Playtech revenue gains offset Asia pains, stock rises

(Reuters) - Shares in gambling software maker Playtech PTEC.L gained 8 percent on Thursday after first-half results that showed double-digit growth in many of its developed markets, offsetting a blow to profit from change in Asia.

Adjusted profit at the company, which provides online games and platforms for some of the world’s biggest gambling brands, fell 34 percent in the first half of 2018, weighed down by the impact of competition in China and tougher regulation in Malaysia.

But excluding its Asia business, revenue jumped 35 percent and the company said it had made substantial progress on shifting into more stable regulated markets, where it now expects to source 80 percent of 2018 revenue.

“The headwinds in the Asian market are not reflective of the core strength of the Playtech model as the regulated segment

continues to report organic growth and encouraging momentum,” Playtech Chairman Alan Jackson said.

In Malaysia, where regulators are seeking to crack down on online gambling, Playtech said activity is significantly lower than its full-year 2016 run rate.

However, 69 percent of its revenue came from regulated markets and the company said it expected this to be 80 percent by the end of 2018.

Regulated revenue growth is largely due to Snaitech, Chief Executive Mor Weizer told Reuters.

Playtech in April agreed to buy a majority stake in Italy’s Snaitech for 291 million euros ($359 million) in a move to generate more revenue from regulated markets. Snaitech now operates as a wholly-owned unit of Playtech.

In China, where it faces increased competition from cut-price newer entrants, the company said it was seeking to invest in its product rather than engage in what it saw as unsustainable price cuts.

Some 53 percent of revenue at its gaming division, which operates products such as Age Of The Gods Bingo and Age Of The Gods Slots casino, came from regulated markets.

Investec analysts said Playtech’s results were in line, but significant risks remained including a ban on gaming machines in Italy where Snaitech generates about 50 percent of its overall revenue.

Reporting by Sangameswaran S in Bengalurul Editing by Patrick Graham/David Evans