NetPlay TV (LON:NPT) (13.5p and 2% of JIC portfolio) I have bought a holding in Netplay TV representing 2% of the JIC portfolio. I hope to be indebted to Simon Thompson who has highlighted the attractions of this stock in the Investors Chronicle today. Netplay TV is the UK's largest interactive gaming company, with highly successful brands such as Supercasino.com and jackpot247.com, which its customers can play on TV, online and on their smart phones. Games such as TV roulette and blackjack can be played 24 hours a day. The latest trading statement issued on 7th January reported a strong 4th quarter with full year results expected to be ahead of expectations. It saw a 51% year on year increase in new depositing casino players to 13,874 and a 17% increase on the 3rd quarter. The number of mobile and tablet users increased to 31% of new players up from 8% the year before and 25% in Q3. Active depositing casino players increased by 43% to 25,376 over the prior year. The key to Netplay TV is the operational gearing. As the Investors Chronicle points out a 20% forecast increase in revenue in 2012 should lead to a 50% increase in earnings per share. Growth in 2013 should continue as the Company continues to spend on advertising and as the use of tablets and smart phones grows. There is also built in growth as all the new players recruited during Q4 play throughout this year. The Company generates a lot of cash and had net cash on the balance sheet of £10.5m at the half year stage which compares to the current market capitalisation of £38.6m. Conclusion: on current forecasts, which I think will be upgraded, the shares are valued at 9.6x 2013 earnings for 16% growth and 7.5x 2014 earnings of 1.8p for 28% growth. On top of that there is the cash on the balance sheet and the Company is forecast to pay a dividend of 0.4p for 2012 giving a yield of 2.9%. This seems far too cheap to me. (see transaction history) I have raised the money to pay for this by reducing the holding in Taylor Wimpey to 3.5% and Telecity, which is up 8% today to 2.5%. (see transaction history) www.JohnsInvestmentChronicle.com
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