| CASUAL GAMING FOR NEXT-GEN CONNECTIVITY INVESTMENT THESIS TransGaming ("TNG" or "the Company") is an emerging technology company that is well positioned to benefit from the worldwide growth occurring in casual gaming for Smart TVs and other connected devices. Building upon existing contracts with operators in the US and Europe, TV manufacturers such as Samsung (005930-KS, Not Rated) and Toshiba (6502-TYO, Not Rated), and further exploiting the Company’s intellectual property (IP) on other platforms and applications will allow TNG to increase revenue and be profitable. Partnerships with Google (GOOG-US, Not Rated) and Adobe (ADBE-US, Not Rated) to utilize TransGaming’s technology provide momentum for the Company’s enterprise IP strategy. FINANCIAL REVIEW F2013 revenue was $9.82M, up 58.7% yoy. The Company has consistently grown its top line, and with the recent pruning of its fixed operating costs, we forecast that TNG will break even in FQ214. For FQ214, we are looking for $1.97M in revenue and adj. EBITDA of $94K. We expect TNG to report FQ214 results during the last week of January. VALUATION We value TNG at $0.60/shr using a DCF model in which we forecast F2013-2017E CAGR of 32.5% for revenue. UPCOMING CATALYSTS NEAR TERM: Partnerships and revenue arrangement with various global managed service operators for GameTree TV™ Opportunities to expand the GameTree brand in various geographies. LONG TERM: Driving revenue growth with increased subscribers and advertising based revenue. We are initiating coverage on TransGaming with a STRONG BUY rating and a 12-month target price of $0.60, providing an upside of 76.5% to our target. Given the risks associated with an emerging technology company, we rate the risk profile as SPECULATIVE. |