Last close As at 05/08/2026
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Research: Consumer
Gamesys Group’s FY19 pro forma results were slightly higher than previous consensus, with revenues increasing by 15% to £565.3m. Asian revenues increased by 137% and now comprise 22% of the total – predominantly from Japan. We are encouraged by the 5% growth in the UK, after a challenging year for the sector. Pro forma EBITDA of £158.9m was 4% lower than the previous year, largely due to higher UK gaming taxes. Following the acquisition of Gamesys, the net debt/EBITDA ratio was 2.8x, which we estimate will fall to 2.0x in FY20 and 1.4x in FY21. The stock trades at 4.1x P/E and 5.2x EV/EBITDA with an estimated 19.8% free cash flow yield for FY21. We note that Gamesys is not exposed to sports and therefore the business should be relatively unaffected by the coronavirus outbreak.
Written by
Gamesys Group |
Business as usual despite coronavirus |
FY19 results |
Travel & leisure |
17 March 2020 |
Share price performance
Business description
Next events
Analysts
Gamesys Group is a research client of Edison Investment Research Limited |
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Gamesys Group’s FY19 pro forma results were slightly higher than previous consensus, with revenues increasing by 15% to £565.3m. Asian revenues increased by 137% and now comprise 22% of the total – predominantly from Japan. We are encouraged by the 5% growth in the UK, after a challenging year for the sector. Pro forma EBITDA of £158.9m was 4% lower than the previous year, largely due to higher UK gaming taxes. Following the acquisition of Gamesys, the net debt/EBITDA ratio was 2.8x, which we estimate will fall to 2.0x in FY20 and 1.4x in FY21. The stock trades at 4.1x P/E and 5.2x EV/EBITDA with an estimated 19.8% free cash flow yield for FY21. We note that Gamesys is not exposed to sports and therefore the business should be relatively unaffected by the coronavirus outbreak.
Year end |
Revenue (£m) |
EBITDA |
EPS* |
DPS |
P/E |
Yield |
12/18 |
319.6 |
112.7 |
118.5 |
0.0 |
4.5 |
N/A |
12/19** |
565.3 |
158.9 |
100.4 |
0.0 |
5.3 |
N/A |
12/20e** |
601.7 |
175.8 |
110.8 |
30.0 |
4.8 |
5.6 |
12/21e** |
640.0 |
196.0 |
130.0 |
40.5 |
4.1 |
7.6 |
Note: *EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Pro forma figures.
Strong revenues, maintaining FY20 EBITDA
Slightly better than January’s pre-close statement, Gamesys reported pro forma results above the top-end of consensus, with revenues increasing by 15% to £565.3m and a pro forma EBITDA margin of 28.1% vs 33.6% in FY18. The decline in margin was largely due to higher UK gaming taxes. UK pro forma revenues increased by 5% to £357.2m (63% of the total), with Asian revenues (predominantly Japan) up 137% to £122.4m. We expect continued double-digit growth from Asia and c 5% annual growth in the UK, leading to an annual revenue growth rate of c 6% in FY20–22. Our FY20 EBITDA forecast is unchanged and we assume a steady EBITDA margin of c 30% going forward. We have introduced FY22 estimates.
Reducing adjusted net debt, lowering interest costs
Following JPJ Group’s £490m acquisition of Gamesys in FY19, the enlarged Gamesys Group reported adjusted net debt of £450.3m, including cash of £100.3m. This equates to a 2.8x net debt/EBITDA ratio, which we estimate will decline to 2.0x in FY20 and 1.4x in FY21. Cash conversion remains high and we forecast operating cash flow of £150.8m in FY20. The company has recently refinanced, lowering the interest charge by 50bp, and it has also paid down £40m of long-term debt. We continue to forecast a final dividend of 30p in FY20, payable in FY21.
Valuation: 19.8% free cash flow yield for FY21e
For FY21e, the stock trades at 4.1x P/E, 5.2x EV/EBITDA with a 19.8% free cash flow yield (including interest payments) and a dividend yield of 7.6%. Operationally, the business has no meaningful exposure to sports (and hence sports cancellations) and its online e-gaming business should be relatively secure despite the coronavirus pandemic.
