【stake 8 results】Peel Hunt: Playtech could realise value through Caliplay IPO

Over the weekend, Playtech reported that its revised agreement with Caliplay had received approval from Mexican antitrust regulators, meaning that the deal would complete on 31 March.

This marks the end of the long-running dispute between the Mexican sports betting business and its B2B supplier, which had resulted in hundreds of millions of euros in unpaid feeds being racked up.

Under the revised agreement, Playtech gained a 30.8% stake in Caliente Interactive, Inc, the new US incorporated holding company for the business.

New structure reduces Playtech complexity

Earlier in the year, Peel Hunt had highlighted that Playtech was at peak complexity, with various factors including the Caliplay deal working to obscure its underlying value.

The analysts said on Monday (24 March): “Friday’s announcement, that its strategic agreement with Caliplay would be executed, is the first step in reducing that complexity.

“Playtech was entitled to fees and a profit share from the Caliplay business in Mexico, but a prolonged dispute meant Playtech did not get paid.

“Under the new agreement, Playtech will swap its ‘profit share’ for equity in a new US holding company for the Mexican business, from which it will receive dividends.”

Peel Hunt added an eventual IPO of the US company could work to valorise Playtech’s shareholding.

They also pointed to the possibility the Caliente brand will now work to enter new geographic markets.

The analysts added that Playtech’s remaining implied value appeared “very undervalued” to them, and reiterated a Buy recommendation with a 1,000p target price. At the time of writing, shares are trading for 743p.

The supplier announced in September it would sell its Italian B2C unit Snaitech to Flutter Entertainment for £2.3bn, with a special dividend to be distributed to shareholders.