Playtech worth betting on, but US growth is key

Gambling software company Playtech’s (PTEC) future is largely dependent on the US. Like most gambling companies, its hope is that the US easing of gambling regulations will turbo-charge future growth. This is why Playtech highlighted the 103 per cent B2B revenue growth to €46.4m (£40m) in the Americas in its first-half results.

This meant that in its B2B business, the Americas was the biggest driver of growth. In Europe, sales were up 19 per cent to €66.5m, while in the UK revenue shrank 10 per cent to €59.6m. However, the company declined to clearly split out the US portion of the revenue and the main driver of the Americas was actually in Caliente Mexico where it saw “significant growth”.

Instead of sharing its US revenues, the company hinted at future growth by highlighting some deals it has signed. It has launched with Parx Casino in Michigan and has announced new partnerships with Scientific Games and Novomatic “alongside continued progress with bet365 and BetMGM in New Jersey”. This is promising but execution is yet to be seen.

Even without significant US growth, the company was still able to increase adjusted cash profits by 14 per cent on a constant currency basis to €124m thanks to online revenue growth.

Peel Hunt is optimistic that Playtech will be able to pull off the US strategy and is forecasting EPS of 18.9p for full-year 2021 before rising to 29.3p in 2022.

With a forward PE ratio of 20, which is at the lower end of the sector, there is relative value on offer but we reiterate our US caveat. Buy.

Last IC view: Hold, 499p, 11 March 2021