Beyond Trump (1/11) : GVC Holdings

We identified 11 companies able to go beyond Trump’s tweets and respect the following criteria :

  • Good «Fundamental Strength »
  • Market cap between €1.5bn and €20bn
  • Singular business model (capital light, excellent cash conversion, natural industry consolidator…)

GVC is an online gambling group with headquarters in the Isle of Man, currently trading under a number of brands, including Ladbrokes, Bwin, Sportingbet, Partypoker and PartyCasino.

In addition, the group provides B2B services with third-party online gaming operators.

The company employs over 30,000 people and owns licences in 15 countries. By revenue, GVC is the largest gambling operator behind Bet365, Paddy Power-Betfair (PPB) and Amaya.

Dash for size with proprietary IT platform

  • Sports betting is universal
  • GVC builds up with industry consolidation credentials
  • Immensely scalable IT
  • Size helps dilute marketing/branding costs
  • US untold promises add to excellent geographic balance
  • Essentially an equity-less money printing operation

Robust Q2 trading, helped by the FIFA World Cup

GVC released, on July 18th 2018, another robust set of trading figures for the three months to 30 June 2018:

  • Group NGR up 12% at cc
  • Online NGR up 25% at cc
  • UK Retail NGR up 2%

The performance was mainly driven by the online division which posted a strong 22% net revenue growth (+25% at cc), driven by new products and marketing campaigns, while the UK Retail division was up only 2%, which is slightly below our expectations given the World Cup’s contribution.

We however expect the positive momentum to subsist during Q3 as England went far in the competition, having lost only last week to Croatia (11/07). Lastly, European Retail posted 19% (+16% at cc) NGR growth, also supported by the World Cup’s contribution.

All in all, a positive set of trading figures. Excluding the FIFA World Cup, i.e. looking at the 01/01- 13/06 performance, the group posted a 17% increase in Online NGR, at constant FX, meaning that the online momentum isn’t slowing, although the group’s performance is hindered by a weak Q1 in UK Retail due to the poor weather conditions (see our previous Q1 updates).

GVC’s CEO said the strong online momentum means GVC is “well placed to deliver against its full year expectations”, meaning that the FY results should be close to the upper range of market estimates (Bloomberg FY18e: EBITDA £689m, AV: £727m).

To read our full analysis on GVC Holding : click here