reports
- Victoria Pease
Bragg Gaming Group - Rebranded with Oryx at the core
Bragg Gaming Group (Bragg) has reported its first half year, having acquired Oryx Gaming (a European online B2B platform) in December 2018. H119 continuing revenues grew 48% to C$18.0m, achieving EBITDA break-even. Bragg’s strategy is to expand its B2B presence, both organically and through complementary acquisitions. Key milestones will be the development of EBITDA, as well as the successful payment of the remaining c C$30m of deferred and contingent consideration for Oryx Gaming. In order t...
- Victoria Pease
JPJ Group plc - Raising FY19 forecasts by c 3%
JPJ’s standalone H119 revenues increased by 14% to £169.5m, with an adjusted EBITDA of £54.0m. Including Gamesys, pro-forma H119 revenues were £265.6m. This was above our expectations due to another exceptional performance in the Vera&John division, which grew revenues by 58%. As expected, the UK (both JPJ and Gamesys) and Sweden continue to suffer the impact of rising taxes and restrictive regulations. The Gamesys acquisition is due for completion in Q319 and we raise our FY19 pro-forma fo...
- Victoria Pease
JPJ Group plc - Proposed acquisition of Gamesys
JPJ has announced a £490m proposed acquisition of Gamesys (its current platform provider), which equates to c 7.3x adjusted EV/EBITDA. The resulting company will be over 50% larger and key benefits include full control of the technology and meaningful scale with high-profile brands. The £490m consideration will be split between £250m cash (including £175m add-on facilities) and £240m in 33.7m new JPJ shares. Net debt/EBITDA is expected to be c 3.1x on the pro forma basis, although we envisa...
- Victoria Pease
OPAP - Strong EBITDA driven by VLTs and cost controls
Q119 gross gaming revenues (GGR) increased 5% to €396.0m, OPAP’s strongest Q1 performance since 2010. This was driven by a 58.9% increase in video lottery terminals (VLT) GGR (17% of GGR). The core lottery business was steady at €191.7m, although sports betting declined by 5.3%. Sustainable cost containment contributed to an adjusted EBITDA margin of 25%. Our headline forecasts are broadly unchanged, and we assume that the VLT roll-out will continue as previously planned. Cash generation r...
- Victoria Pease
Stride Gaming - Recommended cash offer from Rank
Rank Group has made a recommended £115.3m cash offer for Stride Gaming, which equates to an EV of £93.4m. Using the run-rate H119 EBITDA, the deal is valued at c 7.5x EV/EBITDA. The offer of 151p per share is a 29% premium to the previous day’s closing price. Irrevocable commitments have been received by 61.3% of Stride’s shareholders and completion is anticipated in Q319.
- Victoria Pease
JPJ Group plc - Growth through diversification
Once again, a strong performance in international markets has fully offset the well-flagged regulatory challenges in the UK. Q119 revenues increased by 13% to £83.3m, driven by a 62% growth in the Vera&John division. Operating leverage from the proprietary platform contributed to a 16% increase in adjusted EBITDA (£29.0m vs £24.9m). Net debt/EBITDA has fallen below 2.5x and management will provide an update on plans to return cash to shareholders in August. For FY20 the stock trades at 6.5x P...
- Victoria Pease
bet-at-home - A strong start to the year
bet-at-home (BAH) has started the year very well, with Q119 gross gaming revenues (GGR) increasing by 12.1% y-o-y to €37.2m, and an EBITDA of €12.7m. This is especially encouraging in light of management’s recent guidance of €130–143m GGR (0–10% decline) and an EBITDA of €29–33m for FY19. While this guidance seems conservative, we are leaving our forecasts broadly unchanged until there is further clarity on the impact of the Swiss IP blocking. The stock trades at 13.1x EV/EBITDA ...
- Victoria Pease
OPAP - A record quarter; continued high dividends
OPAP’s FY18 results were in line with our forecasts, with gross gaming revenue (GGR) growth of 6.3% to €1.55bn and a 22.9% EBITDA margin. The recently installed video lottery terminals (VLTs) contributed €208.7m to GGR (vs €57.6m in FY17) and new Kino features led to a strong Q418 within the core Lottery division. OPAP’s investment phase is nearing completion, cost containment is in place and the business model is highly cash generative. The €0.70 FY18 dividend was over 100% of free ...
- Victoria Pease
JPJ Group plc - International continues to drive growth
Driven by an impressive 42% organic growth in the Vera&John division, JPJ reported FY18 revenue growth of 10% to £319.6m with an EBITDA margin of 35.3%. International now comprises 43% of revenues and we expect this to increase as the company diversifies away from the UK. Cash generation remains strong and adjusted net debt/EBITDA has fallen from 3.6x in FY17 to 2.7x in FY18. Management is committed to a progressive dividend policy (once the ratio is sustainably below 2.5x) and would also consi...
- Victoria Pease
JPJ Group plc - Farewell to Mandalay
JPJ has announced a definitive agreement to sell its Mandalay subsidiary to 888 Holdings for £18m cash. During FY18, Mandalay reported revenues of c £11m and PBT of c £3.7m, which represents a deal value of c 5.0x EV/EBITDA. This subsidiary has significantly underperformed the rest of JPJ’s business and was particularly affected by the additional bonus tax in 2017. We therefore believe this asset sale is a net positive and should enable the company to better focus on its market-leading bran...
