Global Gaming is down for the count as the Administration Court has decided not to grant inhibition. Global Gaming will appeal the decision to the Administrative Courts of appeal (Kammarrätten). However, we find it unlikely that the outcome will be favourable for Global Gaming. Moreover, we believe that Global Gaming is evaluating different alternatives, where migrating the Ninja Casino brand to an external platform is the most likely alternative. As a result, we have evaluated the scenarios and updated our estimates.
The Administrative Court (Förvaltningsrätten) has decided not to grant inhibition for Global Gaming´s subsidiary SafeEnt regarding the revoked Swedish license. This puts Global Gaming in a very bad position as the flagship brand, Ninja Casino, is closed for business until further notice. The brand is losing customers and sales every day. Furthermore, we believe that it is unlikely that Global Gaming´s appeal to the Administrative Courts of appeal (Kammarrätten) will change much.
Most likely Global Gaming is running discussions with external platforms parallel with the legal process. No matter the outcome of the legal process Global Gaming needs to operate the Ninja Casino brand on a platform with a Swedish license as soon as possible. Although, Global Gaming has not much room to negotiate. We believe any deal with an external platform will either have a large platform fee or an option for the third party to acquire the Ninja Casino brand to favourable multiple in a couple of years.
Winning the legal fight
In the bull case scenario, Global Gaming will come out on top at the end of the legal processes regarding the license. However, much damage will already be done as the inhibition will be postponed. The flagship brand, Ninja Casino, will lose a large part of its customers and sales on the Swedish market. The company will have to adapt the operational cost to the new reality and try to focus on growing in other markets. In this scenario, we expect that the sales level will be around SEK 400m in 2020 for the group. Profit margins will be low, and a large part of the current cash position will be consumed to handle all the challenges. Our bull case scenario indicates a fair value of SEK 8.
Adapting and finding a partner
In the base case scenario, we assume that Global Gaming needs to migrate the Ninja Casino brand to an external platform. At the same time, the company have to adapt the operational cost, which will consume a large part of the cash position. The company should be able to maintain some of the sales on the Swedish market, as Ninja Casino is a well-established brand. Global Gaming should also be able to grow in other markets. The profit margins will, however, be limited and the Ninja Casino brand will be locked to an external partner. Our base case scenario indicates a fair value of SEK 4.6.
Sell the IP and close the business
In the bear case scenario, without any room to negotiate, and the limited time frame, it might be difficult to find an acceptable deal with an external partner. With the risk of losing all sales in Sweden and only end up with poor profit margins in the other markets – The company might be forced to sell the Ninja Casino IP at an unsatisfying price level to save some of the shareholder value. At the same time, closing the remaining business will consume a majority of the cash position. Our bear case scenario indicates a fair value of SEK 3.
The uncertainty remains high. However, we will closely monitor additional information from the Swedish Authorities and Global Gaming in the coming weeks.