Playtech boosted by Italian gamblers

Gambling company Playtech (PTEC) has seen significant growth in both B2B and B2C business in the past year. However, reported profitability dropped significantly due to a €251mn (£221mn) year on year fall in unrealised gains on call options held in Latin America.

For the B2B business, most of the growth was driven by the Americas. Regulated markets in the Americas grew revenue by 50 per cent while sales in European markets jumped 39 per cent. The majority of the Americas growth has come from Mexico – where Caliente has become Playtech’s largest partner. Commercialisation in the US is imminent in the coming month, with the company now licenced in six states.

The B2C business is in Italy through Snaitech, a business acquired in 2018. Adjusted cash profit (Ebitda) at Snaitech was up 154 per cent to €131.7mn, a surge prompted by the opening up of retail betting after pandemic restrictions were eased. Compared with 2019, growth was a more modest 13 per cent.

These results have made broker Investec appraise its full-year cash profit forecast of €374mn as too conservative. It now expects 2022 cash profit to be nearer €400mn, which would mean around a 20 per cent increase to EPS. Currently its 2022 forecast has Playtech trading on an affordable looking 2022 PE of 14.8.

Demand for B2C gambling will likely soften. Snaitech currently makes up 61 per cent of total sales, but at this price there is still value, especially if the US investment starts to generate cash. Buy.

Last IC View: Buy, 448p, 24 Sep 2021