Gamesys Group - Business as usual despite coronavirus

Gamesys Group’s FY19 pro forma results were slightly higher than previous consensus, with revenues increasing by 15% to £565.3m. Asian revenues increased by 137% and now comprise 22% of the total – predominantly from Japan. We are encouraged by the 5% growth in the UK, after a challenging year for the sector. Pro forma EBITDA of £158.9m was 4% lower than the previous year, largely due to higher UK gaming taxes. Following the acquisition of Gamesys, the net debt/EBITDA ratio was 2.8x, which we estimate will fall to 2.0x in FY20 and 1.4x in FY21. The stock trades at 4.1x P/E and 5.2x EV/EBITDA with an estimated 19.8% free cash flow yield for FY21. We note that Gamesys is not exposed to sports and therefore the business should be relatively unaffected by the coronavirus outbreak.