- Victoria Pease
Stride Gaming - Trading broadly in line
Stride’s AGM confirmed that trading for the current financial year has been broadly in line, despite well documented regulatory headwinds. To counterbalance rising gaming taxes and other sector pressures, the group is implementing numerous cost-cutting initiatives, which will be key to hitting our FY19 EBITDA estimate. Looking ahead, we expect growth to resume in FY20 (once many regulatory burdens have been lapped) and we believe Stride will take market share within a disrupted industry. Cash ...
- Victoria Pease
Mercia Technologies - Good progress across the portfolio
Mercia’s H119 results reflected continued steady progress across the portfolio, with net assets rising slightly to £125.2m and FuM remaining stable at £394.9m. The direct investment portfolio increased 17.7% to £77.8m, reflecting £9.2m of cash investment as well as £2.6m fair value uplift. Key portfolio companies continue to deliver against commercial milestones and with c £60m of investment expected in FY19, Mercia is well positioned for further progress in FY19. The shares continue to ...
- Victoria Pease
Stride Gaming - Strong cash flow and special dividend
Stride’s FY18 results statement was dominated by the impact of recent regulatory news, as well as by the decision to significantly increase cash payouts. Our FY19 estimates now reflect a £7.1m fine for procedural failings (vs £4m previously), as well an additional five months of higher remote gaming duty (RGD), which equates to a one-off hit of £2.5m. None of this affects FY20 and, given Stride’s competitive positioning, we believe it should achieve market share gains and we raise our FY2...
- Victoria Pease
JPJ Group plc - Remote gaming duty increases in April 2019
Following the resignation of Sports Minister Tracey Crouch, the UK government has bowed to pressure to bring forward the reduction in FOBT stake limits, from October 2019 to April 2019. To coincide with the FOBT changes, the planned increase in remote gaming duty (from 15% to 21%) will also commence in April. We reduce our FY19e EBITDA by a further £6m but our FY20 estimates are unchanged. JPJ shares have fallen by c 30% ytd and, despite the reduced EBITDA, trade at only 5.7x P/E, 7.5x EV/EBITD...
- Victoria Pease
GVC Holdings - Parliamentary U-turn
Following the resignation of Sports Minister Tracey Crouch, the UK government has bowed to pressure to bring forward the reduction in FOBT stake limits, from October 2019 to April 2019. The planned increase in remote gaming duty (from 15% to 21%) will also commence in April. We reduce our FY19 EBITDA by a further £95m and net debt/EBITDA now peaks at 3.0x in FY19. Our FY20 estimates are broadly unchanged.
- Victoria Pease
JPJ Group plc - Strong figures despite headwinds
Despite the deluge of negative news across the UK gaming sector, JPJ Group plc (JPJ) has produced another strong quarter, with gaming revenue growth of 8% to £77.8m and an EBITDA margin of 37%. The strategy to expand beyond the UK is clearly paying off; Vera&John revenues increased 40% and international now represents 44% of total revenues. Net debt is reducing rapidly, helped by Q318 operating cash flow of £33m, as well as the £18m cash from the disposal of the social business, and we antici...
- Victoria Pease
Stride Gaming - RGD marginally higher than expected
The UK government has raised remote gaming duty (RGD) from 15% to 21%. This was better than recent rumours of 25%, but 1% higher than market expectations of 20%. With implementation from October 2019 (rather than April), we raise our FY19e EBITDA by 5%. However, assuming no mitigation, we lower our FY20e EBITDA by £3m to £14.5m. While regulatory pressures are likely to remain a feature of the UK gaming sector, Stride is the number three online bingo-led operator and should benefit from its str...
- Victoria Pease
GVC Holdings - Budget not as bad as feared
The Budget has provided long-awaited clarity on a number of gaming-related issues. The implementation of the £2 FOBT stake reduction will begin in October 2019, at the same time as a 600bp increase in remote gaming duty (RGD), from 15% to 21%. This is 1% higher than market expectations, but lower than recent rumours of 25%. We now include a £30m annual EBITDA impact in our forecasts. Also adjusting for an earlier implementation of the FOBT stake limit, we have lowered our FY19e EBITDA by 7%. O...
- Victoria Pease
GVC Holdings - Q3 trading update shows continued progress
In a continuation of previous trends, GVC’s Q318 trading update has demonstrated strong growth and market share gains across all territories. Total net gaming revenues (NGR) were up 14%, driven by a 28% growth in online NGR. UK retail was only down 2%, helped by a strong FIFA World Cup. The integration of Ladbrokes is progressing well, although GVC has announced that Paul Bowtell (former Ladbrokes CFO) will resign in March 2019. Our estimates remain unchanged, but there is a £20-25m risk to o...
- Victoria Pease
JPJ Group plc - RGD increase marginally higher than expected
The UK government has raised remote gaming duty (RGD) from 15% to 21%. This is 1% higher than expected by the market and we now include a c £12m annual impact on group EBITDA into our forecasts for JPJ. While regulatory pressures are likely to remain a feature of the UK gaming sector, JPJ should benefit from its market leading position and we anticipate annual operating cash flow of over £90m. The stock has fallen c 40% since June and now trades at 7.9x EV/EBITDA, 5.6x P/E and 15.5% free cash ...
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