Exhibit 1: Financial summary
£m |
2017 |
2018 |
2019* |
2020e* |
2021e* |
2022e* |
||
Year end 31 December |
||||||||
PROFIT & LOSS |
||||||||
Revenue |
|
|
304.7 |
319.6 |
565.3 |
601.7 |
640.0 |
681.4 |
Cost of Sales |
(147.5) |
(158.9) |
(287.9) |
(310.9) |
(322.4) |
(344.5) |
||
Gross Profit |
157.2 |
160.7 |
277.4 |
290.8 |
317.7 |
336.9 |
||
EBITDA |
|
|
108.6 |
112.7 |
158.9 |
175.8 |
196.0 |
207.4 |
Operating Profit (before amort. and except.) |
|
|
108.2 |
112.2 |
140.9 |
157.8 |
178.0 |
189.4 |
Intangible Amortisation |
(62.6) |
(60.3) |
(52.7) |
(52.7) |
(52.7) |
(52.7) |
||
Exceptional and other items |
(104.9) |
(16.3) |
(23.4) |
0.0 |
0.0 |
0.0 |
||
Share based payments |
(1.4) |
(0.6) |
(0.5) |
(0.5) |
(0.5) |
(0.5) |
||
Operating Profit |
(60.8) |
35.0 |
64.3 |
104.6 |
124.8 |
136.2 |
||
Net Interest |
(30.0) |
(19.5) |
(21.4) |
(24.0) |
(21.0) |
(19.0) |
||
Profit Before Tax (norm) |
|
|
78.2 |
92.7 |
119.5 |
133.8 |
157.0 |
170.4 |
Profit Before Tax (FRS 3) |
|
|
(65.8) |
18.5 |
44.2 |
80.6 |
103.8 |
117.2 |
Tax |
(0.7) |
(0.5) |
(2.9) |
(13.4) |
(15.7) |
(17.0) |
||
Profit After Tax (norm) |
77.5 |
92.3 |
116.5 |
120.4 |
141.3 |
153.4 |
||
Profit After Tax (FRS 3) |
(66.5) |
18.1 |
41.3 |
67.3 |
88.1 |
100.2 |
||
Average Number of Shares Outstanding (m) |
73.9 |
74.2 |
108.7 |
108.7 |
108.7 |
108.7 |
||
EPS (p) |
104.9 |
119.5 |
100.4 |
110.8 |
130.0 |
141.1 |
||
EPS - normalised (p) |
|
|
103.9 |
118.5 |
100.4 |
110.8 |
130.0 |
141.1 |
EPS - (IFRS) (p) |
(90.0) |
19.5 |
31.2 |
61.9 |
81.1 |
92.2 |
||
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
30.0 |
40.5 |
46.1 |
||
Gross Margin (%) |
51.6 |
50.3 |
49.1 |
48.3 |
49.6 |
49.4 |
||
EBITDA Margin (%) |
35.6 |
35.3 |
28.1 |
29.2 |
30.6 |
30.4 |
||
Operating Margin (before GW and except.) (%) |
35.5 |
35.1 |
24.9 |
26.2 |
27.8 |
27.8 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
595.9 |
521.9 |
1,045.6 |
992.9 |
942.2 |
891.5 |
Intangible Assets |
589.0 |
514.7 |
1,008.7 |
965.0 |
922.3 |
879.6 |
||
Tangible Assets |
1.3 |
2.2 |
31.7 |
22.6 |
14.6 |
6.6 |
||
Other long term assets |
5.6 |
5.0 |
5.2 |
5.2 |
5.2 |
5.2 |
||
Current Assets |
|
|
93.2 |
124.0 |
165.9 |
217.3 |
244.0 |
269.8 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors (incl swaps) |
26.0 |
30.5 |
53.2 |
58.2 |
63.2 |
68.2 |
||
Cash |
59.0 |
84.4 |
100.3 |
145.7 |
166.4 |
186.2 |
||
Player balances |
8.2 |
9.0 |
12.4 |
13.4 |
14.4 |
15.4 |
||
Current Liabilities |
|
|
(98.5) |
(52.3) |
(122.6) |
(117.6) |
(112.6) |
(107.6) |
Creditors |
(46.3) |
(47.8) |
(117.9) |
(112.9) |
(107.9) |
(102.9) |
||
Short term borrowings |
(0.3) |
0.0 |
(4.7) |
(4.7) |
(4.7) |
(4.7) |
||
Contingent consideration |
(51.9) |
(4.5) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(386.7) |
(374.5) |
(624.2) |
(574.2) |
(524.2) |
(474.2) |
Long term borrowings |
(369.5) |
(371.5) |
(545.8) |
(495.8) |
(445.8) |
(395.8) |
||
Contingent consideration |
(7.7) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(9.4) |
(3.0) |
(78.3) |
(78.3) |
(78.3) |
(78.3) |
||
Net Assets |
|
|
204.1 |
219.1 |
464.7 |
518.4 |
549.4 |
579.5 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
102.0 |
106.8 |
100.8 |
150.8 |
171.0 |
182.4 |
Net Interest |
(30.9) |
(19.5) |
(22.7) |
(24.0) |
(21.0) |
(19.0) |
||
Tax |
(1.0) |
(0.8) |
(3.0) |
(13.4) |
(15.7) |
(17.0) |
||
Capex |
(3.2) |
(5.3) |
(16.7) |
(18.0) |
(20.0) |
(20.0) |
||
Acquisitions (inc earn-outs) |
(94.2) |
(55.3) |
(462.0) |
0.0 |
0.0 |
0.0 |
||
Financing |
22.2 |
(2.3) |
240.5 |
0.0 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
(43.6) |
(56.6) |
||
Net Cash Flow |
(5.2) |
23.6 |
(163.2) |
95.5 |
70.7 |
69.8 |
||
Opening net debt/(cash) |
|
|
305.6 |
310.7 |
287.1 |
450.3 |
354.8 |
284.1 |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
310.7 |
287.1 |
450.3 |
354.8 |
284.1 |
214.3 |
NPV of outstanding earnouts/other |
|
|
76.6 |
15.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Currency swaps |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Adjusted net debt |
|
|
387.3 |
302.1 |
450.3 |
354.8 |
284.0 |
214.2 |
Source: Gamesys, Edison Investment Research. Note: *Pro forma figures.
|
|
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