Paddy Power shares fall as revenue up

Paddy Power’s share price dropped yesterday following a positive set of results, with traders blaming the dip on profit taking.

The company continued the positive momentum achieved over 2012 into the first five months of the year. Total net revenue is up 20% for the year to date compared, with the same period last year.

However, the results elicited contrasting views from two stockbroking firms. Paddy Power’s shares plummeted on April 23 when Davy changed its rating on the company to under-perform. Davy did not change its view following yesterday’s results.

“Absent any material change to cost guidance, we do not foresee any material changes to our full-year forecasts for the group (Earnings before interest and taxation €161m, earnings per share 292.4c).

“While we continue to regard the stock as the highest quality in the sector, we do not believe that the valuation is attractive enough at current levels and would seek lower price entry levels,” according to Davy analyst David Jennings.

But rival stockbroking firm Goodbodys retains its buy recommendation on the stock. “While retail has under-performed in the year- to-date (YTD), we believe there is scope for this to improve as the year progresses. The key positive for us remains the underlying growth in its online businesses, particularly the continued mobile performance (YTD 42% of online revenues from mobile v 32% in FY12). It is these trends that underpin our positive investment view on the stock. We reiterate our buy recommendation,” said Goodbody analyst Gavin Kelleher.

The performance over the first five months of this year revealed a sharp divergence in fortunes between the online and the traditional retail businesses. The online operations were up 29% compared with 2012, while retail was up 8%.

Excluding Paddy Power’s Australian division, online revenues were up 30% compared with last year, while the Australian business was up 28%. Within the online business, betting over mobile phones has increased by 112% and now contributes 42% of all online revenues.

The company’s Italian business contributed 3% to its overall net revenue. “Our online sports book market share increased to 6% in the first quarter of 2013, while we also significantly expanded our gaming product range in the last two months,” its statement said.

Net revenue in the UK’s retail business was up 2% whereas the Irish retail business was up 3%. There were 17 new shops opened in the UK and six in Ireland.

Net cash was €208m for the year-to-date.


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