Shares of gaming technology and forex brokerage company Playtech PLC (LON:PTEC) soared more than 10% on Thursday, after the company reported better-than-expected financial results in Q3.
A good part of that positive surprise was thanks to Playtech’s newly established Financials Division, which consists of the online trading brands it purchased from controlling shareholder Teddy Sagi earlier this year – primarily the Markets.com retail forex business and binary options brokerage TopOption.
Overall, Playtech’s legacy Gaming Division saw just a 2% rise in Revenues over Q2 – nice, but probably not warranting a 10% pop in share price. The big ‘juice’ in Q3 was the Financials Division. Q3 was, in fact, the first complete quarter for Playtech’s Financials Division. That business contributed €27.5 million of Playtech’s €170.9 in Q3 revenue (or 16% of overall company income), but clearly was better than expected and left investors bullish that things were just going to get better.
Playtech’s Financial Division is indeed slated to get a lot bigger. The company is hoping to close the announced acquisitions of both Plus500 Ltd (LON:PLUS) and AvaTrade at some point during Q4, while it awaits final regulatory approval for each deal. The AvaTrade acquisition seems to be in jeopardy, as the Ireland-based and regulated company saw the Central Bank of Ireland formally oppose the deal, a move which Playtech is challenging.
Assuming that both deals get done, adding AvaTrade’s approximately $18 million in quarterly revenue and Plus500’s Q3 revenues of $81 million to the mix would mean that Playtech’s Financial Division would grow very quickly to about €118 million in quarterly turnover. That would make the Financial Division account for about 45% of overall Playtech revenue.
At its current share price of £8.73, Playtech has a market capitalization of £2.6 billion, and it is approaching its all-time high of £9.36.