Stocks of Playtech dropped dramatically by 60% after the declaration of a dividend payout.
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Playtech's shares have plummeted by over 60% due to a significant special dividend payout amounting to nearly two-thirds of its market cap. This dividend stems from the sale of the company's Italian consumer arm, Snaitech, to Flutter Entertainment last year.
The gambling software firm handed out close to £1.5 billion as part of this sale. Consequently, Playtech's share price nose-dived from 800p to 316p.
Ivor Jones, research analyst at Peel Hunt, explained this price drop is approximately proportionate to the size of the special dividend. Despite the drop, Peel Hunt still maintains a Buy rating for the stock. According to Jones, if you subtract the dividend from their previous 1,000p target price, it implies an upside of 62%.
After this sale, Playtech has transformed into a nearly purely B2B player. A year ago, it maintained an equal split between B2B and consumer focus. Peel Hunt now suggests that most of the firm's value comes from its role as a provider of technology platforms for online gambling and the services needed to operate them, as well as its software as a service arm, which supplies gaming content to operators in exchange for a revenue share.
"Playtech is intricate but worth the hassle," remarks Jones. Moreover, he points out that the company boasts a sustainable business model, multiple investments nearing maturity, and a highly motivated management team.
However, analysts note that Playtech's earlier low in the previous year was at 442p, whereas its current share price stands at 316p.
When Playtech unveiled its full-year results in March, it surpassed analyst expectations. Group adjusted operating profit came in at €480m, compared to the €474m forecasted by analysts. Expansion in the US was surprisingly robust, with revenue soaring 19% to €252m.
Additionally, Playtech increased the value of its stakes in several other businesses, including an €802m stake in Caliente (an upgrade from last year's €730m) and a €141m stake in Hard Rock Digital (an upgrade from €77m last year).
Aiming to capitalize on its technological prowess, Playtech has set its sights on expanding its B2B operations globally while streamlining its business model for accelerated growth.
Additional Insights:Following the sale of Snaitech to Flutter Entertainment, Playtech has set a strategic course to concentrate on its B2B offerings in high-growth gambling markets[1][4][5]. By prioritizing its core strengths in technology-led solutions for the gambling industry, the company seeks to drive growth and simplify its business model. Its key strategic changes include a B2B focus, a simplified business model, growth potential, and increased shareholder value through a future dividend payment[1][4].
- Jones from Peel Hunt asserts that despite Playtech's share price drop due to the special dividend, the stock still holds an upside of 62% if you subtract the dividend from the previous 1,000p target price.
- Playtech, having sold its Italian consumer arm to Flutter Entertainment, has morphed into a predominantly B2B player, with its value derived primarily from its technology platforms for online gambling, service offerings, and software as a service arm.
- Aiming to capitalize on its technological prowess, Playtech plans to expand its B2B operations worldwide, while simultaneously streamlining its business model for accelerated growth.
- The sale of Snaitech marked a strategic shift for Playtech, as it now concentrates on its B2B offerings in high-growth gambling markets, prioritizing technology-led solutions for growth, a simplified business model, growth potential, and increased shareholder value through future dividend payments.
