Playtech Plc – Value Analysis (LONDON:PTEC) : December 29, 2017

Capitalcube gives Playtech Plc a score of 68.

Our analysis is based on comparing Playtech Plc with the following peers – GVC Holdings PLC, Webis Holdings plc, William Hill PLC, Veltyco Group Plc, 888 Holdings Plc and Ladbrokes Coral Group Plc (GVC-GB, WEB-GB, WMH-GB, VLTY-GB, 888-GB and LCL-GB).

Investment Outlook

Playtech Plc has a fundamental score of 68 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis angle, relative underperformance over the last year has improved more recently.
  • It’s current Price/Book of 2.90 is about median in its peer group.
  • We classify PTEC-GB as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • PTEC-GB‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • PTEC-GB‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • While PTEC-GB‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • PTEC-GB has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

PTEC-GB has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 16.89% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 13.19%), and a well-cushioned interest coverage level of 13.64x, PTEC-GB can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 6 chosen peers for the company, only 5 of the stocks have an outstanding debt balance. Companies with no debt include 888-GB.

PTEC-GB has maintained its Quick & Able profile from the prior year-end.

  • PTEC-GB‘s interest coverage has increased 2.47 points from last year’s low but is still below its four-year average interest coverage of 49.83.
  • While its interest coverage increased to 13.64x from 11.17x (in 2015), its peer median decreased during this period to 5.10x from 31.75x.
  • Interest coverage rose 29.11 points relative to peers (and is now higher than its peer median).
  • PTEC-GB‘s debt-EV is its highest over the last four years and compares to a low of 0% in 2013.
  • The increase in its debt-EV to 16.89% from 15.40% (in 2015) was also accompanied by an increase in its peer median during this period to 13.19% from 10.82%.
  • Relative to peers, debt-EV fell 0.88 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
GVC Holdings PLC 9.49 1.25 0.92 25.36
Webis Holdings plc N/A 1.11 5.1 117.14
William Hill PLC 27.22 0.77 5.01 31.6
Veltyco Group Plc 0.05 13.13 217.62 19420.15
888 Holdings Plc 0 0.72 No interest exp 999
Ladbrokes Coral Group Plc 33.98 0.36 2.52 15
Playtech plc 16.89 1.15 13.64 66.62
Peer Median 13.19 1.11 5.1 66.62
Best In Class 0.05 13.13 No interest exp 19420.15

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Company Profile

Playtech Plc develops unified software platforms and content for the online, mobile and land-based gaming industry. The company’s gaming applications include casino, poker, bingo, sports betting, live gaming, lottery and casual games. It provides licensees with the cutting-edge tools, which includes established online operators, sportsbooks and entertainment brands. The company was founded in 1999 and is headquartered in Douglas, Isle of Man.


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