Founded in 1999 by Teddy Sagi, a London-based Israeli businessman, Playtech PLC is the world’s largest online gaming software supplier traded on the London Stock Exchange. Listed under the ticker LSE:PTEC, the company is included in the following indices: FTSE 250, FTSE 350 Travel & Leisure, FTSE All-Share, FTSE All Share Consumer Services, FTSE All Share Travel & Leisure and FTSE 350. At the time of writing, Playtech had a market capitalization of GBP 2.39 billion and was trading at 816.75 pence, which marked a 0.52% decrease for the day.
The company was floated in 2006 at a price, which evaluated the entire business at about GBP 550 million. Playtech is a software provider for online casinos, bingos, poker rooms, scratch games, fixed-odds arcade games, sports betting, live dealer games and binary options, social and mobile gaming. All of the company’s products can also be freely incorporated into existing systems as standalone applications, because they are part of unified platform.
During the fiscal year ended on December 31st 2014, Playtech’s Total Revenue rose for a fourth consecutive year to reach EUR 456.98 million, which represented a 24.45% surge compared to the fiscal year ended on December 31st 2013.
The company’s Net Income, on the other hand, fell for the first time in the past four years in 2014, down at an annual rate of 71.28%, to reach EUR 140.33 million.
Operating Income also dropped for the first time in the past four years in 2014, down 72.48% compared to the fiscal year ended on December 31st 2013, to EUR 128.11 million.
Total Assets grew for a fourth consecutive year in 2014 to EUR 1.253 billion, or by 17.63% compared to a year earlier.
At present, the company has more than 3 600 people in employment, with the majority of them being engaged in the research and development of current and future games technologies across development centers in 12 countries.
Playtech states internationally renowned online operators and entertainment brands such as Betfair, bet365, William Hill, Paddy Power and others, as being its licensees.
Casino Gaming
Playtech has always striven to satisfy players’ demand for a thrilling web experience by offering a unique combination of unbeatable games and cutting-edge technology. The company’s portfolio features more than 500 innovative casino, poker and sportsbook games, with over 50 new games being launched on annual basis in order to ensure players are able to test their luck and skills at a variety of slot, table and card and fixed-odd options. To have a closer glance at Playtech’s best paying slot games, you can read our specialized article.
As competition in online casino gaming industry reached all-time highs, technology providers began to realize that new, groundbreaking gaming decisions would probably be the driving factor behind growth in the future. One such decision was the introduction of live dealer casino games. In order to respond to demand for a higher level of entertainment, Playtech developed a live dealer platform, which brings about the most authentic live gaming experience currently on offer. All traditional casino games (roulette, blackjack, baccarat) are available in a live-dealer format along with remarkable new games such as Unlimited Blackjack, Double Screen Roulette among others. In order to ensure high-roller needs are satisfied, Playtech offers a special VIP area, known as the Ruby Room, where this specific contingent of players are able to enjoy the above mentioned gaming options.
First steps in Forex trading
As gambling sector companies have been on the lookout for ways to spur growth via acquisitions amid new regulations and more stern tax regimes in some of their key markets, Playtech’s intention to enter the Foreign Exchange Market (Forex) hardly comes as a surprise.
The gambling technology provider announced in April 2015 it had come to an agreement regarding the purchase of a majority stake in TradeFX, a leading provider of international payments and currency exchange. The deal was valued at EUR 458 million, as a cash payment of EUR 208 million was to be made initially and an additional amount of up to EUR 250 million was to be transferred by December 2017, taking into account future EBITDA numbers. Given the cash payment of EUR 208 million, Playtech was to pay 8.1 times EBITDA for Markets.com brand.
Being the ownership entity behind the brand, TradeFX is majority owned (86.45%) by Telesphere, a subsidiary of Israeli billionaire Teddy Sagi’s benefit trust. Sagi also has a 33% stake in Playtech through Brickington Trading Limited.
