Online key to bet firm growth

Paddy Power’s long-term global growth strategy is dependant on how fast and in what manner governments open their territories to online gambling, says Davy Stockbrokers.

Yesterday, Paddy Power reported strong growth in net revenue of 23%, in an interim management statement which disclosed the company retains significant financial flexibility with net cash of approximately €169 million at Nov 14, excluding customer balances.

Gamblers using mobile phones are losing more money on betting than traditional gamblers and Paddy Power said its mobile betting is positively impacting online turnover growth and sportsbook gross win percentages.

“In October, mobile turnover as a percentage of total online sportsbook stakes was 27% in Australia (June: 25%) and 45% in paddypower.com (June: 41%). The most rapid mobile penetration continues to occur in gaming, with mobile gross win in October accounting for 28% of Paddy Power Casino (June: 19%) and 25% of Paddy Power Games (June: 20%),” the company said.

Davy Stockbrokers analyst, David Jennings, said they believe Paddy Power has significant scope to grow internationally. “As such, we believe the valuation of the stock in the short term is up with events but we continue to like the longer-term story,” he added.

Trading was boosted by a 74% increase in marketing spending in the first half, though betting activity during the Olympic Games was slower than during the Euro 2012 soccer tournament earlier in the summer.

The company said its Irish retail side also performed positively with like-for-like stakes up 0.4% and net revenue up 8%. It plans to open 45 shops next year in the UK, where like-for-like net revenue was up 5% in the third quarter.

The firm, which has increased its presence in Britain, Australia, Canada and France in recent years, did not give details of its performance in the Italian market it entered this year.

However, Goodbody Stockbrokers noted: “While the group did not comment specifically on Italy, we suspect customer acquisition has been very strong. Given the group’s retention track record, we believe this will augur well for future growth from this new market launch.”