iGB North America magazine IGBNA Aug/Sep | Page 54

Business and Finance

iGaming Index Top 10 52 Week Performance
7.0

6.0

5.0

4.0

3.0

2.0

1.0

04/15/14

05/15/14

Betfair

06/15/14

Playtech

07/15/14

Paddy

08/15/14

09/15/14

Optimal

sector, and represent opportunistic
moves by the supplier, as numerous CFD
companies have suffered as a result of
the upheaval in the CFD market this
spring mainly due to the millions of losses
incurred from the abrupt elimination of
the long-time ceiling on the Swiss Franc,
spurring considerable speculation and
M&A activity. This process saw Plus500’s
market capital halved on 18 May, when
the company announced some accounts
would be frozen as a result of investigations
into money laundering and more rigorous
checks would be required.
According to Peel Hunt’s Nick Batram,
“they are being opportunistic but it’s not
without risk. The timing could be fantastic,
or it could look a bit silly.” The acquistion
of Plus500, the shirt sponsor of Spanish
soccer team Atletico Madrid, is expected
to close in September. While City Analysts
were bullish on the idea of horizontal
expansion into another sector, it is outside
Playtech’s core online gaming market.
Investors seemed a bit weary as well,
with the share price sold off 35.5 pence,

10/15/14

Will Hill

11/15/14

Betsson

12/15/14

Net Ent

01/15/15

Unibet

02/15/15

Amaya

representing a 4% drop over the remainder
of the period.
Betfair’s (+0.1%) seems to be accorded
‘Unicorn’ status, well at least in the opinion of
Ivor Jones from Numis Securities. The share
price once again hit an all-time high of 2,698
pence, up an astounding 145% since the
company rejected the bid from PE giant CVC
Capital Partners two years ago.
In the spring, the momentum of Betfair’s
share price continued, with Q3 financial
results that demonstrated the pointof-consumption regime in the UK had
not impacted the company’s financial
performance. Following the news, Barclays
analyst Patrick Coffey spent a day at an
investor roadshow with the management
team, and came away increasingly confident
that Betfair will continue to take market
share in the UK with its strong investment
in product, promotion and pricing strategy.
“We are incrementally more excited about
the longer-term international prospects for
the brand, albeit there are clear challenges.
We are 8-10% ahead of company-compiled
consensus in FY16/17 and remain

54 | iGamingBusiness North America | Issue 20 | August/September 2015

03/15/15

03/15/15

04/15/15

05/15/15

06/15/15

bwin party

confident that Betfair can deliver ahead of
expectations.” He cited three specific reasons
for his views (1) changing brand perception:
(2) international diversification outside core
UK market and (3) the US with TGV as the
main reason for growth.
Numis analyst Ivor Jones, while equally
optimistic, astutely pointed out that trees
don’t grow to the sky, especially since the
vast run-up in the share assumed continued
growth at the current rate. Later in the
period he wrote another memorably titled
note A horse with a stick on its nose is not a
unicorn…and neither is Betfair. While Numis
is impressed with the management and the
product, he is less convinced of the market
dominance that Betfair would need to
establish in order to justify the inflated share
price. “Numis has taken a rare stance in its
Sell recommendation typically reserved only
for companies with ‘fundamental problems
and Betfair is not one of those in our view”.
However, with the increase in share price
outpacing the rate of his upgrades, he stated:
“we simply cannot make sense of the share
price for more than our view of 2,100p (up