Elys Likely To Gain From Small Venue Gaming, Land-Based License Additions With FIFA World Cup An Additional Driver: Analyst

H.C. Wainwright analyst Scott Buck reiterated a Buy rating on Elys Game Technology, Corp ELYS with a price target of $2.00.
On December 27, 2022, shares of Elys increased 111.9%, versus a 0.7% decline in the Russell 2000 as it announced a gaming license for B2B partner Cloakroom Gentlemen's Club.
Given results at the company's first D.C. location, Grand Central, Buck believes the Cloakroom could generate up to $1.0 million annually in gaming revenue.
While ELYS shares have not exceeded Buck's expectations this year, the company continues to make meaningful progress in the U.S. and Europe, likely to manifest in better operating results beginning in 2023.
In addition to a second gaming location in Washington, D.C., the company has positioned itself to open more than 100 locations in Ohio beginning in 2023.
Further, the company has signed two new locations in Maryland and should begin to see revenue from its announced U.S. mobile partnership with Lottomatica S.p.A.
The ongoing deployment of recently acquired operating rights in Europe suggests a meaningful increase in wagering volume beginning in 2023, likely to drive improving revenue through the next 12 months.
Given this momentum in the operating business, the analyst saw an apparent dislocation between operations and valuation.
As operating results begin to show improvement, Buck expects investors to gravitate towards deeply discounted ELYS shares.
Buck views the company's small venue gaming strategy as a meaningful differentiator in a growing U.S. sports wagering market.
The analyst believes profitability should improve further as the company continues to deploy additional land-based licenses during 4Q22.
Buck believes the recently concluded FIFA World Cup should have been a favorable driver of wagering activity.
The proposed capital raise should alleviate the balance sheet overhang, analyst notes.
Elys' valuation represents a significant upside from current trading levels of $0.37.
While the legal U.S. sports betting and gaming industry remains in its infancy, investors have been attracted to the multi-billion-dollar revenue opportunity.
Near term, the analyst views a discount as warranted, given the lack of operating history in the U.S. and inconsistent profitability.
However, longer-term, Buck believes the company is positioned to achieve positive EBITDA and bottom-line earnings in 2024E, likely ahead of many gaming peers, due to the differentiated business model, which could drive significant multiple expansions over time.
Price Action: ELYS shares traded lower by 24.3% at $0.2801 on the last check Wednesday.

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