The deal, encompassing a 91.1% fully-diluted stake in TradeFX, was seen as a potential generator of cost and revenue synergies, which could facilitate Playtech’s customer base expansion and also its access to new markets. “We intend to offer TradeFX trading platform to all of Playtech’s licensees and other gaming companies, given the fact that the trading platform is complementary to gaming companies’ operations”, Mor Weizer, Playtech’s CEO, commented for Reuters.
Since its launch back in 2009, TradeFX has enriched its spectrum of trading brands, with Markets.com and TopOption being the most renowned. In December 2014 Markets.com launched the latest addition to its trading platform portfolio – a proprietary web-based platform, which utilizes technology from Leverate.
On May 7th 2015 Playtech officially announced that all outstanding conditions in regard to the acquisition of TradeFX have already been met, including the approval of the Cyprus Securities and Exchange Commission, while the transaction has been completed.
Remarkable growth
TradeFX reported an 87% surge of its revenue to USD 27.6 million during the first quarter this year compared to the same period a year earlier, while its Q1 EBITDA was valued at USD 12.3 million. The Forex and CFD (contracts for difference) broker also reported 23 900 active customers in Q1, while having operations in over 100 countries.
In addition, on June 18th Playtech announced that its TradeFX unit achieved remarkable business results during the period January-May 2015. TradeFX’s net revenue from trading soared by the whopping 72.24% to reach USD 42.2 million in the first five months of the year compared to the same period in 2014.
The number of first time depositors for core CFD B2C business increased 34% to 18 200 during the five-month period to May 31st, from 13 600 reported during the first five months of 2014.
At the same time, the number of active customers for core CFD B2C business went up 30% to reach 32 000 during the reported period, from 24 600 customers reported in the first five months of 2014.
The Plus500 acquisition
On June 1st this year, it became clear that the governing bodies of Playtech PLC and Plus500 Ltd, a CFD broker based in Israel but listed in London (FTSE AIM 100 and FTSE AIM All Share), have reached an agreement on a cash acquisition, according to which the entire issued ordinary share capital of Plus500 will be acquired by Playtech.
According to the terms of the deal, the CFD broker was valued at GBP 459.6 million (USD 702.05 million) or GBP 4 (USD 6) a share. Shareholders at Plus500 were to receive 400 pence in cash for each Plus500 share. However, Playtech’s CEO Weizer noted that the deal might not take place, if ”certain material adverse change” that affects Plus500’s business occurs.
On May 18th Plus500 Ltd was ordered by the UK Financial Conduct Authority to freeze the trading accounts of its customers as part of anti-money-laundering checks, which were initiated in the beginning of 2015. The FCA was reported to have found ”major failings” in the way the company gathered information about its customers’ financial position and proof of residence. This led to a more-than-50% decline in the CFD broker’s share price.
According to the boards’ announcement, the acquisition is seen as an unique opportunity for Playtech, because of Plus500’s market reach, advanced technology, product offering and existing customer relationships worldwide. All these are necessary prerequisites for a successful customer attraction and conversion. In addition, Playtech is to provide Plus500 with CRM capabilities and expertise, so that the CFD broker could maximize customer life time value, which would undeniably boost its standalone financial results. Last but not least, the acquisition, which is to be finalized by the end of September 2015, is anticipated to bring about an immediate earnings improvement.
Following the announcement, Plus500’s stock received support to reach a daily high of 403.00 pence on June 1st. At the time of this article, Plus500 was losing 0.32% for the day to trade at 386.50 pence in London. On May 22nd the share price plunged to lows unseen since November 2013, reaching 198.00 pence.
“Having recently completed the acquisition of TradeFX, the opportunity to acquire Plus500 will prove transformational for our ambitions to expand Playtech’s wider offering. As an immediately earnings enhancing acquisition, the combination of the two businesses is compelling, enabling us to apply our market-leading products and services to the enlarged financial trading business as we continue to execute our growth strategy for the Group”, Playtech’s CEO Weizer said in regard to the deal.
