ABGSC analyst Oscar Rönnkvist on the iGaming sector: “The sector is a defensive position in uncertain times”

Oscar Rönnkvist is an analyst at ABGSC and covers iGaming companies such as Evolution, Kindred, Kambi, Betsson, Better Collective and Catena Media. He recently published a sector report, available to ABGSC clients here.
What is your current view of the sector?
“I am relatively optimistic. If you look at historical growth rates, the sector has stood up well in times of economic uncertainty. Now, the valuations of several online gaming companies have dropped and look attractive in my opinion. I believe we should view the sector as a defensive position in uncertain economic times.”
What risks do you foresee?
“A downside risk that one should take into consideration is a potential rise in wage inflation coupled with increased difficulty attracting tech talent. That could pressure margins slightly.”
Is the sector impacted by the ongoing war in Ukraine?
“Revenues stemming from Russia are naturally expected to decrease significantly as the rouble’s value has fallen, while the sanctions on SWIFT alongside Mastercard, Visa and PayPal restricting cross-border transactions should make it more difficult for Russian residents to gamble online on “.com-sites”. However, the sector’s exposure to Russia is limited. Among the companies that I cover, Evolution is the only one with revenues from Russia worth mentioning. Their exposure is fairly low but not insignificant.”
How do you view other ESG-related risks connected to the sector?
“The ESG risk is an element that can never be ignored completely for this sector and there are different views among investors. While some investors have an aversion to the entire sector, others have chosen to invest in companies that are responding to issues like gambling addiction and responsible advertising in a transparent manner. Some Nordic companies in this sector have come relatively far in their proactive ESG work. However, this will always remain an issue for the sector and a risk that investors must consider.”
Oscar Rönnkvist’s research is available to ABGSC clients at https://extranet.abgsc.se/