JPJ Group: RGD Increase Marginally Higher Than Expected
Edison | Oct 30, 2018 08:44AM ET
The UK government has raised remote gaming duty (RGD) from 15% to 21%. This is 1% higher than expected by the market and we now include a c £12m annual impact on group EBITDA into our forecasts for Jackpotjoy (LON:JPJ). While regulatory pressures are likely to remain a feature of the UK gaming sector, JPJ should benefit from its market leading position and we anticipate annual operating cash flow of over £90m. The stock has fallen c 40% since June and now trades at 7.9x EV/EBITDA, 5.6x P/E and 15.5% free cash flow yield for FY19e.
RGD increase to begin October 2019
The UK government’s budget has provided long-awaited clarity on remote gaming duty, which will rise from 15% to 21%. This compares to the 20% that was widely expected, but is a better result than recent rumours of 25%. The increased duties will affect all online gaming operators (not sports) in the UK from October 2019 (rather than April), but at least the sector now has a degree of certainty. Other ongoing regulatory pressures include social responsibility, anti-money laundering, source of funds etc. All this is likely to lead to a continued market shake out, with dominant players likely to benefit. We note that as the largest online bingo-led operator in the UK, JPJ is particularly well positioned.
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RGD Increase Marginally Higher Than Expected
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