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Bull or Bear Independent Analysis
Mr Green & Co AB
Value Drivers
Quality of Earnings
Risk Profile
Growth expected: organic growth (Q1 2015: +26,2% in
game wins) paired with promising success of the recently closed acquisitions of “Garbo” (for mSEK 4,4) and
“Spin Towers” (for mSEk 35,5)
Analyst
Dorothea Agricola
dorothea.agricola@analystgroup.se
Diversification: fast geographical expansion and i.e. entering the strong and revenue promising Italian gambling
market this year with the acquisition and granted license
of operating Mybet Italia operations (for mEUR 1,0),
(slightly delayed launch in Q3 2015)
Austrian tax dispute: Risk of high dependency on state
laws and tax regulations as experienced in 2014
Competitive advantage: Enormous sensibility and quality
of management in regards to trends and brand image creation of Mr. Green i.e. focusing on new target groups “Women” and Social Network Applications “Facebook”
Mobile application sector: Early focus on this attractive
market with an expected growth of about 10% yearly
over the next 4 years
SEK 45
SEK 43
SEK 41
SEK 39
SEK 37
SEK 35
SEK 33
SEK 31
SEK 29
SEK 27
SEK 25
Quality of Management
Share price (SEK)
52wk
high / low
Nyckeldata
Shares outstanding
Market cap (MSEK)
Net debt (MSEK)
EV (MSEK)
Sector
List / Ticker
Next report
Performance
1 month
3 month
1 year
YTD
Major owners
Hans Fajerson and companies
Henrik Bergquist and companies
Fredrik Sidfalk and companies
Martin Trollberg and companies
The Avanza Pension insurance company
Mikael Pawlo and companies
The
Avanza
Pension insurance company
Euroclear
Bank
Robur Försäkring
Försäkringsaktiebolaget, Avanza pension
Others
Management
Per Norman
Tommy Trollberg
Management
Date
2015-03-06
2015-02-25
2015-02-24
2015-01-01
2015-01-01
2014-12-02
2014-09-05
2014-09-04
2014-09-03
40,1
52,82/52,95
35 849 413
1438
-155
1283
online gambling
MRG
2015-05-19
-6,25%%
1,35%%
6,24%
13,31%
Ownership (%)
19,91
18,70
12,00
5,48
5,41
5,04
4,20
2,89
26,36
CEO
Chairman
Insider Transactions
Insider
Shares
Total
Niclas Enhörning
+100
643
Niclas Enhörning
-400
0
Niclas Enhörning
+143
543
Niclas Enhörning
+400
400
Niclas Enhörning
+400
400
Niclas Enhörning
0
0
Stein Erik Myhre +40 000 40 000
Simon Falk
+40 000 40 000
Simon Falk
+5 000 20 000
Value Drivers & Prospects
Additional
geografical
expansion and
targetting of
new markets
growth through
M&A activities
faster technology
implementation
techniques
organic
growth
through new
licenses
expected
fast growth of mobile and tablet
segment
refer to important disclosures
at the end
of this document
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våra ansvarsbegränsningar
i slutet av rapporten
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2015-05-20
Investment Thesis
Value Drivers: For the future one can expect the
online casino market to grow by approximately 8%
in 2015. Mobile gaming growth is forecasted exceptional with about 37% in Europe in this financial
year. Furthermore within the next 3 years mobile
gaming is expected to make up 50% of the online
gambling market. (Source: Mr Green and H2GC).
Since Mr Green’s Management recognized trends
early, mobile gaming already made up 30% of the
revenues in Q1 of 2015. This field can be identified
as a major value driver. In general the operational
and organic EBITDA growth (game wins) of Mr
Green was around 26,2%. Accounting for nonrecurring events, a negative net income of 112.1
mSEK was disclosed though. However, considering
the strong and stable financial position, the company is able to deal with such, also from a credibility standpoint of view. The intense growth of the
company besides the revenues can also be detected
in the increase of employees by 33% to 152 employees. In 2014 two acquisitions took place, which
are expected to influence future growth. The brand
“Garbo” was acquired. It is an online casino, specified on mobile applications and targeting Women
mainly. Furthermore the acquisition of the brand
“Spin Tower”, a UK Facebook gambling application,
was completed. The brands itself will not be fully
integrated but pursue to operating autonomously.
Concluding one can identify the strong brand image, meeting market demand on time and acquisitions in relation to this as main value drivers.
strategies are set in the holding. The entrepreneurs
are partial owners of the company and the former
CEO Michael Pawlo is still involved in the management of the holding and investment company, but
in early 2015 the Per Norman a non-founder was
appointed as the CEO of of the Mr. Green & Co. AB.
