Shares in gambling firm Playtech (PTEC) have rallied 5.5% to 388.4p after it predicted that earnings for the year to 31 December 2019 will beat expectations as long as its Asian business contributes.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to reach €390m to €415m, beating broker Shore Capital’s estimate of €380m.
Playtech's guidance depends partly on revenues from its Asian business remaining stable at a €150m annual run rate. If the company struggles in Asia, earnings could be impacted.
In 2018, earnings were hit by intense competition in Asia.
SUN BINGO TO TURN A PROFIT
The renegotiation of the Sun Bingo contract with News UK for up to 15 years is expected to contribute positively to earnings.
Shore Capital analyst Greg Johnson now sees Sun Bingo making money whereas previous forecasts implied it would lose around €10m to €20m.
Playtech’s decision to adopt IFRS 16 accounting standards will also boost EBITDA by around €20m.
SHAREHOLDERS ARE FINALLY BEING REWARDED
Thanks to regulatory headwinds and repeated profit warnings, 50% of Playtech’s market value has been wiped off over the last year.
The most recent warning came on Christmas Eve after the Italian Senate voted to hike online gaming taxes.
On the plus side Playtech’s acquisition of Italian gaming operator Snaitech has paid off with 14% EBITDA growth in the year to 31 December driven by higher online sales.
Snaitech’s strong performance helped offset the impact of weaker Asian markets, lifting group adjusted EBITDA by 7% to €343m.
Moreover Snaitech has enjoyed ‘strong trading’ so far in 2019 despite the decision to raise online gaming taxes in Italy.
With net cash from operations up 26% and €447m of cash from the sale of its holdings in GVC (GVC) and Plus500 (PLUS), the firm has committed itself to a 'progressive' return of capital to shareholders.
As a result it has announced a final dividend of €12 per share and a buyback for up to €40m with potential for more to follow.
