We haven't been able to take payment
You must update your payment details via My Account or by clicking update payment details to keep your subscription.
Act now to keep your subscription
We've tried to contact you several times as we haven't been able to take payment. You must update your payment details via My Account or by clicking update payment details to keep your subscription.
Your subscription is due to terminate
We've tried to contact you several times as we haven't been able to take payment. You must update your payment details via My Account, otherwise your subscription will terminate.
author-image
TEMPUS

Gan’s gambling software looks a good bet

The Times

The US gambling market has historically been a place where few British companies have wished to tread, but one exception ploughing a potentially lucrative furrow is Gan. Full-year results yesterday from the London-based business-to-business supplier of online gaming software showed losses narrowing as revenues rose 30 per cent year-on-year to a little under £8 million.

Make no mistake, this Aim-listed business remains a tiddler with a market capitalisation of just £20 million, but analysts at its new broker believe the share price could easily treble as investors get comfortable with its model.

Gan’s Gamestack software, developed over 15 years, gives physical casinos an online presence, enabling them to go after a digital customer base previously denied to them. At present the company has signed 13 partnerships with major US casino groups out of a total of more than 900, highlighting the potential for growth.

Regulators appear to be opening up the market and as the authorities liberalise, the opportunities for Gan will grow, with the company earning money from providing the software that bricks-and-mortar casinos need to get online, as well as taking as much as a 35 per cent share of net gaming revenues.

In the first three months of the year, active player-days on Gan’s software platform went above 2.2 million compared with about 1.7 million in the third quarter of last year, while average revenue per daily active user has risen over the same period from $7 to $7.69. These figures point to 2017 being the break-even year for the company as the $50 million investment in its core software starts to come good.

Advertisement

And all of this is without factoring in the biggest cash cow of them all, simulated gaming. Here Gan is providing the software for a fast-growing market that allows real-world customers of casinos to buy virtual chips that they can use to gamble online.

US law being what it is, these tokens cannot be redeemed for real money, but are instead used to buy services such as food, drinks, hotel rooms and free slot machine bets, building customer loyalty. This is already a multibillion-dollar business and big growth is expected, with Gan well placed.

Four years on from its IPO, it appears the time finally might have come to put a few chips behind Gan and its casino clients.

My advice Buy
Why The US gambling industry looks to be evolving in favour of its business model

IAG
While hundreds of thousands of customers will be spitting its name, International Consolidated Airlines Group has given investors little reason yet to dump it. Shares in BA’s owner have been barely affected by the IT disaster that crashed computer systems over the bank holiday weekend, leaving passengers stranded worldwide. Indeed, on a five-day horizon the stock is still slightly up after a rally yesterday.

Advertisement

So is this all a fuss about nothing? Can days of damning headlines really be written off as so much noise?

The market appears to be taking BA at its word, accepting that the problems are a one-off caused by an unusual power surge (and rather ignoring the fact that American carriers were hit by similar problems last year). The cost of patching up the problems could be considerable, though, and some in the City have started comparing the crisis to the outages at big banks that have left them with bills running into the hundreds of millions as they overhaul their IT systems. Analysts at RBC Capital Markets have cautioned that investors should see the IT repair job as an “annuity of failure” likely to be repeated. And this is before the authorities get involved.

All of which would point to further pressure on IAG’s dividend yield, which having hit 4.5 per cent last year was already forecast to slip in 2017 and 2018. This now looks a racing certainty, with higher spending and compensation costs coming down the line. One to avoid for the time being.

My advice Avoid
Why Longer-term impact of IT disaster could leave a bigger bill than the market expects

Volution
Volution, a West Sussex-based ventilation company, made its tenth acquisition in five years yesterday with the £7 million purchase of Voltair, of Sweden. The deal adds to a trio of businesses Volution has bought in Scandinavia and takes it further into the new-build ventilation market, where it is less well established compared with residential repair, maintenance and improvement. Nevertheless, this remains a largely UK-focused company and British sales make up more than half of its revenues, with the largest slice coming from the residential market.

Advertisement

It is perhaps unsurprising that it should be such an acquisition-focused business, given its pedigree as a carve-out from Smiths Group which then passed through a succession of private equity owners before being listed in 2014. Private equity may be gone (its former owner sold its last shares seven months ago) but old habits persist.

Expansion, financed by cash rather than debt, has not come at the cost of income for shareholders and the dividend has been rising since its flotation. In 2015 the company paid a net dividend of 3.3p, equating to a dividend yield of 2.3 per cent, rising to 3.8p a year later, though down slightly in yield terms at 2.2 per cent.

My advice Buy
Why Good non-debt financed growth and a decent dividend

And finally...
Sportech is closing in on its £83 million sale of the Football Pools after it updated investors with the announcement that the buyer of the business had received a licence from the Gambling Commission. Opcapita, a Mayfair-based private investment company, is set to take control of the Football Pools before the end of next month. Sportech announced the sale in March as part of a strategy to focus on its US-based gaming business, with the money from the disposal expected to help bankroll the move.

PROMOTED CONTENT