RE: nice reading15 Sep 2016 12:13
And yesterday's opinion from ST in IC:-
Netplay priced to spin higher
Aim-traded shares in Netplay TV (NPT:9.25p) have effectively flatlined since I covered the full-year results in March ('Netplay's shares spin higher', 21 Mar 2016) once you factor dividends in the interim even though the online gaming company is expected to lift full-year adjusted pre-tax profits by 18 per cent to £2.6m and 0.95p, respectively. First-half results revealed that both underlying profits and EPS rose by 30 per cent to £1.44m and 0.52p, so well over half of full-year forecasts are already booked.
Major points worth flagging up include a recovery in trading after a soft second quarter, and ongoing product investment in Netplay's business intelligence data room. This unit supports a data-led approach to marketing following the rollout of Netplay's automated predictive customer retention platform across the SuperCasino and Jackpot247 brands. Enhancements in these capabilities should help deliver improvements in customer acquisition costs and player lifetime values, while the roll-out of new games content across both mobile and desktop platforms, and last month's launch of the UK's first Apple TV application which streams Netplay's live roulette products to television, should enhance the player experience. Contract renewals with both ITV and Channel 5 continue to provide its brands a high profile presence to attract new players.
The other part of the business is a B2B operation specialising in online digital marketing and formed after Netplay made a small acquisition last summer. This unit provides a complementary revenue stream to the consumer division and is trading ahead of expectations to such an extent that the acquisition was effectively acquired on just three times its forecast cash profits this year. Netplay's board is open to deploying some of its £9m cash pile on further acquisitions.
Admitttedly, Netplay hasn't been generating the bumper growth of rival 32Red (TTR:134p), a company I initiated coverage on at 51.75p ('Game on', 7 Jul 2013), and last advised running profits at 135p ('Spinning higher', 2 Aug 2016). However, a four point earnings gap between the two is too wide. On 7 times earnings estimates after stripping out net cash, and offering a dividend yield of 6 per cent, Netplay's shares rate a buy.
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