Despite Contagious Gaming’s 35% year-on-year decline in revenue, Global Maxfin Capital analyst Manish Grigo believes that the company is just getting started.
Contagious Gaming posted revenue of $209,398 in its fiscal Q1 ending June 30th, compared to $323,847 in the same period last year, attributable to lower revenues from third-party development contracts.
The company generated an adjusted EBITDA loss of $546,722 from a $30,163 gain in Q1 2014. Adjusted earnings also fell from a loss of $5,278 last year to a loss of $1m in Q1 2015.
The company noted that the decrease in the adjusted EBITDA is primarily due to general and administrative and regulatory compliance costs the company did not incur until completion of its reverse takeover of Contagious Sports Ltd. and Telos Entertainment Inc. on September 19, 2014.
However, Grigo says that while the company missed both of his top and bottom line expectations, he believes Contagious is just getting started and its mergers and acquisition could transform it in short order, noting that the proposed acquisition of Sportech PLC could be a huge catalyst.
“We believe that this transaction, should it go through, would be transformational for CG as the joint entity would be the largest pure play sports focused gaming company on the TSX [Toronto Stock Exchange] with leverage to mobile gaming,” added Grigo.
The company said its talks with Sportech are ongoing while noting that there is no certainty that a formal offer will be made.
Last month, Contagious Gaming has made a cash-and-share offer to Sportech, which is likely to have to be higher than the latter’s share price on August 13 of 62.63p.
Contagious also continues to progress with its €5m cash-and-shares bid to acquire German sports and race betting software developer Digitote, which provides its Xturf B2B platform for companies like Winners (bwin Spain) and Betcenter (Belgium), in addition to its own Gibraltar-licensed Digibet, which was among the 20 recipients of German federal sports betting licenses in September 2014.