- B2B profit expected to increase 50 per cent
- B2C could slow as economic conditions tighten
The concern with Playtech (PTC) is that as the economy weakens people will gamble less. However, there is so far no sign of a slowdown. Last year, business-to-consumer (B2C) gambling revenue increased 48 per cent to €983mn (£855mn). In part, this is because the pandemic effect in 2021 provided some easy comparators but, even then, the Italian B2C business Snaitech continued to grow in the second half of the year.
Italian gamblers have been propping up the B2C business, but it is the North American market that brings the promise of growth. Playtech sells business-to-business (B2B) gambling software and as the regulation eases in the US it opens more opportunities. Also, as this software is licensed Playtech doesn’t have to worry about a softening gambling market. It will get paid either way.
Last year, B2B revenue rose 14 per cent to €632.4mn while adjusted cash profit (Ebitda) rose 15 per cent to €160mn. At the start of this year, it had licences granted in Ohio and Maryland and is now licensed in nine states. Management is guiding to medium-term B2B adjusted cash profit of €200mn-€250mn.
Combining this B2B target with Snaitech’s target of €300m-€350mn of adjusted cash profit gives a total of between €500mn and €600mn. This is decently ahead of Peel Hunt’s 2027 forecast of €518mn. In the nearer term, the broker is forecasting 2024 cash profit of €459m and an adjusted EPS of 66.6, giving a 2024 price/earnings ratio of just 9.5.
The slowdown in B2C gambling could come eventually, but with the potential B2B growth on offer in the US, the current share price looks very affordable. Stick to buy.
Last IC View: Buy, 411p, 23 Mar 2023
PLAYTECH (PTEC) | ||||
ORD PRICE: | 551p | MARKET VALUE: | £1.69bn | |
TOUCH: | 550-552p | 12-MONTH HIGH: | 636p | LOW: 361p |
DIVIDEND YIELD: | NIL | PE RATIO: | 47 | |
NET ASSET VALUE: | 555¢ | NET DEBT: | 12% |
Year to 31 Dec | Turnover (€bn) | Pre-tax profit (€mn) | Earnings per share (¢) | Dividend per share (¢) |
2018 | 1.23 | 188 | 40.7 | 24.1 |
2019 | 1.44 | 88.2 | 18.5 | nil |
2020 | 1.08 | -52.7 | -24.5 | nil |
2021 | 1.21 | 605 | 230.3 | nil |
2022 | 1.60 | 95.6 | 13.5 | nil |
% change | +33 | -84 | -94 | - |
Ex-div: | na | |||
Payment: | na | |||
£1 = €1.15. *Includes intangible assets of €981mn or 321¢ a share . |