GAN in Spotlight Following Aristocrat Deal for Playtech

Posted on: October 18, 2021, 09:15h. 

Last updated on: October 18, 2021, 09:37h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Late Sunday, Australian gaming machine Aristocrat Technologies announced it’s purchasing rival Playtech in a $3.71 billion transaction. That values the target at a 58 percent premium to where it closed last Friday. At least one analyst believes the deal highlights potential opportunity with gaming technology provider GAN Ltd. (NASDAQ:GAN).

GAN Bain
Aristocrat’s deal for Playtech highlights gaming tech consolidation. GAN has what buyers are looking for. (Image: Nasdaq)

B. Riley analyst David Bain says the premium Aristocrat is paying to acquire Playtech, which has a similar business model to GAN, could be indicative of valuation opportunity with GAN.

We believe the deal further demonstrates scarcity value of both business-to-business (B2B) technology and content, highlighting valuation of GAN and a handful of other B2B/business-to-consumer (B2C) gaming technology and content suppliers in the space, which continues to see extremely heavy M&A (mergers and acquisitions) activity,” said Bain in a note to clients today.

The analyst rates GAN “buy” with a $26 price target, implying upside of 71 percent from the Oct. 15 close.

GAN Has Scarce Assets

Shares of GAN, which, like Playtech, makes gaming-related software that propels iGaming and sports wagering platforms, are off 25 percent year-to-date. But the company’s technological capabilities remain alluring.

That’s even more true at a time when much of the consolidation in the online gaming industry is revolving around buyers getting their hands on technology to fortify their in-house tech stacks. That’s exactly what Aristocrat is doing in acquiring Playtech. The UK-based target makes software for internet casinos, web-based poker rooms, and online sports wagering, and provides software for fixed-odds arcade games and online games.

While GAN isn’t yet generating buzz as a potential takeover target, it’s clear some buyers are pursuing targets for technology assets. There’s speculation that it’s tech DraftKings (NASDAQ:DKNG) wants in its overtures toward Entain Plc (OTC:GMVHY). As another example, Bally’s (NYSE:BALY) recent purchases of Gamesys and Bet.Works confirm gaming operators are keen on vertical integration and want to bring tech in-house to realize cost efficiencies.

As for GAN, its market capitalization of about $640 million makes it easily digestible for any number of suitors. But the Irish company hasn’t been directly tied to takeover rumors.

Another Reason to Like GAN

There are no guarantees that a suitor will come calling for GAN, but B. Riley’s Bain says there are other reasons to consider the shares, including a recently announced deal with Red Rock Resorts (NASDAQ:RRR) the investment community may be overlooking.

Last week, GAN said it inked an accord with the casino operator “to build and deploy the infrastructure for Station’s ‘STN Sports’ online sports platform, mobile applications, and retail Over-the-Counter and Kiosk-based sports betting throughout Nevada.”

“We believe the agreement validates elements of GAN’s Coolbet technology, which will be incorporated into the multiple elements of the deal. Given the RRR agreement was announced late in the day (Friday), and not discussed on its Analyst Day call, we believe it may have been overlooked by investors,” said Bain.

The analyst raises 2022 and 2023 sales estimates on GAN to $176.2 million and $225.3 million, respectively, from $159.2 million and $187.3 million.