Management: Due to the managements’ extraordinary sensibility to market industry trends sand following them strategically, earnings were growing in
the past years. With offering online casino only a
niche was served. This was very successful with
creating a unique and young brand image of Mr
Green and transferred into rapid growth within
Europe. The trend research is mainly done in the
operating Maltese casino, whereas investment
Overview and Outlook: Mr Green has potential to
further outperform the gambling market because if
the innovativeness and well-marketed brand character, which also proofed to be successful in
Europe. In the near future the mobile and tablet
applications will be launched further and promising
markets like the Italian gambling customers are
targeted. High bargaining power of customers and
capital strong competitors offering attractive deals
mainly determine pressure in the market.
Risk: Regarding the risks of the stock the strong
dependency on laws and state regulations regarding gambling and gambling taxes should be mentioned. 2014 the company experienced a major obstacle in this area since priory no provisions were
build and the Austrian government later raised
substantial tax claims. As further risks the dependency on seasonal fluctuations and gambling behaviour of customers can be mentioned. Due to the expansionary strategy, the company is furthermore
practicing partial hedging only and is therefore exposed to exchange rate risk. The geographical development of Mr Green in Europe was enormous in the
past years. In the last year alone, the Nordic Region
accounted for 15% less of the annual revenues than in
the year before. Recently in 2015 a new licensee of
Mybet Italia operation was obtained Mr Green is
launching its services in Q3 2015 in the strong Italian gambling market. The competitive advantage if
the company of focusing on one product niche only,
can also be classified as a risk due to low product
diversification and the risk of changing customer
demands paired with low switching barriers for
customers.
Company Description
Maltese online gambling company with its holding Mr
Green & Co AB based and traded in Stockholm. Founded in 2007 by three entrepreneurs and experienced a
successful IPO in 2013. Offering customers a sustainable and responsible gaming solutions with protective
measures.
Please refer to important disclosures at the end of this document
2015-05-20
Valuation
Investment Characteristics:
The company pays out dividends since its IPO in
June 2013 and lastly paid out a high dividend of 1,3
SEK (payout ratio -1,66) in regards to the net income. Mr Green is mainly held by the entrepreneurs,
also through investment companies, managers and a
relatively undiversified shareholder base, consisting
of 2638 shareholders in total. Trade liquidity can be
recognized as low with a weekly frequency of
18 702. The stock with its relatively high dividend
payouts is suitable for active traders with interests
in observance of further growth and monitoring
abilities in expected growth periods. In regards to
the immatureness of the stock holding the stock
would not match the expectations of long term cash
dividend tending and risk adverse investors. In contrast to other online gambling companies Mr Green
stands for a sustainable gambling environment with
a focus on long-term profitable stock growth. Q1 results 2015 give indication on growth in remaining
2015, which fosters the perceived undervaluation.
msek
2012
# of shares in m.
shareprice
Revenue
Revenue Growth
Gross Profit
Gross Margin
Profit (Loss)
Profit margin
FCF
Equity
Debt
Leverage
Solidity (Equity/Assets)
Sales /Share
Equity /Share
Earnings/Share
FCF/share
42,2
200,50
2204
27%
1854
84%
681,9
0,309
31,7
1578
1379
87%
53.4%
52,2
37,4
13
0,75
Betsson AB
2013
2014
43,4
196,23
2477
12%
2074
84%
708,2
0,286
529,2
2032
1484
73%
58%
57,1
46,8
13
12,19
46,5
275,00
3035
23%
2546
84%
949,2
0,313
371,7
3074
1937
63%
61%
66,6
67,4
16,9
8,15
Notes on Multiple Valuation:
The online gambling industry is lead by market
leaders like Unibet and Bwin which determine the
fast pace of development and highly competitive
market Mr Green build up its position in the highly
competitive Swedish gambling market and started
well off. As the multiple comparison with the market peers Betsson, Cherry and Nordic Leisure
(Lifeland Gaming), which are also operating in
Online Gambling shows, Mr Greens growth is
stronger than its peers. Besides the non-recurring
tax provisions, causing a lower profitability in
2014 investments are fruitful and stable with regards to profits. The operations are strong with
high gross margins, close to the largest competitor.
The non-recurring happening is also responsible
for making the EPS comparison against the Swedish market leader look weak with -0,78. Levering
up slightly is reasonable considering the closed
deals in 2014.