“We are very proud to have built Plus500 in a short time into a significant player in the CFD market. Having been admitted to AIM at a share price of 115p on 24 July 2013 and paid significant dividends during this time, we believe that now is the right time to combine the business with Playtech who can provide additional infrastructure and expertise to add to our core skills in products, technology and marketing”, Plus500’s Chief Executive Officer, Gal Haber, commented on the deal, as cited by Business Insider.
More deals to come?
Playtech’s expansion into trading industry may not end with Plus 500, as major media revealed the technology provider was in negotiations for the acquisition of Forex trading platform AvaTrade.
In addition, in May this year the Israeli website financemagnets.com stated that Teddy Sagi had not once visited Cyprus, as he intended to acquire another Forex broker, IronFX.
However, Playtech refused to reveal any details on the matter. On June 1st the company’s CEO hinted that more deals were possible. “I do believe we will see consolidation over a period of time, and we intend to act as an aggregator”, Playtech’s Mor Weizer said in an interview, cited by Reuters.
Share Price Performance and Forecast
Having fallen to a prominent low at 210.50 pence on November 23rd 2011, Playtech’s share price entered a relatively tight range, after which that low was tested with a higher low at 218.63 on December 20th 2011. A gap and a prominent bull spike marked the beginning of a bull trend in late December 2011, a trend which, obviously, is still valid, as there has not been a break of the major trend line ever since.
At the beginning, two bull spikes followed by two tight channels were to be observed – the first one formed in late December 2011 and the second one in early March 2012. The most prominent high since July 2011 was reached in late April 2012, which coincided with the Relative Strength Index (RSI) touching its overbought level. Then, a pullback and support at the 50-day Exponential Moving Average (red on the weekly chart) followed.
The 25-day EMA (blue on the chart) crossed the 100-day EMA (green) in a bottom-up manner in mid-August 2012, after which in mid-October the 50-day EMA did the same. Since then the three Exponential Moving Averages have been in a perfect order (the EMA with the shortest period being on top and the EMA with the longest period being at the bottom). The fact that this order still remains intact suggests that the bull trend is still in play.
A prominent high at 818.00 pence was registered in mid-February 2014, which coincided with the RSI reading moving beyond the overbought level (a signal the price has risen too suddenly in a relatively short period of time). A pullback and support at the 100-day EMA occurred in May 2014, while the Moving Average Convergence Divergence (MACD) pointed to weak bearish momentum. May-July 2014 was a period of indecision in the market (a trading range), which was eventually breached to the upside in early August 2014. The up move, which was supported by both the RSI (showing readings above its 50.00 level) and the MACD histogram (bullish momentum), drove the price to highs unseen since February, at 779.50 pence in late October 2014.
Three consecutive bear-trend bars led the price down to the 100-day EMA, where an overshoot took place in early November 2014. The retracing move was halted at the 100-day EMA, after which a trading range formed. As momentum turned bullish, the RSI moved back above its 50.00 level, the perfect order of the three moving averages and the major trend line remained intact, logically, a breakout from the upper boundary of the range occurred in late January 2015. The up move drove the price to highs unseen in at least five years, as it reached 868.50 pence on April 27th 2015. Later, on May 15th there was a test of that high with a lower high at 864.00 pence, after which a certain retreat was observed, which led to an overshoot of the 25-day EMA in early June.
From this point on, given the fact the perfect order is still in place, the major trend line is intact, the RSI is above its 50.00 level but still far from the overbought level (70.00), and if the price breaks above the two prior prominent highs (May 15th and April 27th), we have a reason to believe that more upside is to be seen.
As of the moment of this analysis, a tight-range bull-trend bar formation can be observed. In case we see a break above its high, this could be taken as an additional reason to expect continuation of the bull trend.
