Playtech a Good Bet

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Playtech has been building its gaming stakes quite nicely and holds strong positions in both web and land based casino, poker, bingo, live game betting, lottery and sports betting across Europe and Asia and is fast becoming the player to beat.

Playtech develops software platforms and content to help both on-line and land based gaming industries perform better and has some impressive blue chip names on their books, William Hill being the most notable UK known name that just happens to have renewed contracts to use Playtech’s bingo.

During the interim management statement for 3 months to 30 September 2014, released on 22 October, Playtech stated that results represented a “strongest ever quarterly performance” and that average daily revenue was up 2% for first 21 days of Q4 2014 when compared to the same period of 2013.

Comparisons with Q3 2013 show that revenue was up 28.6% with best contributors being sport increasing 108.8% to €7.1m, casino up 33.3% to €62.4m, services and land based services improving 19.3% to €34m and 20.7% to €3.5m respectively. It is not hard to see why casino operations are considered flagship by Playtech.

These quarterly figures lead Playtech directors into stating confidently that full year expectations should be exceeded.

There was a blip in Playtech shares between 27 October 2014 and 12 November caused by speculation on the quality and viability of Malaysian derived revenues which was shrugged off by Playtech, but shares retracted 23% peak to trough nonetheless. This weakness was not reflected in quarterly results.

Technically, buying Playtech at their December nadir and holding through to March would have yielded an average gain of 36% along the way (based on figures from 2009 to date). This of course assumes exact timing of troughs and peaks in each year. A similar gain in Spring 2015 would put the shares at circa 850p, a level last achieved in February 2014.

Whether Playtech shares could punch into record territory above 850p remains to be seen but it seems Malaysian gossip has created a nice opportunity to pick up stock at lower levels, unless that gossip turns out to have substance.

It seems Playtech is a good bet based on the results, positive noises from directors and historical price actions.

Date Company Status Mid Price Target 1 Target 2 Target 3 Target 4
03/01/2015 Playtech Initial write up £6.725 £7.80 £8.68 £9.39 £9.95

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