Running gambling websites in countries which don’t regulate betting is a risky business. That’s a lesson Playtech (PTEC) has learnt the hard way. Since Malaysia (an unregulated market and the second largest contributor to Playtech’s Asian revenues) suddenly placed a temporary ban on online gaming in late 2017, sales growth across the Asian market has slowed. Business-to-business gaming revenues are down 8 per cent on a like-for-like basis in the first few weeks of 2018 and there has been no improvement in the market outlook. This means that Numis’ forecasts (which assume for a recovery in Malaysia) might be optimistic. The broker expects adjusted cash profits and EPS of €357m (£316m) and 83ȼ, respectively, in 2018 (from €325m and 76ȼ in 2017).
But a greater fear is the potential for a crackdown in China. There are already strict laws against gambling in China, but Playtech serves gambling operators there through licences obtained in the Philippines. In 2017, these licenses contributed 35 per cent of revenues, so, if Chinese authorities were to clamp down on gambling, Playtech could be in trouble.
Still, management is making progress diversifying into new regulated markets, which now make up 54 per cent of overall sales. Acquisitions such as BGT have helped the group expand, while the purchase of BetBuddy increases their image as a responsible gaming group.
| PLAYTECH (PTEC) | ||||
| ORD PRICE: | 702p | MARKET VALUE: | £2.23bn | |
| TOUCH: | 699-702p | 12-MONTH HIGH / LOW: | 1,020p | 678p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 424ȼ* | NET CASH: | €584m | |
| Year to 31 Dec | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
| 2013 | 367 | 491 | 167 | 23.2 |
| 2014 | 457 | 144 | 48.4 | 26.4 |
| 2015 | 630 | 142 | 44.5 | 28.5 |
| 2016 | 709 | 200 | 61.4 | 32.7 |
| 2017 | 807 | 267 | 78.9 | 36.0 |
| % change | +14 | +33 | +29 | +10 |
| Ex-div: | 03 May | |||
| Payment: | 01 Jun | |||
| *Includes intangible assets of €1.1bn, or 331ȼ a share £=€1.13 | ||||
