It was disappointing but hardly surprising to see Playtechs (LSE: PTEC) share price continue to slide in October and sink to fresh multi-year lows. Just like a high tide lifts all boats, the opposite, of course, is also true and the FTSE 250 firm was just another good stock that sank in the bloodbath that hit stock markets last month.
The supplier of online gaming and sports gambling software recovered ground at the back-end of last month but its slipped again in the first half of November. Investors may still take some convincing after Julys shock profit warning, but results released today suggest that Playtech has steadied the ship.
In the first release since Augusts half-year statement, the firm said that its expectations remain unchanged and that it expects to produce adjusted EBITDA for 2018 in the range of 320m and 360m.
Playtech noted that revenues growth outside of Asia has remained good since the end of June, and that sales at its beleaguered Asian division had stabilised at an annualised revenue run-rate of around 150m.
Great growth potential
You cannot blame holders of Playtech stock for selling en masse at the back end of the summer and for this bearishness continuing a little longer. But in my opinion, the selling should probably stop as I see the companys low, low forward P/E ratio of 8.8 times already reflecting its problems in Asia.
I think the excellent revenues opportunities that Playtech has in the bright emerging markets of Eastern Europe and Latin America suggest that the firm offers plenty of upside at current prices. In the first half, the business further improved its outlook in these key markets when it signed new licensing agreements with Polish national lottery operator Totalizator Sportowy, and Colombian firm Sportium Colombia to provide its technology across both retail and online markets.
Whats more, Playtechs ability to throw out mind-boggling amounts of cash should enable it to build on its growth-boosting acquisition hunt that saw it snap up a majority stake in Italys Snaitech earlier this year. Net cash from operations swelled 51% during the six months to June, to 222.5m, a result which pushed cash and cash equivalents to 936.6m by the end of the period from 584m six months earlier.
Yields launch above 7%
An added benefit of Playtechs qualities as a cash machine comes in the form of its inflation-smashing dividend yields.
The gambling giant hiked the full-year payout 10% in 2017 to 36 euro cents per share, and while a milder rise is expected this year to 36.8 cents growth slowing because of those trading problems in Asia this figure still yields a colossal 6.9%.
Things get even better for next year too. Expectations that Playtech will bounce from an earnings dip this year to a double-digit-percentage rise next year means its expected to hike the dividend to 40.6 cents, resulting in a colossal 7.6% yield.
Despite its recent travails in Asia, I believe that Playtech has remained a great bet for long-term investors. And those gigantic dividend yields add a considerable cherry to the cake. Its a brilliant buy in my opinion.
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