into the huge US market where Q1 YoY revenue growth was 142%. Part of the beauty of this company is its scalability and low regulatory burden allows it to break into lucrative new markets with relatively low cost. They estimate gaming revenue to grow 248% from £13.3B to £33.1B by 2026, the majority of which will be supplemented by expansion in the US market.
Part of their success can be attributed to their highly popular Slingo (slots + bingo) line which is trademarked and owned by gaming realms. This is a fantastic moat and USP.
Some financials
YoY revenues grew 28.62% from 11.40m to 14.67m
Debt to Total Capital ratio of 22.61%, lower than the previous year's 33.56%
Adjusted EBITDA grew 57% to £5.7m up from £3.3m
| metric | amount |
|---|---|
| Net profit margin | 8.55% |
| Return on investment | 8.67% |
| PE Ratio | 55.68 |
| Forward PE | 11.62 |
| EPS Growth Rate | 181.48% |
| Market Cap | £71.54m |
| Share price | £0.245 |
| Book value per share | £0.05 |
Caveats
Gaming Realms are currently more dependent than I'd like on their Slingo line of games, luckily they have trademarked the word "Slingo" which gives them a bit of a moat however cheaper competitors could eat away at their market share with cheap alternatives.
Sources
https://www.gamingrealms.com/wp-content/uploads/Gaming_Realms_FY_2021_Presentation.pdf
https://www.gamingrealms.com/investors/
Financial Times
advfn
Google finance
Yahoo finance