LEAF Mobile scores with new titles, Haywood Capital says

Neal Gilmer of Haywood Capital Markets believes LEAF Mobile (LEAF Mobile Stock Quote, Chart, News TSXV:LEAF) is in position to keep growing, maintaining a “Buy” rating with a target price of $6.50/share for a projected return of 136 per cent in an update to clients on Tuesday.

Headquartered in Vancouver, LEAF Mobile is one of Canada’s largest free-to-play mobile gaming companies, with a number of gaming titles leveraging celebrity-IP and a proprietary technology platform called IdleKit.

Gilmer’s latest analysis comes after LEAF released a pair of new celebrity-IP games within the last week: RuPaul’s Drag Race Superstar and B-Real Mobile Buds.

“The B-Real game should result in meaningful engagement from those interested in cannabis culture as well as those interested in hip hop culture,” Gilmer said in his November 2 report regarding B-Real Mobile Buds. “The launch of the game demonstrates LEAF’s commitment to developing and releasing counterculture games built on valuable IP with a long history of having loyal fans.”

According to Gilmer, B-Real Mobile Buds, developed by LEAF subsidiary LDRLY Games in collaboration with DGT Enterprise LLC and rapper B-Real from the group Cypress Hill, is based on the artist’s actual life and business, which enables players to join the game to work with B-Real, a longtime cannabis advocate, in growing his cannabis empire.

The game is also an expansion of LEAF Mobile’s cannabis game portfolio, building off the success of the Bud Farms franchise that has had over 30 million downloads since launching in 2014.

“Being from California, B-Real is well versed with cannabis culture which can be seen in his lyrics and is one of the early advocates to be picked up by mainstream media,” Gilmer said. “The company anticipates organic use growth through the promotion and support across B-Real’s platform.”

“I am really excited about the game, it’s off the chain. The graphics are dope, the schematics of the game as well,” said B-Real (real name Louis Mario Freese) in LEAF Mobile’s November 1 press release. “The content itself, your abilities while playing this game – you are going to be blown away by it.”

Meanwhile, RuPaul’s Drag Race Superstar, developed in collaboration with World of Wonder Productions, has already built out a significant runway in its first week since its release, as App Annie, a platform that tracks mobile performance such as market and advertising analytics and data, noted that the game ranked at the top amongst either Role Playing or Simulation games in the IOS app store for eight countries over the past week, as well as in one country on the Google Play store for Android users while being in the top 10 in 11 countries total.

“We know fans around the world have been waiting for this day and we’re incredibly excited to be able to announce the worldwide release of RuPaul’s Drag Race Superstar,” said Darcy Taylor, CEO of LEAF Mobile in the company’s October 25 press release announcing the game’s availability. “This is one of the first major mobile game productions that puts the LGBTQ+ community at the forefront, and represents an exciting step forward. We know fans of RuPaul around the world are going to love this game and can’t wait for them to start playing. It’s been an absolute pleasure partnering with WOW to bring this experience to life.”

The two new releases also come ahead of the company’s plans to release The Office: Somehow We Manage, in collaboration with Universal Games and Digital Platforms, toward the end of this year.

Gilmer is a believer in the company’s upward growth trajectory as evidenced by his financial projections, as he forecasts revenue to reach nine figures at $101.3 million for 2021, representing a potential year-over-year increase of 25.8 per cent, before predicting a boom to a projected $181.3 million for a potential year-over-year increase of 79 per cent.

Meanwhile, Gilmer’s first EBITDA projection for the company comes in 2021 at a figure of $11.8 million for a potential margin of 11.6 per cent, before growing to a projected $29.5 million in 2022 for a potential margin of 16.3 per cent.

Gilmer believes the company’s latest announcement signals that LEAF Mobile is ready to pursue potential growth and acquisition opportunities.

“As a result of the game being developed on IDLEKIT, it demonstrates the platform’s flexibility and depth for large-profile games and creates the opportunity to gain valuable data from gameplay for future game development and releases,” Gilmer said of the B-Real release. “Additionally, the launch shows a continued ability to execute on securing high-profile IP and quickly turning it into a mobile game.”

Overall, LEAF Mobile’s stock price has dropped 46.9 per cent since it began trading on the Toronto Stock Exchange on February 10, peaking early at $4.95/share on February 12 before dropping ever since, recently bottoming out at $2.52/share on October 28.

Disclosure: LEAF Mobile is an annual sponsor of Cantech Letter.