Mr Green & Co AB
2012 2013 2014
2012
x
x
36,6
x
x
x
0,05
0,0013
1,24
122,1
5,86
5%
95%
2,02
6,74
0
0,07
12,8
20,46
231,5
-51%
107,6
47%
30,4
0,131
54
332,2
53,9
16%
86%
18,1
25,9
2,37
4,22
35,9
34,33
349,8
856%
292,2
84%
29,1
0,0831
110,6
743,8
203,6
27%
79%
15,3
32,5
1,27
4,84
35,9
35,00
659,4
89%
537,9
82%
-28
-0,0425
89,9
671
341,9
51%
66%
18,4
18,7
-0,78
2,51
Cherry AB
2013 2014
12,8
31,20
266,3
15%
86,2
32%
-7,89
-0,0296
152,3
175,8
58
33%
75%
20,8
13,7
-0,62
11,9
13,4
34,50
340
28%
210,5
62%
-38,3
-0,113
22,9
94,3
67,8
72%
58%
26,5
7,35
-2,99
1,79
Forcasted Growth in # Million Devices
Source: Mr Green and Juniper Research
1500
1000
500
0
2015
2016
2017
2018
Tablet
Smartphone
2019
Please refer to important disclosures at the end of this document
Nordic Leisure AB
2012 2013 2014
32,1
2,15
101,8
31%
73,7
72%
6,67
0,0656
-2,15
27,7
41,3
149%
40%
3,64
0,99
0,25
-0,08
38,2
2,70
69,9
-31%
54,9
73%
49,4
0,706
5,44
84,7
8,06
10%
91%
1,83
2,22
1,3
0,14
38,2
2,20
67,1
-4%
48,9
73%
-1,33
-0,0198
19,9
85,5
13,6
16%
86%
1,76
2,24
-0,03
0,52
2015-05-20
Interview
2015/05/11
Per Norman (CEO of Mr Green & Co AB)
From detecting trends to making money: How
does the management anticipate turning potential
trends and potential value drivers into value?
The market research and monitoring is conducted
by the Maltese operational departments, where
special industry and country specific knowledge is
hold and markets monitored closely. Ideas and detected investment possibilities are set into strategic
context with the Stockholm based holding, such as
investment decisions. There is no distinctive investment strategy, which allows for a certain flexibility.
Market reregulation and tax laws: In the recently
published quarterly results the monitoring in regards
to changing regulatory determinants are mentioned.
Which risk management mechanisms are applied?
of controlling for acting in accordance with the legal
regulations. Due to the good industry and country
knowledge such as network, prevailing in the operating department in Malta a close monitoring is
possible.
Organic growth or M&A activities? In 2014 growth
was possible organically (+ 1,5% of active customers)
and through acquisitions. What can the shareholders
expect for 2015 and what special deals are offered to
the customers to boost customer acquisition and can
the stockholder expect M&A events?
Unfortunately Mr Green is not publishing forecasts,
only backward looking financial data. Therefore
neither special marketing measure or planned acquisitions can be named. Nevertheless it can be
confirmed that both growth opportunities are further focused strategically.
Firstly one has to mention that the management
believes in the movement of a stronger market
reregulation. A compliance department is in charge
Bull or Bear
Value Drivers
Quality of
Earnings
Risk Profile
Quality of
Management
& Ownership
Overall View
Modern brand image. Growth triggers through acquisitions in the field of fast
developing applications and devices (mobile and tablet) such as geographical
expansion in Europe. Nevertheless a certain necessity can be detected to keep
up with market peers in high growth speed of competitive environment.
Earnings growth could be recognized in the past years, which can be valued
as stability or earnings in an in general fluctuating relatively in transparent
earnings generating industry. Through an unforeseen tax claim by Austrian
authorities 2014th net income dropped considerably because of provision
building measures. Growth in profitability is forecasted in 2015. Q1 showed
higher cost of sales, marketing and other expenses and therefore lower EBIT.
The low financial leverage minimizes the default risk. Geographical diversification within Europe and recently lower dependency on Nordics. High
dependency on online casino, due to no activities in other gaming applications and as the industry implies framework setting state regulations.
Well lead and marketed company with extraordinary brand image created by
founders and entrepreneurial thinking, internationally connected, industry
experienced management board. Stability was recently disordered by management changes in various leading positions of the group.
Well-structured young company with stable growth, besides one extraordinary event in the past year. Exceptional growth in past. Currently stages of
declining growth in terms of customer acquisition. Responding to the high
competitive market, organic growth is accomplemented by M&A activities.
Please refer to important disclosures at the end of this document
2015-05-20
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Please refer to important disclosures at the end of this document