GVC +ve trading update and dividend, new research with 465-495 p target

9th Jan '14 by jjis

8 comments 11746 reads

GVC which I sought views on here last year. Updated research avaialble 17/1/14 details added at the end of this post.

They announced a trading update and divdend today. Highlights extracted from statement as follows:

"Revenues in the fourth quarter averaged €531k per day, 3% ahead of the third quarter. The Group thus expects to report clean EBITDA above the top-end of analysts' current forecasts.

This third and increased dividend represents management's confidence in the Group's current trading and future prospects and brings the total of interim dividends paid in the 2013 financial year to 32.5€cents, (2012: 22.0€cents). GVC anticipates declaring a final dividend for the year ended 31 December 2013 along with the release of its Preliminary Results in the week beginning 7 April 2014.

2013 has been a transformational year for GVC with the completion of the Sportingbet acquisition on the 19 March 2013, its successful integration, a reduction in the inherited cost base of around 50%, and a growth in its inherited revenues.

Kenneth Alexander, Chief Executive Officer of GVC Holdings plc, said: "The Board is pleased to be able to present excellent figures for 2013 and to continue to reward our shareholders with an increased dividend.

The Sportingbet acquisition and our successful restructuring of that business has been transformational for GVC. The Board's confidence in the future growth of the Group is demonstrated by our ongoing progressive dividend policy, and we look forward to providing a full update at the time of the Preliminary Results in April."

Still looks cheap on the numbers, but hey it is an on line gambling business after all, but I guess that is why the market has neglected it a bit. I note they also say they will be providing a trading update after the World Cup, so as I thought in my last post this should be significant for them this year."

Apart from the valuation (P/E and Yield) looking cheap the technical picture is a bit mixed. They look a bit overbought in the short term given a jump yesterday ahead of this update. Against that though this does seem to represent a break out from the recent sideways trading range of roughly 300p to 360p so maybe it can step up to a new 360p - 420p range? I note that late last year Panmures had a 393p target on it…

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jjis

9th Apr '14

Final results today in which they say clean EBITDA of €38,5m is ahead of upgraded forecasts.
However I note the Normailized EPS figure at 57.2c diluted or 58.6c undiluted is a little behind the 60c (F) on Stockopedia. The dividend is the bigger surprise coming in at 48.5c, ahead of the current years forecast thanks to a 4.5c special in these numbers. Nevertheless the underlying 44c is still nearly 13% ahead of the 39c (F). So seems like they are still delivering on the Sportingbet acquisition with possible excitement from the World Cup still to come shortly.

So much so that it seems they are ready to look for more deals as highlighted in the statement together with some reassurance on the dividend as follows:

Executing the complex acquisition and turnaround of Sportingbet has been a milestone for GVC and has led to greater geographical diversification and a significant increase in profits and dividends. We are now ready for the next stage in our corporate development and further geographic expansion through organic growth and acquisitions. GVC aims to deliver this without diluting the dividend. The Board is confident of meeting current market expectations for the 2014 financial year as underpinned by our proposed dividend of 16 €cents total.

So looks like they remain confident of delivering and with the yield and World Cup to come after consolidating in the 350p to 400p range so far this year perhaps it can move up to a new trading range of 400p to 450p on the back of these numbers?

pooledaniel

Very positive results today. Good to see they are making a point of ensuring dividend is sustainable whilst looking at acquisitions. As you suggest, I'd expect a new trading range to be found off the back of these results, something above 410p at least. Very happy to hold here - expecting strong developments over the next 18 months.

SevenPillars

Amazing, Netplay produced pretty good results yesterday but was smacked hard because of UK Government consumption tax fears. Today the market seems to have lost its fears when it comes to GVC. All the bookies seem to be suffering because of the threat of the new tax, so what magic answer does GVC have that makes it different? Did they mention today how much their bottom line will be affected? The fears may be overplayed, but usually when Government stick their nose in, companies affected tend to take a dive.

Not really Q4 contribution from UK was 4% for GVC and in the presentation on the results in slide 6 they say:

UK exposure to point of consumption tax not material impact to GVC

I guess that might explain why this one was not hit by those fears.

10th Apr '14

Yes, they don't really say much about it, but in a previous update I think the figure suggested was that the hit would be no more than 2million euros, which sounds a lot to me, but in the greater scheme of things might be quite small for GVC? Correct me if I'm wrong, but I believe that GVC's advantage is that most of their business in not UK based, whereas the consumption tax hits mainly UK players? Trouble with this is that once the Government have put their nose in the tax trough, they may decide they want to extend it further. They are one step away from simply saying that all such profits will be taxed in future. Of course, that is purely speculation, but nevertheless has to be considered from an investment perspective.

GVC does look attractive in the sector, fundamentals are by no means stretched, but Government seem to have latched on to this sector as a way of raising new taxes while also playing the morality watchdog card. As always, Government likes to have its cake and eat it, while putting up any argument that justifies its action. Because of this I doubt whether GVC can feel totally safe from future tax grabs.

Maddox

23rd Apr '14

Hi SevenPillars,

GVC's foreign earnings are safe from UK tax as they are offshore and thus out of reach.

Cheers, Maddox

14th May '14

They issued an AGM and trading update for 41 days to May 11th. Surprisingly after what William Hill (LON:WMH) had to say recently this showed continued growth of 8.1% Q on Q and 11% Y on Y, and they say this would have been up 20% at constant currencies. They also said:

This clearly demonstrates that GVC is continuing to grow its revenues. This is especially true for the mobile product where the Gross Revenue per day is double that of last year at an average for Q2-2014 of €108k per day.

They have also announced today a sensible looking strategic investment in Scandinavia with a small upfront payment funded from cash flow and a call option in 2017. Panmure Gordon have apparently today upgraded their price target to 480p today for what that's worth.

Firmly into the 400 - 450p trading range I was looking for last time and going well with the World Cup to come, although I'm out now as I was always uneasy about this one and it is often better to travel hopefully than arrive - but I'm betting I'll live to regret it.

Happy with the update today. I'm still staying in this one for a little longer!

GVC +ve trading update and dividend, new research with 465-495 p target

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Jjis

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