The entire UK gaming sector has been stung by recent regulatory changes and, like other operators, Stride Gaming PLC (LON:STRST)’s strategy is to diversify its UK-centric model into international markets. In the UK, the company is gaining market share, with H118 adjusted revenues increasing 14% to £44.9m, driven by 25% growth in the proprietary platform. However, we have lowered our total FY18 and FY19 EBITDA forecasts by 16.6% and 28.7% to reflect increased costs associated with regulatory compliance and international expansion. The stock has fallen 18% year to date and trades at 8.3x EV/EBITDA and 13.4x P/E for CY18e.
Strong organic growth; social to be disposed of
Stride Gaming is continuing to gain market share in the UK, with H118 adjusted revenues increasing 14% to £44.9m, driven by 25% growth from the core proprietary platform (66% of revenues), which includes an encouraging £1.0m contribution from the Aspers JV. Adjusted EBITDA declined 1% to £8.7m, as a result of the anticipated £1.7m impact from the point of consumption tax (POCT) on free bets. Unsurprisingly, the social gaming business (InfiApps) has been reclassified as “held for sale”, affecting FY18 revenues by £5m and EBITDA by £0.6m. Including the Aspers JV, our core revenue forecasts decline from £93.6m to £91.4m in FY18 and from £104.5m to £103.1m in FY19.
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