CONSUMER CYCLICALS: Playtech (PTECLN Secured; Ba2/BB CW Neg) 1H results
Playtech - which will now more than ~halve in size as it closes the B2C sale to local issuer Flutter - still reported firm results for its B2B/remain-co division.
- Revenue €382m (+14%), adj. EBITDA at €112m (+38%) and at a 29.4% margin (+500bps).
- Growth came out of LATAM (33% of sales) that was +37%yoy.
- FY B2B EBITDA to be in €200-250m, well ahead of the original 3-5yr target set in 2022 and marginally ahead of consensus.
Again our issue is not with numbers but the messy structure. It has taken a 30.8% equity stake in Calipay (Mexico JV, 27% of B2B revenues last year) but will stop annual services and associated fee collection - increasing reliance on cash dividends being paid and upstreamed. It adds to a number of existing equity stakes in the business (49% in Wplay.co, 30% galera.bet, 27.5% in Northstar) and one with concentration risk; top 3 clients make up 40% of the remaining division this half. A view on those - and Caliplay in particular - is key, which we don't have. On credit metrics BS will move to a ~net cash position, gross leverage at mid-point of guidance will sit at 1.95x (pro-forma of €26s getting pulled). We have doubts on if it will stay low-levered, Moody's believes it will (below co's previous net 1-2x target). Other risk was mgmt departures post €100m bonus pool on the Snai sale; CEO made some positive comments on that today (business as usual etc.) but we have no firm view on it.
€28s have been left wide at OAS+190/4.6% working out to 3yrs. We have no firm view but would encourage caution. It trades in-line with the Allwyn/SAZKAG (Ba2 Neg/BB Neg/BB-) curve - much larger scale but private, higher levered and again has number of partial equity stakes it consolidates in reported earnings. Flutter supply should come next year for those looking for a stronger gaming name - and if you are not willing to wait till then, the €29s, though trading much richer, does screen value.