Last checked at 15 Sep 2015 11:08
London, UK, 15 September 2015
Edison initiates coverage on Rank Group
Highlights of the analysis on Rank Group by Edison's gaming analyst Jane Anscombe include:
Rank has been re-energised over the past year. It is a leading UK gaming operator with its 'bricks and mortar' Grosvenor casinos and Mecca bingo clubs, which still generate 88% of its revenues. It has 2.7m loyal members who made 20.3m visits in FY15, yet only 5% of them play on Rank's digital sites. In Grosvenor Casinos it is only 2%. With more effective marketing and a better platform we expect digital revenues to grow by 60% over the next three years as Rank develops a fully multichannel offering. CEO Henry Birch and the new management team delivered an excellent set of final results in August, with adjusted PBT up 19% to £74m and a 24% increase in the dividend. The underlying business is strongly cash generative, with debt on track to be eliminated by the end of 2018 in the absence of any acquisitions.
Rank's shares are up 60% this year but the FY16 EV/EBITDA is still only 8.3x, below the peer group average despite the fact that it is fully regulated and delivering good profits and dividend growth on our estimates. The reduction in holding to 56% by the major shareholder (Hong Leong) in February 2015 has improved liquidity. Our sum of the parts produces a value of 290p to 360p per share.
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For more information please contact:
Jane Anscombe Edison Investment Research +44 (0)20 3077 5740
tmt@edisongroup.com
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