Evolution AB - The King of iGaming

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I picked up a small slice of EVO for my portfolio, so I’m opening a dedicated thread here. The company is at an interesting stage, so a few people might find this interesting.

This is a company that produces online casino (Live Casino) games, which has rapidly conquered Europe and is expanding into Asia/America.

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ESG investors should not read beyond this point. This is not my favorite business either, but I recognize its high profitability and growth as a platform business with high moats and good scalability. The company receives approximately 10% royalties from all profits of casinos using their gaming tables on a monthly billing basis, without bearing the casino’s loss risk itself.

IR Pages:

H1/2020 Report:

https://www.evolution.com/sites/default/files/1280416.pdf

Alta Fox’s research from June, which clearly outlines the main aspects of the case:

In addition, the company is being followed by RedEye. They are currently preparing a company update due to a rather significant M&A development (the acquisition of NetEnt) over the summer.

A couple of graphs from Redeye’s somewhat outdated report, illustrating the business’s profitability:

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  • EBIT margin approaching 50% levels (2019)

Typical profitability figures from history.

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Analysts’ consensus is currently around 720 SEK. Most recently, on 2.10., BofA updated its recommendation to BUY / 715 SEK:

EVOLUTION: DOUBLE WINNER FROM CHANNEL AND PRODUCT SHIFT - BOA

STOCKHOLM (Nyhetsbyrån Direkt) Evolution Gaming has a unique position to capture growth in the online market, and the current share price does not reflect the strong growth prospects.

This is according to Bank of America in an analysis, and as Nyhetsbyrån Direkt previously reported on Friday, the bank initiates coverage with a buy recommendation and a target price of 715 kronor.

“Evolution benefits from a dual growth theme, firstly from a channel shift from land-based, and secondly from existing online markets’ growing demand for live casino,” the bank writes.

The company’s geographical and customer diversification provides additional protection against regulatory risks, and high entry barriers give Evolution a relatively secure position as market leader, the bank believes.

Live casino has high entry barriers, and with large economies of scale, it is unlikely that operators will start creating their own live casino products, it states.

The strong position as a sub-supplier should be further strengthened by the acquisition of Net Ent, which gives the company greater breadth.

“It will also provide a better position to capture growth in the USA; not all states are suitable for the economics behind live casino, but in those states, iGaming shares can be taken by offering ‘non-live’ slot products,” Bank of America writes.

The company will report its Q3 results on October 22, 2020.

https://www.evolutiongaming.com/financial-calendar

Here’s a tracker for player numbers, e.g., for September:

https://insider6.com/sv/evolution-statistik-september/

Updater, here’s a long thread of September player statistics: https://twitter.com/Marcamannen/status/1311414384749617153

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Good opening, thanks! Interesting timing also in that I’ve been following this somewhat superficially for several months, but more closely only in the last few weeks. I also became an owner on Friday at market open with terrible luck before the rises.

From Twitter, I picked up a few Finnish investors who also mentioned joining specifically on Friday. It would be interesting to know what made you, Aston, jump in right now, as nothing new has really emerged since the NetEnt takeover bid, and I don’t believe it’s a coincidence that several people ended up on the buying side specifically on Friday.

I had hesitated for a while, thinking there must be some catch, as the numbers were too good to be true, and because I also found nothing, I was sure I had missed/didn’t understand something essential and refrained from buying. However, over the past few weeks, an increasing number of foreign investors I follow have shown interest in the company, and through this, I only then read that several institutions have prohibited themselves from buying gambling companies. This information was enough to convince me that this was the missing piece I hadn’t realized. It also says something about how thoroughly I had researched this previously when I hadn’t grasped this, but better late than never. :slight_smile:

Generally speaking, I find the industry very interesting, and another company I’ve been following for a while is Aspire Global, which also focuses on B2B offerings. In these B2B providers, I consider the political risk to be very moderate in the sense that even if an operator using Evo’s live casino were denied a license, players would very likely just move to another provider that still uses Evo’s games. I consider a total ban on online casinos to be highly unlikely. I don’t dare to comment on B2C providers in the iGaming sector, and in these, I specifically see the risks as quite unpredictable, unlike with B2B providers.

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A very interesting company. I personally decided not to invest precisely because of the political risk targeting gambling companies, even though it’s highly unlikely. The market is extremely profitable and growing, and exactly the kind of dream scalable SaaS business an investor looks for.

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EVO caught my eye in August-September, and it convinced me enough that it now makes up over 20% of my portfolio. EVO has an excellent product, outrageous margins, and hardly any competition (EVO has made a takeover bid for another competitor, which should go through, and a third competitor’s growth has stalled in 2020). It’s not cheap, but it’s rare to find such dominant companies in a sector with such juicy margins, so I see plenty of room for growth in the coming years :slight_smile:

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About competitors… Doesn’t $GAN do the same in the US?

