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The sound balance sheet and low valuation aside, Netplay TV is in a prime position to deploy its healthy cash pile to exploit opportunistic investments as the sector consolidates in the era after the introduction of the POC tax. I would expect any deals to be significantly EPS accretive. That’s because analysts predict that after accounting for the impact of the new POC tax, Netplay will report cash profit of £3m and pre-tax profit of £2.6m on revenue of £26m in fiscal 2015. So, if the company was only to deploy half its cash pile to take out rivals on a multiple of around five times cash profits – the multiple its business is in effect being valued on – then this would boost Netplay’s pre-tax profit by half to almost £4m. It would also generate the extra income to support the board’s progressive dividend policy. And there is always the chance that the board will return some of the excess cash on the balance sheet to shareholders. Expect more details at the forthcoming full-year results. Either way, Netplay TV’s cash-rich shares look a bargain buy on a cash-adjusted PE ratio of five for 2015 and rated on less than 1.5 times book value.
Just for you. Shares in online gaming companies took an almighty battering last year due to investor concerns over the impact of the UK government’s new point of consumption (POC) tax. The company behind Supercasino.com and Vernons.com, Netplay TV, has seen its share price hit hard, losing almost two-thirds of its value from a high of 24.25p last January. However, these fears are overdone as an upbeat pre-close trading statement from the company confirmed that the business is trading in line with analyst estimates. That seems to have arrested the share price decline which is hardly surprising considering that Netplay TV has net funds of £12.6m, or 4.3p a share. That’s almost half the company’s market capitalisation. To put it another way, a business that is predicted by analyst Johnathan Barrett at broker N+1 Singer to have made pre-tax profit of £3.3m on revenue of £27.3m in 2014 is being ascribed a value of only £14m. Admittedly, those profits are well down on the £4.9m made in fiscal 2013, reflecting a fierce level of marketing by rivals in the run up to the introduction to the POC tax, which impacted revenues. Netplay sensibly didn’t play this uneconomic game and reined in the level of marketing and adopted a more conservative strategy in the short term to focus on driving returns from existing customers through better retention rates and higher spending. This strategy has paid off: the company revealed in a fourth-quarter trading update that average revenue per user had increased and the cost of acquiring new players had fallen. Marketing spend had been reduced, too, so with revenues being held steady at £6.4m in the latest three-month period, Netplay TV is on course to report annual cash profit of £3.6m for 2014. And that cash profit underpins a healthy dividend. Having raised the half-year payout per share by 22 per cent to 0.22p, N+1 Singer predicts a 19 per cent hike in the final to 0.38p when Netplay TV releases its results in April. On that basis, the prospective dividend yield is 6.7 per cent. The payout is well covered by 2014 forecast EPS of 1.1p and the £1.8m cost of the payout is around half the company’s expected cash profit.
If a fiver for a copy of the IC is a concern, there's no way you should be investing in this widows and orphans stock
Any chance you can re-post some of what he said about NPT?
It seems some investors still trust ST tips! Lets hope he is actually correct this time and knows sonething we don't or more money down the drain.
Included by ST in IC - will it give them a kick start today?
Sold half at l7% profit...may leave the rest to run but not sure yet?
now
Nice buys in and now close to 9p. Yes, I am sure div will be held. Div paying coy and looks very attractive at this low sp.
10p target seems a bit mean. Director was buying after the update that knocked the price and cash in the bank so hoping div will be held and target will be passed.
yep, thought this was rock bottom so added.
Hi Kums Glad to see you is back
just issued 10p target
GM all.
& 6 times the average volume, to boot GLA
10% up now
paid
8.50p to buy now... Up 14% on my buy price last Friday
6.45% now.
Having sold at 22p, I am back in as now this looks way way oversold. Henderson seems to think so and have increased there holding. I am back in today.
Well we've broke the 8p mark, its been a steady rise in the last week - not sure why - but at least it's heading in the right direction. In at 14p, so a long way to go, but I still think Netplays worth a punt' Appreciate many others bought in much higher. It'll be interesting to know their bank balance and how much they've burnt of it in the last 3 months.
MMs hedging their bets with a ridiculous 10% spread, totally unacceptable practice IMO.
Time for this gambling dog to beat the odds, me thinks
Interactive TV gaming company NetPlay TV (NPT:AIM) is eyeing up acquisitions after its trading update on 13 January showed encouraging results despite the new point of consumption tax. N+1 Singer says it offers ‘exceptional value’ on a 2.2 times EBITDA multiple and a yield of 7.6%. (EP)
Anything above 7.2p is ÌMO a buy so lots of buys showing up as sells...same palava yesterday