Late in April, Transgaming (Transgaming Stock Quote, Chart, News: TSXV:TNG) announced an agreement with Google that would see the tech giant license TransGaming’s SwiftShader 3D rendering technology, which allows applications to generate 3D graphics on a CPU alone without the use of a graphics processing unit. The agreement was an expansion of a previous license between the two companies.
M Partners analyst Ron Shuttleworth says he is not optimistic about Transgaming’s digital content business, but says royalty-based licensing should contribute significantly more than expected to overall company performance.
He says his previous valuation of Transgaming was based primarily on its digital content business, but as the company missed milestones and suffered delays in monetization, his expectations of its performance also declined.
The M Partners analyst says the Google license ranges from between $2-million and $4-million, so he assumes that $3-million we be recognized in fiscal 2013’s fourth quarter. Shuttleworth also believes there is a solid pipeline of potential similar sized licensees that will follow Google.
In a research update to clients this morning, Shuttleworth maintained his one year price target of $0.12 on Transgaming, but, owing to a slide in the company’s share price, raised his rating on the stock from SELL to BUY.
Shuttleworth says he believes a Transgaming that is valued on its IP licensing assets offers shareholders a more solid measurement that can also be used to compare the stock to a broader peer group. He says he values this ahead of IP pure-plays such as Wi-LAN and Acacia Research, but behind gaming and connected entertainment companies such as Zynga and Netflix.
Shares of Transgaming closed today even at $0.09.