Transgaming is undervalued, says M Partner’s Ron Shuttleworth

Transgaming CEO Vikas Gupta said “The Asia-Pacific marketplace is going to outpace the rest of the world in terms of IPTV adoption and TransGaming is at the forefront.” He added: “We expect to bring this solution to market and then work with other industry leaders until we stand as the dominant content provider to operators throughout the region.”

M Partners analyst Ron Shuttleworth points out that Transgaming has increased its subscriber universe to 73-million people around the world, which is a 14.6 times increase in available subscribers over last year. He believes this illustrates sufficient demand for GameTreeTV among IPTV providers. In a research update to clients today, Shuttleworth reiterated his BUY recommendation and twelve-month share price target of $1.00.

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Toronto-based Transgaming got its start more than a decade ago, designing porting software that allowed PC gamers to play games on other platforms without the time and cost of rewriting code. The software became especially useful to gaming giant Electronics Arts because it could save money on coders while publishing simultaneously on multiple platforms. With this model, TransGaming revenue crept up from $1.59 million in fiscal 2008 to $5.07 in fiscal 2011. Two years ago, however, the company announced a more ambitious plan; it was partnering with Intel to create GameTreeTV, an on demand gaming system that works much the way Netflix does for movies.

While the rollout of the GameTreeTV was plagued by delays, momentum in 2012 has been decisive, including the acquisition earlier this year of the interactive TV division of Oberon Media, a New York-based games distributor. That pickup added more than a hundred game titles to TransGaming’s portfolio, including iconic Hasbro titles such as Scrabble, Risk, and Monopoly.

Shuttleworth says the timing for the Hasbro titles is particularly good for Transgaming because they are much more compelling than previous content offered by the company, and should help it better convert available subscribers. The M Partners analyst says the company has to now just penetrate 1.1% of its clients’ subscriber base to reach his 2013 earnings estimate of $20.3-million.

At press time, shares of Transgaming were down 3.8% to $.25 cents.

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