Thread by @dividendblower

Evolution Gaming Let's try to model and size up the TAM of this SEK 100bn giant once again. The key takeaway from this exercise is not to say "this will happen" but rather "this is how it looks like if it happens". There will be new data points to adopt to reality frequently

Sources: Historical market figures H2GC. Estimates my own.

(1) Europe TAM
- COVID landbased impact surging online activity 20e
- 5% RNG CAGR 19-24E
- 35% Live penetration 24E (~50% share of iCasino up from ~32%)
- EVO implied m/s 81% @ 11.5% take-rate
- Goal to grow larger than Eur market. Let's ballpark same level
-Q1-20 growth: 30% y/y

(2) North America TAM
- California joins the party later on
- Live grows like RNG 20e and then start to penetrate with customer adoption
- 100% m/s with Ezugi today, ~85% 24e in an oligopoly and monopoly market for many states
- 1.15% total penetration 24e
- Q1-20 growth: 54% y/y

(3) Asia
- Strong preference for Live as TRUST is VERY important for Asians (Live >> RNG), look at 18/19 development
- Here it's important to point out H2GC numbers 08-19 are likely VERY flawed with unreported numbers. But let's use it anyway and then come back to it later (1/2)

- As RNG isn't as trusted in the Asian market total penetration from landbased is probably the better way to model it from
- COVID online activity surge like all other markets during Macau shutdown 20e
- Q1-20 growth: 160% y/y

Let's come back to the Asian TAM skepticism directly to point out the very likely HIGH unrecorded figures in those historical years. What I've heard from industry experts, management calls etc.

- Asian potential claimed to be 10-20x European size
- Asia Gaming rumored to generate ~1bn in Asia profits (6x EVO 2019 EBITDA)
- Above implies a 31% m/s for EVO @ 11% take-rate. I've heard about a likely 5-10% m/s range
<- Implies a much higher underlying market today

If one just for the fun of it triangulate the possible underlying TAM out of this
- 5-10% m/s implies 5-9bn 19e
- Asia Gaming EUR 1bn profit and same margin assump. as EVO and 60% m/s implies ~3bn TAM
- Taking 5bn with same growth trajectory equals ~30bn 24e (10x Europe 19e)

30bn 24E would more than double this TAM-summary as Asia is included with 8bn in my model atm

EVO's topline would then look something like this picture.
IF (!) with capital letters:
(1) Competition is still kept arm's length away because of EVO's superior CAPEX/Innovation advantage
(2) Regulation doesn't ruin the party
(3) Unknown factors

Cash build-up would probably look something like this.. With a ~8% cash flow yield 24e and EUR 1.5-2.0bn cash at hand.

And this would translate to a fwd valuation something like this..

Plenty of things to go wrong here obviously, but Asian opportunity is also larger than the reach of the eye.

Disclaimer: I still own shares in EVO. Don't take the exercise for granted, see it as a ballpark. TTWO could start a GTA Live Casino, Netflix kill it etc. Who knows..