Profitable Micro Cap Thriving As The World Shifts Online - InvestingChannel

Profitable Micro Cap Thriving As The World Shifts Online

Stay at home. Shelter in place. That’s the advice of health authorities around the world to try and stem the spread of Covid-19, the novel coronavirus that has claimed more than 66,560 lives since it first was discovered late in December in Wuhan, China.

To that point, millions of employees are working from home now and for the foreseeable future, which could re-shape how business is conducted once this whole pandemic is behind us. It is for good reason that stocks like Zoom Video Communications (NASDAQ:ZM) are actually thriving while the broader markets languished against coronavirus fears.

Savvy investors are not just looking for stocks that can directly address viruses, such as Moderna (NASDAQ:MRNA), but for stocks that benefit from people being at home while “non-essential” businesses where groups of people typically gather are shuttered. Theaters, gyms, schools, restaurants, bars, museums and even parks are just part of those public places that were / are closed.

Another put on lockdown is gambling, an industry expected to reach a value of $565.4 billion by 2022. Las Vegas, the city that never sleeps, has effectively been turned into a tourist ghost town thanks to coronavirus. Macau, a special region of China famous for gambling venues, even made the bold more to close its casinos. Mind you, casinos drive more than 80% of Macau’s government revenue.

Thing is that people are going to gamble, especially when confined to their home with “nothing else to do.” For those with that itch that needs scratching, online gambling is the only solution.

And that falls right into the wheel house of Golden Matrix Group Inc. (OTCPK:GMGI). Even ahead of the Covid-19 pandemic, Golden Matrix was getting traction under the leadership of online gambling veteran Brian Goodman, who came on as CEO of GMGI in 2017.

In three years, Goodman has eliminated all of the company’s toxic convertible debt, taken the company to profitability and stockpiled its financial coffers, while continuing to build revenue momentum and capture market share. Covid-19 is simply adding to the tailwinds and fast-tracking a market which would have been inevitable anyway.

Yes, GMGI is thriving in the age of coronavirus-induced quarantine as it and other online gaming businesses have suddenly become indispensable to the modern economy.

GMGI has the systems (and possibly a lifeline) that will provide land-based casino operators with an opportunity to go online and expand their businesses globally, reduce overheads and even generate much needed taxes for states and countries.

Who Is Golden Matrix Group?

Based in Las Vegas, Golden Matrix Group is an established gaming technology company that develops and owns online gaming intellectual property and builds configurable and scalable white-label gaming platforms, sold under the GM-X brand, for its international customers, located primarily in the Asia Pacific (APAC) region. The gaming IP includes tools for marketing, acquisition, retention and monetization of users. The company’s platform can be accessed through both desktop and mobile applications.

The company’s sophisticated software automatically declines any gaming or redemption requests from within the United States, in strict compliance with current US law.

The turnkey platform includes management tools via a single suite of integrated applications to collect, store, manage and interpret real-time gaming data. It is designed to engage users, incentivizing them with credits, prizes and rewards, thus enhancing the experience and fostering user retention. An e-store component is also part of Golden Matrix’s product offering.

The platform provides access to state-of-the-art games across in-demand gaming genres (both free and pay-to-play), which is critical to acquiring, retaining and extending the user base. In addition to constant updates to the current game roster, new games are regularly added.

The capital expense costs to implement and run the GM-X gaming system of Golden Matrix is a fraction of the cost compared to running a traditional land-based casino and can actually accommodate a lot more players at one time.

Golden Matrix customers include some of the largest gaming content providers in the world.

Across these customers, the platform has registered more than two million players.

Further, Golden Matrix offers live studios to its clients. These products are as close to a traditional casino as possible where live dealers deal cards at gaming tables with the game live streamed all around the world. Dealers and players can interact and, unlike in an actual casino, the number of players at each table is unlimited.

Going Forward Plan

Looking to increase its share in the rapidly growing online gaming market, Golden Matrix is working on strategic opportunities to expand the scope of its operations and corporate value. These initiatives are underpinned by deepening existing roots with major gaming content providers and bringing more on board, as well as releasing new, proprietary games to the market. The expansion efforts come at an opportune time not just because of the temporary Covid-19 environment, but because casinos are realizing that in order to be competitive, they need to have a strong online presence.

To date, the GM-X platform has been licensed to 310 gaming operator clients, including 24 new clients recently, with another 40+ operators expected to license GM-X by the end of April. Management has stated that these new clients are expected to produce “significant incremental GMGI revenue going forward.”

Noting that the Covid-19 pandemic is actually resulting in an uptick in business rather than damaging effects like most others are experiencing, Goodman recently commented, “While our heart goes out to all those afflicted by coronavirus, we nonetheless expect the current trend toward online gaming to continue well into the future.”

Something else for investors to be excited about will provide some horizontal growth for Golden Matrix. Management is in discussions to merge with a large, government-licensed lottery operator in the APAC region. This will significantly bolster the top and bottom line, while serving as a catalyst to facilitate an uplisting of GMGI stock to a national or international exchange.

In a recent quarterly conference call, Goodman conveyed that the lottery business is highly profitable and generates large amounts of cash. He added that the relationship is synergistic where both companies will benefit from each other’s technologies, making it a great marriage.

The Numbers Say It All

In the most recent quarter (Q2 fiscal 2020, ended January 31, 2020), revenue increased to $876,754, up 23% from $713,542 in the year prior quarter.

Net profits rose to $438,802 in the latest quarter, up from $421,791 in Q2 fiscal 2019. With that, Golden Matrix’s cash on hand improved to $1.9 million from $1.1 million a year earlier.

Profitability in a company with a $12 million market cap is certainly an anomaly in the pink sheet world.

Total assets climbed 103% year-over-year to $3.7 million from $1.8 million. Total liabilities were trimmed from $1.8 million to $1.2 million. Shareholder equity was $2.5 million, a stark turnaround from -$118,007 12 months prior.

You Can Bet on GMGI

In a document highlighting the second quarter, management plays on its business by saying “You can bet on us.” Given the impressive numbers and the track record of Goodman, it is an appropriate literary technique to explain the opportunity and the traction the company is earning.