GAME - Engine Media (GAME)(GAME:CA) - Out of Eden

Sale of Eden Games. The Company announced the sale of its subsidiary, Eden Games, to Animoca Brands for $16 million or 1.8 times projected fiscal 2022 revenue of $8.78 million. Engine received $15.3 million for its 96% stake. We view the transaction favorably, given that we viewed Eden as a non-strategic asset.A more focused approach. The sale of Eden should allow management to focus its attention on its fast growing B2B businesses, which include gaming data and analytics, programmatic advertising, and influencer marketing.Favorable source of capital. Although the sale price was below our expectation of $30-$40 million, we view the transaction favorably. Proceeds from the sale will allow the company significant capital to fund its business development and avoid near term debt financing or possible dilution through a potential equity offering.Financial flexibility. As of November 30, 2021, the company had $9.7 million in cash and $5.6 million in long-term debt. As such, the $15.3 million raised in the sale of Eden provides a substantial cash influx, giving the company meaningful financial flexibility.Compelling valuation. Near current levels, the GAME shares trade at 0.3 times enterprise value to our 2022 revenue forecast. This assumes an enterprise value adjusted for the the cash raised from the Eden sale as well as the lost revenue from Eden's operations. Our $14 price target represents a target EV/2022 revenue multiple of 3.8 times. Read More >>