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32Red looks strong as it heads for exit

The company posted strong growth, largely due to its sport channel
March 14, 2017

When we labelled 32Red (TTR) a 'buy' in our tip late last year (136p, 1 Dec 2016), it turns out we weren't the only ones who thought so. At the end of February Kindred, the Swedish owner of online betting company Unibet, offered 196p a share for all issued and to be issued shares in the company. Shareholders, as at the record date of 3 March, are also eligible for a second half-year dividend of 4p a share on 23 March.

IC TIP: Await documents at 194p

Heading into the acquisition, the company looks to be performing well. Cash profit before share option costs and exceptional items - largely due diligence costs and restructuring costs in the prior period - doubled to £10.6m.

The top line moved ahead more than a quarter (see table), as the core casino business continued to grow net gaming revenue strongly. Mobile delivered 57 per cent of casino revenue, up from 44 per cent last year. The smaller non-casino products segment grew quickly, led by sports betting product 32RedSport, which has benefited from increased marketing investment. Overall, marketing spend was up 26 per cent during 2016. The company hopes this will put it in a strong position ahead of proposed UK changes to remote gaming duty.

32RED (TTR)

ORD PRICE:194pMARKET VALUE:£166m
TOUCH:194-194.75p12-MONTH HIGH:201pLOW: 97p
DIVIDEND YIELD:2.7%PE RATIO:26
NET ASSET VALUE:15p*NET CASH:£10.1m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201232.12.042.81.4
201325.42.293.11.8
201432.13.414.52.4
201548.71.071.22.8
201662.36.547.55.3
% change+28+511+507+89

Ex-div: 2 Mar (see text)

Payment: 23 Mar

*Includes intangible assets of £7.5m, or 9p a share