UEFA Euro championship delayed

This latest delay and postponements of sports events leave few betting events in sports-books. The larger the betting exposure, the larger cuts we expect to consensus 2020e earnings. Conversely, we believe online casinos should hold up relatively well, (revenues coming from online casino: Kindred ~50%, Betsson ~70%, LeoVegas ~90%, NetEnt/Evolution 100%). Suspended/postponed events are a key near-term negative, but still temporary. This and the resilient online casino case make us believe the onl...

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Kindred Group (Buy, TP: SEK75.00) - Set to bounce back in 2020

The US expansion is interesting, but it is still early days (GBP12m–13m EBITDA loss guided in 2020). Kindred must thus achieve earnings growth elsewhere, which we believe it will (20% EBITDA growth YOY in 2020e). 2021 should be more challenging given the Dutch re-regulation. We maintain our BUY and SEK75 target price on the good start to 2020 and promising outlook.

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Kindred Group (Buy, TP: SEK75.00) - Sweden returning to growth

Kindred obviously planned for higher revenue growth in the 2019 budget than the c2% YOY it delivered, and we have cut our 2020e EBITDA forecast by 17% post the Q4 profit warning. 2020 looks set to be a sportsbook year, and Kindred has one of the top sportsbooks. We expect growth recovery in Sweden (based on current trends) to mark the end of a de-rating period. We reiterate our BUY with a new SEK75 (95) target price.

October Swedish gaming tax

For the third consecutive month, October showed strong progress for state-owned betting incumbent Svenska Spel. Kindred and LeoVegas also performed well (up c20% MOM) while Bet365 and Cherry underperformed (down c20% MOM). Notably, the ‘Ten challengers’ recovered somewhat on the back of improvements from Videoslots and Mandalorian Technologies. In general, the October figures followed our expectations of normal seasonal patterns (Q4 being the strongest quarter in gambling). We expect the Swe...

Comment on the APPG report

After the recent GBP2 stake limit introduced for FOBTs in the UK, an informal UK parliamentary group is now calling for stake limits on online gambling products (in a report partly funded by land-based casinos). Most of the leading Nordic operators and game providers are exposed to the UK, a market generally seen as a bellwether for gambling regulation, we believe. Potential further restrictions on licensed online gambling are likely to come with medium-term earnings risk. We question how much o...

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Kindred Group (Buy, TP: SEK95.00) - Improved discipline and confidence

We reiterate our BUY and have increased our target price to SEK95 (90) after the Q3 EBITDA beat versus our expectations and consensus. With a strong start to Q4 and near-term scale ambitions, we expect further material QOQ earnings improvements near-term. The soft Swedish market is a concern, but we expect further signs of the market concentrating towards leading brands like Kindred.

September Swedish gaming tax

September showed solid progress for state-owned betting incumbent Svenska Spel while Kindred and LeoVegas’s recent positive trends were reversed. Looking ahead, we expect 1) more signs that the Swedish market is concentrating towards leading brands; and 2) in addition to high season for gaming, the recent closure of unlicensed operator Mobilebet could support the licensed market and brands such as LeoVegas, Kindred, and Betsson.

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Kindred Group (Buy, TP: SEK90.00) - Look past challenging 2019e

We expect a soft Q3 hampered by a relatively soft sportsbook margin, the first year with Swedish re-regulation, and tough key markets. We have reduced our EPS by 4% for 2019e and 2% for 2020e. That said, a weak 2019e is no news to us and we expect earnings to recover in Q4 onwards. We reiterate our BUY but with a new SEK90 (98) target price.

August Swedish gaming tax figures

August was the third consecutive month with signs that the Swedish market is concentrating towards the leading brands. In the long-term, such a trend should support leading licensed operators such as Kindred and LeoVegas, which experienced a stable MOM progress in August compared to a c10% drop for the aggregate of challenger brands, according to the data.

July Swedish gaming tax figures

According to the latest gaming tax data from the Swedish Tax Authority (including data for all ~70 licensees), July was the second consecutive month with signs that the Swedish market is concentrating towards the leading brands, partly explained by the shutdown of Ninja Casino in June. Kindred and LeoVegas, with an estimated 10% and 20% of group revenue from Sweden, respectively, experienced decent progress in the low-season period July, we believe.

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Kindred Group (Buy, TP: SEK98.00) - Caught by surprise

The weak Q2 results raised questions about Kindred’s strategy and its ability to adapt to the current challenging market conditions. The high level of marketing could prove beneficial medium-term; however, we have cut our 2019e adj EBITDA by 18% and 2020e by 10%. We still expect sequential results improvement in H2 and reiterate our BUY, but have cut our target price to SEK98 (118).

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Kindred Group (Buy, TP: SEK118.00) - A consistent strategy

We believe Kindred is focusing on new player intake especially in re-regulated Sweden where the opportunity to gain market share is significant. With high marketing spend and the impact of the Swedish gaming tax, we estimate Q2 EBITDA of -11% YOY. However, we expect more QOQ improvements ahead and forecast a return to strong YOY earnings growth in Q1 2020. We retain our BUY and SEK118 target price.

Svenska Spel lunch takeaways

We hosted a lunch in Stockholm today with the state-owned leading Swedish gambling operator Svenska Spel. Overall, our key takeaways were tilted to the positive regarding the market growth outlook: 1) the newly regulated Swedish market should soon stabilise after a very challenging start; 2) the number of licensees in the market does not appear sustainable, implying a market share shift to the established companies (from the many small challengers); finally, we conclude that sizeable Svenska Spe...

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