GVC’s H117 results were accompanied by a bullish update for Q317 and positive future indicators. Underlying 20% daily NGR growth in Q317 (to 10 September), combined with continued synergies from the bwin acquisition, should lead to upgrades in consensus estimates. The company is ambitious and well positioned as a consolidator in the gaming industry. Accretive M&A is highly likely in our view. The stock trades appropriately towards the top of its peer group, at consensus 2018e 9.4x EV/EBITDA and 12.9x PE respectively. Our forecasts are currently under review.
Written by
GVC Holdings |
Exuding confidence - upgrades to come |
H117 results |
Travel & Leisure |
14 September 2017 |
Share price performance
Business description
Analysts
GVC Holdings is a research client of Edison Investment Research Limited |
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GVC’s H117 results were accompanied by a bullish update for Q317 and positive future indicators. Underlying 20% daily NGR growth in Q317 (to 10 September), combined with continued synergies from the bwin acquisition, should lead to upgrades in consensus estimates. The company is ambitious and well positioned as a consolidator in the gaming industry. Accretive M&A is highly likely in our view. The stock trades appropriately towards the top of its peer group, at consensus 2018e 9.4x EV/EBITDA and 12.9x PE respectively. Our forecasts are currently under review.
Year |
Revenue (€m) |
EBITDA |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
247.7 |
54.1 |
50.0 |
76.4 |
56.0 |
11.6 |
6.3 |
12/16p** |
894.6 |
205.7 |
121.2 |
41.5 |
30.0 |
21.4 |
3.4 |
Note: *Normalised and diluted (EPS) excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Pro forma results include bwin.party as if it were included from 1 January 2016.
H117 net gaming revenues (NGR) grew 10% to €486.2m, with 11% and 8% growth in Sports and Games Brands NGR. Sports Brands gross win margin increased from 9.1% to 9.8% and is currently 10.2% ytd, in line with management’s target of 10%. Games Brands benefited from a 32% increase in partypoker NGR and, apart from bingo, there is significant positive momentum across the gaming segment. Benefiting from scale, volume and synergies, H117 EBITDA margin grew from 24% to 28%.
Current trading in Q317 (to 10 September) is strong, with daily NGR up 12% and underlying daily NGR (excluding Euro 2016) up 20%. Customer migrations have been successful, removing a risk to revenue forecasts. Management has stated that it expects FY17 EBITDA to be comfortably ahead of consensus (€255.9m) and we anticipate upgrades to consensus figures. Additionally, the CEO’s target of doubling EBITDA within four years is significantly more bullish than current market estimates and implies double-digit revenue growth and market share gains.
GVC has strong organic growth prospects, as well as an excellent track record with integration, which is likely to be augmented by M&A at some stage. The stock trades towards the top end of its broader peer group, at 9.4x EV/EBITDA and 12.9x P/E for 2018e. Continued strong cash flow should enable further special dividends.
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Disclaimer
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Research: Financials
FinTech Group (FTG) announced a solid set of H1 results and FY17 guidance was re-affirmed. While EBITDA slipped by 6% to €13.0m, this reflected a €1.8m provision reversal in H116, and hence the underlying growth was 9%. Brokerage customers grew by 11% over H116, and transactions rose by 10%, while three new B2B projects have been delivered that will contribute in H2. Additionally, the collateralised credit book jumped by 42% over the six months to €187m. Consequently, management anticipates a strong H2. Despite being the fastest growing major broking business in Europe, the shares continue to trade at a discount to the sector.