32Red (LON:TTRL) has announced a positive 2016 post-close trading update and strong current trading with a 21% increase in January revenues (to 30th). We expect 2016 EBITDA to have doubled to £10.5m (a marginal reduction on our previous forecast due to lower win margins), helped by the highly accretive Roxy acquisition. Our unchanged 2017/18 forecasts are for continued very strong profits growth as the business scales up, with more favourable supplier agreements and Italy now in profit. The 2017e EV/EBITDA of 6.8x looks much too low for a high growth, 77% regulated, cash generative gaming business in a consolidating market.
Record revenues for 2016 despite tough Q4
32Red has announced record net gaming revenues (NGR) of £62.3m for 2016, 28% up on 2015. We have trimmed our 2016e EBITDA forecast by £0.5m to £10.5m due to below-average H216 win margins, as widely reported across the industry. We see no reason to change our 2017/18 forecasts given the strong start to the year. Margins are benefiting from economies of scale, more favourable terms from platform providers Microgaming (from 1 November 2016) and Kambi Solutions (from 1 January 2017) and a move into profit in Italy.
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