After listening to interviews with both the CEO and the largest owner of Casino and betting affiliate Catena Media, I started to understand this niche market a bit better. I decided to take a position in this gaming industry niche. Gaming affiliates has been a pretty murky business, with a high number of very small companies (more or less one guy sitting at home creating a homepage). But it has also been an insanely fast growing and lucrative business. Catena Media is organically and by acquisitions building up to be a large dominant player in this market. They recently took a step to invest in the Japanese market. It probably won’t be easy to break through in the Asian markets, but the Swedish gambling companies are very much at the forefront in general. So this can be a first step towards new growth for Catena.
This is a high risk position, but I feel I have space to take risk in my portfolio right now, cash-levels are very high and I lowered my Beta my taking less bets on China and buying more quality companies. So I initiate this at a 6% position, since I believe it is a good entry point, where the market has oversold this holding on scares of majority owners exiting the company. Which was in a pretty clear way denied, by the majority owner in a recent interview. Also the company looks cheap valuation-wise. A full analysis might come at a later date, but right now I’m focusing on finding more new investment cases.
Hi there,
I got curious after reading your post. I started looking at the investors material. Interesting company! The strategy to move to revenue share will be a very good move I think. Also with all the sport events coming up next year, I think this could be a good time to get into this stock. Why do you think the company is cheap (I don’t think it’s that cheap). I read last week that the CEO has left. It looks to me that this was not voluntary (interim CEO taking over), what’s your take on that ?
I think that the CEO leaving in such a way is worrying and I have considered to reduce my position to kind of taking a wait and see approach. My worry is that something has been found in the accounting for Q3. The only positive out of this is that the interim CEO is probably better than they guy that was let go. I think the stock has also showed quite a lot of strength through this, which tells me there are larger investors behind who still believe in this stock. More or less the whole trader community was bashing the stock after these news came out.
I think it’s cheap because the revenues they have are fairly sticky (they make money as long as the customer they got in is still playing). So on that basis with further potential growth it looks pretty good. The biggest risk I see is that the company has fairly high leverage already.