Rank Group - Digital Revenues Are Back On Track
Edison | May 18, 2017 06:12AM ET
In line with expectations, l-f-l revenues (46 weeks to 14 May) increased 1%, with a 13% growth in digital offsetting a slight revenue decline in Grosvenor Casinos’ and Mecca’s venues. Earlier platform issues have been resolved and we expect digital revenue growth to accelerate, with the H118 introduction of a single wallet fuelling market share gains. The core business is highly cash generative, enabling progressive dividends, as well as potential M&A. Despite this, the stock trades at a calendar 2017e 6.5x EV/EBITDA, a 30% discount to peers. Our estimates are unchanged.
Growth in digital: Mecca has turned the corner
Digital revenues increased 13% vs the prior year, with Grosvenor Casinos’ digital channel growing 35%. Importantly, previous platform migration issues at Mecca’s digital channel now appear to be resolved and Mecca’s digital revenues increased 2% over the period, implying an uplift since December. As detailed in our Outlook note in February, Rank has only 2% of the UK online casino market despite being the leading UK casino operator and number two in bingo. We anticipate market share gains, with the introduction of a single wallet in H118 providing cross-selling opportunities. Rank’s Capital Markets Day on 24 May should provide further details.
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