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Playtech set for revenue surge, Deutsche Bank predicts 16/06/2009

Jon Parker

Playtech has been named as Deutsche Bank's “best play on medium term growth in the online gaming sector”, set for a surge in turnover due its deal with William Hill Online and to moves on online gambling by the US authorities.

The revenue surge will be driven by the migration of the William Hill casino product to Playtech software, the glowing report by Deutsche today stated. The bank also sees “regulatory opportunities and expanding markets as playing a significant part in Playtech’s future growth”, the report continued, including US efforts to legalise online gaming and to clamp-down on illegal US-facing poker sites.

“We remain Buyers of Playtech. Whilst it is not immune from economic weakness in its existing portfolio of more mature licensees, its cash-generative business model and leading position in the industry should continue to drive growth through a recession by adding new licensees and cross-selling more products,” the report concluded.

The bank said that it expects Playtech growth in 2009 to be weighted toward the second half of the year, but that “the pipeline of new licensees and product developments leads us to be positive on the medium term trading outlook as well.”

The bank also predicted that Playtech will look to move up from London’s Alternative Investment Market (AIM) to a main market listing over the next 6-12 months.

On the topic of regulation, the banks said that it sees “regulatory evolution as generating the most significant opportunities for gaining licensees as has happened in Italy”, and that this will benefit Playtech because expanded in regulated markets is a strategic focus for the business.

“In this context, the US is the ‘big one’ and if efforts to legalise online gaming in the US are successful, that should throw up a considerable number of new opportunities as US operators seek to enter the market and will want a reliable software platform to do so,” the report concluded.

As reported on EGRmagazine.com, US congress is presently debating a bill to legalise online gambling presented by congressman Barney Frank (more).

Deutsche said that Playtech, along with PartyGaming, will benefit if the US authorities continue their recent clampdown on illegal US-facing poker sites such as PokerStars and Full Tilt (more), “particularly if this happens before any US legalization occurs.”

The bank dismissed the company’s M&A potential as a relevant factor in its investment potential, arguing that although Playtech has call options over affiliated companies which provide marketing and customer support function to some of Playtech’s licensees, these do not expire until 2011 and are unlikely to be a focus for management given the opportunities to develop its core business as the regulatory environment for egaming evolves.

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Posted: 16/06/2009

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