Regulated Online Betting Adoption And UX Upgrades Will Drive Stronger Long-Term Earnings Potential

Catalysts

About Gentoo Media

Gentoo Media operates performance based affiliate platforms that connect iGaming operators with high value players across global markets.

What are the underlying business or industry changes driving this perspective?

• Ongoing adoption of regulated online betting and casino in markets such as North America and Brazil positions Gentoo to leverage its established publishing assets and diversified partner base, supporting renewed double digit revenue growth as market conditions normalize.
• The next generation proprietary WordPress framework, set to go live from Q4 with benefits expected in 2026, should enhance site speed, UX and conversion. This is expected to lift monetization per visitor and underpin structurally higher EBITDA margins.
• Improved player acquisition efficiency, with roughly two thirds of prior acquisition volume generated at around half the marketing cost, indicates a scalable paid model that can be reinvested into growth while expanding net margins and earnings.
• Focus on quality of revenue through partner and portfolio optimization, including renegotiated terms and exit from weaker relationships, should increase cash generative revenue share deals and further strengthen free cash flow conversion.
• Product and content upgrades on key brands such as AskGamblers and WSN.com, including more feature rich, human curated comparison sites that address changing search and AI behavior, are likely to drive higher user engagement, better retention and structurally improved revenue per FTD.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Gentoo Media's revenue will grow by 11.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.3% today to 25.3% in 3 years time.
• Analysts expect earnings to reach €37.4 million (and earnings per share of €0.27) by about December 2028, up from €5.7 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €52.2 million in earnings, and the most bearish expecting €19.6 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 9.0x on those 2028 earnings, down from 15.0x today. This future PE is lower than the current PE for the SE Hospitality industry at 11.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.48%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent volatility and immature conditions in key growth markets such as Brazil, including unpredictable sports margins and regulatory uncertainty, could limit the scalability of Gentoo Media's affiliate model, suppressing long term revenue growth and delaying operating leverage in EBITDA and net earnings.
• Structural shifts in traffic acquisition, including AI driven search and changing user behavior away from simple comparison top lists, may erode organic visibility for iGaming affiliates that fail to differentiate. This would pressure visitor volumes, weaken conversion rates and ultimately reduce revenue per FTD and overall margins.
• Ongoing regulatory risk in emerging verticals and geographies, such as U.S. sweepstakes and broader iGaming oversight, could restrict or reprice certain revenue streams, dampening high growth segments and compressing both revenue and free cash flow generation over time.
• If partner and portfolio optimization does not translate into sustainably better economics, Gentoo Media may sacrifice near term volume without fully offsetting it through higher quality deals. This would leave overall revenue subdued and limit the anticipated structural expansion in EBITDA margins and earnings.
• While recent cost cutting and governance investments have improved efficiencies, there is a risk that future growth initiatives, restatement related controls and potential refinancing of the maturing bond increase the fixed cost and interest burden again. This would cap net margin expansion and slow growth in free cash flow from operations.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK19.77 for Gentoo Media based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK26.19, and the most bearish reporting a price target of just SEK10.02.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €147.8 million, earnings will come to €37.4 million, and it would be trading on a PE ratio of 9.0x, assuming you use a discount rate of 11.5%.
  
• Given the current share price of SEK6.96, the analyst price target of SEK19.77 is 64.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.