Earn-out paid; another milestone achieved

The major Gamesys earn-out period finished in March 2017 and, as expected, Jackpotjoy plc (JPJ) has announced a £94.2m payment for its penultimate earn-out. There is a further c £44m due for the Spanish assets (Botemania) in June 2018, which should be comfortably covered by operating cash flow. Although adjusted net debt/EBITDA of c 4.0x remains high, we expect significant deleverage from 2018. The stock has recovered some ground recently, but continues to trade at a significant discount to peers, with 2018e multiples of 6.8x EV/EBITDA and 5.7x P/E. Given the company’s leading market position and robust cash flow generation, we would expect a re-rating as the market regains confidence in the business model. Our forecasts remain unchanged.