Quality-first, Business-perspective, Long-term, Urbem (HK) Limited

Urbem Capital

Quality-first, Business-perspective, Long-term

Equity Bottom-Up

<ul>
<li>Although lesser-known, this Swedish company dominates one of the most lucrative segments of the global casino industry.</li>
<li>In our view, it is probably the only investable casino company, and despite its size, still has a massive growth runway ahead.</li>
<li>Our DCF model implies a 15%-20% total return for the company's long-term shareholders.</li>
</ul>


Although lesser-known, this Swedish company dominates one of the most lucrative segments of the global casino industry.
In our view, it is probably the only investable casino company, and despite its size, still has a massive growth runway ahead.
Our DCF model implies a 15%-20% total return for the company's long-term shareholders.


Evolution Gaming: The World's Largest Casino, Which You Probably Never Heard Of

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>PUSU deadline for TTB (Gopher) has been extended until 15 July. Playtech states that this time will allow progress in additional negotiations. Talks are credible, but progress is at snail's pace.</li>
<li>Taking comparables' median 9x EV/Fwd EBITDA, fair value for Playtech would be 772p. TTB should offer close to 800p to entice the Honk Kong based shareholders who derailed Aristocrat's offer.</li>
<li>I see the current valuation of Playtech as an attractive entry point, with the upside of a likely bid. Long PTEC LN.</li>
</ul>


PUSU deadline for TTB (Gopher) has been extended until 15 July. Playtech states that this time will allow progress in additional negotiations. Talks are credible, but progress is at snail's pace.
Taking comparables' median 9x EV/Fwd EBITDA, fair value for Playtech would be 772p. TTB should offer close to 800p to entice the Honk Kong based shareholders who derailed Aristocrat's offer.
I see the current valuation of Playtech as an attractive entry point, with the upside of a likely bid. Long PTEC LN.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>On the 2 February, <a href="https://www.smartkarma.com/entities/playtech-plc" target="_blank" data-smartkarma-citation="entities:22099:1" rel="noopener">Playtech Plc (PTEC LN)</a>'s shareholders voted down <a href="https://www.smartkarma.com/entities/aristocrat-leisure-ltd" target="_blank" data-smartkarma-citation="entities:10303:1" rel="noopener">Aristocrat Leisure (ALL AU)</a>'s £2.1 billion Offer.</li>
<li>The Offer failed after Playtech was unable to engage with a block of Asia-based investors who owned ~28% of the company.</li>
<li>As a developer of online casino games, Playtech is an obvious target. Reportedly its second-largest investor and two Playtech CEOs - former and current - are piecing together a deal. </li>
</ul>


On the 2 February, Playtech Plc (PTEC LN)'s shareholders voted down Aristocrat Leisure (ALL AU)'s £2.1 billion Offer.
The Offer failed after Playtech was unable to engage with a block of Asia-based investors who owned ~28% of the company.
As a developer of online casino games, Playtech is an obvious target. Reportedly its second-largest investor and two Playtech CEOs - former and current - are piecing together a deal. 


<ul>
<li>Court and EGM meetings are scheduled 2 February. Aristocrat is the only suitor remaining.  Some investors in Playtech who anticipated a bidding war aren't too keen to support the deal.</li>
<li>The Board threatens with a break-up and auction of both Snaitech and the B2B white label software division. Analysts believe that the business is worth more than the current offer.</li>
<li>Reiterate long PTEC LN, TP 680/share (Aristocrat offer), with the potential upside risk of a sweetened offer to placate some investors, or a break-up.</li>
</ul>


Court and EGM meetings are scheduled 2 February. Aristocrat is the only suitor remaining.  Some investors in Playtech who anticipated a bidding war aren't too keen to support the deal.
The Board threatens with a break-up and auction of both Snaitech and the B2B white label software division. Analysts believe that the business is worth more than the current offer.
Reiterate long PTEC LN, TP 680/share (Aristocrat offer), with the potential upside risk of a sweetened offer to placate some investors, or a break-up.


Aristocrat/Playtech: Deal Uncertainty but the Shares Are Inexpensive

<ul>
<li>Since <a href="https://www.smartkarma.com/entities/playtech-plc" target="_blank" data-smartkarma-citation="entities:22099:1" rel="noopener">Playtech Plc (PTEC LN)</a> started putting its house in order, it is receiving a lot of interest, in a sector that has attracted M&amp;A activity in 2020 and 2021.</li>
<li>Assuming the potential offer is at an EV of £3 billion, the potential offer price would be c. 830p. Shares offer an 8.9% 22e FCF yield.</li>
<li>I have revised my valuation following interest in the company. Median implied EV/Fwd EBITDA TP is 841p, c.24% higher than offer from Aristocrat, in line with that suggested by Gopher.</li>
</ul>


Since Playtech Plc (PTEC LN) started putting its house in order, it is receiving a lot of interest, in a sector that has attracted M&amp;A activity in 2020 and 2021.
Assuming the potential offer is at an EV of £3 billion, the potential offer price would be c. 830p. Shares offer an 8.9% 22e FCF yield.
I have revised my valuation following interest in the company. Median implied EV/Fwd EBITDA TP is 841p, c.24% higher than offer from Aristocrat, in line with that suggested by Gopher.


United Kingdom

Playtech is a leading technology company that provides gambling software, services, content, and platform technology to the global gambling industry. The company develops and licenses software and platforms for online casinos, poker rooms, bingo games, online sports betting, and live dealer games. Playtech was founded in 1999 and is headquartered in Douglas, Isle of Man.

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Playtech (PTEC LN)

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Playtech is up 82% so far in 2021, trading c. 10% above Aristocrat's offer. The market gives credit to Gopher's approach, which could come at c. 830p.

Jesus Rodriguez Aguilar

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