East Side Games Group is a triple, says Eight Capital

The stock has had its troubles since it began trading on the TSX a year ago but Eight Capital analyst Adhir Kadve likes what he sees from East Side Games Group (East Side Games Stock Quote, Charts, News, Analysts, Financials TSX:EAGR). In a Wednesday update, Kadve kept his “Buy” rating and $7.50 target on EAGR, saying the stock is well discounted compared to its peer group.

Mobile game maker East Side Games Group announced on Tuesday that now-former CEO Darcy Taylor will be succeeded as of Wednesday by East Side Games co-founder and largest shareholder (at 50.5 per cent ownership) Jason Bailey, who was in the role of Chief Revenue Officer and Board Chair. Taylor looks to join the Board at the upcoming annual shareholders meeting.

“As ESGG’s vision holder, greatest champion and largest shareholder, Jason was the clear and unanimous choice of the Board and Executive Team to serve as ESGG’s CEO,” said Lead Director Mike Edwards in a press release. “He has a proven ability to think strategically, communicate the vision and grow our business effectively. East Side Games is stronger than ever — with $100 million in revenue for our first full year as a TSX listed company, the strongest fourth quarter revenue in our history and a deep game pipeline for 2022 — the timing is right to implement this succession plan. We look forward to working with Jason and the rest of the Executive Team and we are confident they will capably guide ESGG through our next chapter of growth and success.”

East Side Games did have a big 2021, with the casual game developer being bought by Leaf Mobile early last year (the resulting company changed its name to East Side Games Group in December, 2021) before releasing a titles RuPaul’s Drag Race Superstar and The Office: Somehow We Manage. The company is now at over 200 employees with over 200 more working on its games through partner studios. 

“We are working with many of the world’s biggest brands on some of the most beloved television and movie properties in the world. As CEO, I am committed to enable creators to successfully deliver mobile gaming experiences that players engage with every day,” said Bailey in the press release.

Looking at the executive move, Kadve said Bailey is well-suited for the CEO role.

“As Co-Founder, Executive Chairman and CRO, Mr. Bailey has played a key role in the development of the company’s strategy to-date and was in charge of obtaining and launching the company’s new ‘Super Marquee’ IP, which includes RuPaul’s Drag Race SuperStar as well as The Office: Somehow We Manage. Further, we believe that Mr. Bailey brings significant experience and knowledge of the mobile gaming sector to the role and is well suited to guide the company’s strategy moving forward,” Kadve wrote.

“Mr. Bailey noted that there would be no change to the company’s overall strategy moving forward. Thus, we continue to like the setup for ESGG in F22, given a strong slate of nine expected game launches during the year (compared to only two launches during F21), bringing the total portfolio to 21 gaming titles up from 12 at the end of F21. This supports our 60 per cent year-over-year revenue growth forecast for F22,” he said.

At press time, Kadve’s $7.50 target represented a projected one-year return of 200 per cent. Kadve estimated EAGR to be currently trading at 1.0 2023 revenues, which represents a “steep discount” to its independent game publishers who trade around 5x. Kadve’s $7.50 target implies a 3x multiple.

Disclosure: East Side Games Group is an annual sponsor of Cantech Letter.