Shares in gambling firm Playtech (PTEC) have tumbled 27% to 549.6p after warning of a possible miss to expectations by €70m. This is the likely outcome if things do not improve significantly in its Asia business.
The region has seen aggressive pricing from emerging rival businesses, putting profits under pressure.
Broker Canaccord Genuity has been quick to slash its own forecast earnings before interest tax, depreciation and amortisation (EBITDA) by between 12% and 21%. That's based on Canaccord's new €320m to €360m range. It had been anticipating €407m of EBITDA.
Playtech says trading for the first half of 2018 is ‘broadly’ in line as the downturn in Asia emerged at the end of the period and was helped by a strong performance from financial division TradeTech.
Excluding Asia, average daily sales in the year-to-date rose 7% compared to the same period last year, while the consolidation of Italian betting firm Snaitech is anticipated to contribute €80m of EBITDA.
While no trading update has been provided from Snaitech, Playtech is optimistic thanks to the ongoing FIFA World Cup and strong Italian market.
Shore Capital analyst Greg Johnson expects EBITDA of €420m in 2019, including a €100m impact from Asia.
‘Sentiment is likely to stay negative towards Playtech until it can provide more clarity of the scale of the problems in Asia and how it is going address them,’ says Russ Mould, investment director at trading platform AJ Bell.
‘The business has historically been very acquisitive but could the tables now turn and Playtech be seen as a takeover target? The valuation may look more attractive but a bid looks very unlikely unless a predator can find a solution to the company’s Asian problems.’