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It was simply that the company was unfamiliar to me, and on Friday, I came across that Fox paper on Twitter. Usually, I don’t take a long position if there isn’t at least some analysis available. Then I had the opportunity to study more from RE analyses.

In general, in the current world, I’m interested in companies that somehow fit into the… Hype train - platform - compounder - high ROE - megasuper - high EBIT - SaaS - magic money - Moat - entry barrier - supersuper - proven track - 40% EPS growth - ultimate kampaviineri (a Finnish pastry) …club

(This was a small joke)

kuva

The odds are high, but the expected 40% earnings growth works wonders even with a 2-3 year horizon :man_shrugging:

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GAN makes pretty basic slots. EVO primarily makes live games and other related things :slight_smile:

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Good opening. I’ve been waiting for a thread about EVO because I don’t have the skills to create such a comprehensive set.
I’ve been with EVO since 2015 using a buy & forget strategy, and this past spring during the coronavirus pandemic, I became more active and bought more when the news broke that Las Vegas casinos were closing their doors.

Just last week, I was actually thinking about whether I should sell these shares as I don’t have the enthusiasm to follow the Swedish side so actively. Hopefully, this thread will provide good insights and support for my own holdings :slight_smile:

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It’s great that the forum finally has an Evolution Gaming thread. I’ve been with EVO since early 2017, and it has truly been one of the most delightful stocks, consistently delivering positive surprises. The Swedish stock exchange offers a wealth of interesting gaming/casino/betting company stocks, and it feels a bit dull that the forum’s only discussion around these industries is the Remedy thread.

Evolution Gaming, Kambi, Embracer, G5, Stillfront. Right off the bat, these are 5 stocks from our neighboring country’s stock exchange with strong results and interesting futures. Evolution Gaming specializes in live casinos, Kambi in sports betting, and the remaining three are successful in the gaming world.

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Evolution and William Hill announce partnership for US market

Evolution, leading provider of Live Casino solutions, today announced that it has entered into a partnership with William Hill for the supply of Live Casino content and services across the USA.

The deal is for the whole of the USA and will begin with the rollout of Live Casino for William Hill in New Jersey, streamed live from Evolution’s Atlantic City studio, with additional states to follow.

William Hill PLC is one of the world’s leading betting and gaming companies, employing over 12,500 people. Its origins are in the UK where it was founded in 1934, and where it is listed on the London Stock Exchange. In 2012, it established William Hill US with a focus on retail and mobile operations in Nevada, which is now the largest sports betting business in the USA. William Hill US (www.williamhill.us) currently operates 113 race and sports books in Nevada and the state’s leading mobile sports betting app. The company also operates in New Jersey, Indiana, West Virginia, Iowa, Florida, Mississippi, New Mexico, Delaware and Rhode Island.

Johan Nordstrom, Chief Executive Officer Malta and Chief Commercial Officer at Evolution, commented: “We are very proud to have been selected by William Hill US. Our Live Casino solutions have been instrumental in helping to make William Hill’s Live Casino a stand-out offering in regulated European markets. We very much look forward to achieving the same high levels of success for William Hill in the United States.”

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Good thread:

https://twitter.com/caaarli552/status/1314980117417000963?s=21

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From the recent Carnegie event

https://seminars.carnegie.se/Smallcap2020/speaker_details2.asp?SpeakerID=1044&CompanyID=1030

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“initially in New Jersey with additional states to follow”

There’s certainly plenty of work for EVO in the US. I’ve now stepped out of my comfort zone and shaken off the last remnants of my “I definitely won’t invest in gambling” mentality. I finally familiarized myself with the company’s materials and concluded that the case is indeed good. Asia and the US are huge markets in the casino sector, and expansion there is just beginning… I think I’ll throw some money at the screen and tell my conscience that people will continue to gamble even if I let this case slip by :slight_smile:

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@Aston_Livingstone, do you still have this PDF? The link has been closed.

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https://twitter.com/MF_Holdings/status/1317422933627838464?s=20

Other:

https://twitter.com/LiviamCapital/status/1317207356640530432?s=20

https://twitter.com/LiviamCapital/status/1317208773899976706?s=20

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Q2 2020 report narrated by the CEO and CFO, includes Q&A :slight_smile: I’m just about to watch it myself, hoping to get even more insights into the company.

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Right away, this growth in Asia stands out. Now the US is heavily under development, interesting to see what’s to come :slight_smile:

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EVO on its way to OMXS30. Should cause some forced buying.

:gem_stone::flexed_biceps:

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Break & Retest. Technically this doesn’t look bad at all, and the fundamentals are pure diamond :muscle:

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