Raketech Group Holding

Country:
Sector:
Market cap (m):
Sweden
Media
SEK 404.97
Bloomberg:
Reuters:
Website:
RAKE SS
RAKE.ST
Share price (close):
SEK 10.80

Latest Reports

Commissioned Research: Sequential growth a small but positive sign
Online gambling affiliate Raketech's Q3 revenue of EUR 6.0m matched our estimate. Although this meant a revenue decline of 15% y/y, it also meant that revenue grew by 5% q/q, potentially marking Q2 2019 as the trough. It is worth noting that revenue-share contracts represented 56% of group revenue in Q3, up from 45% in Q2. We favour revenue-share income as it provides revenue visibility, but the shift away from fixed-fee income hurts revenue (and profits) short term; ie short-term pain for long-term gain. We trim our DCF-based fair value range to SEK 32-41 (33-42) per share. At 4x 2020E EV/EBIT the stock continues to trade at a seemingly large valuation discount to peers Better Collective (12x) and Catena Media (9x). Note that the company is debt-free, unlike its two peers, and with the buyback programme halted it is reasonable to assume M&A on the horizon.

Commissioned Research: Q3 unlikely to be the turning point
In Q2, online gambling affiliate Raketech slipped into negative organic growth, largely on the back of a tough market environment in Sweden. Based on tax data, business conditions have not improved materially over the last few months and so we find it unlikely that Q3 will be a turning point. We make no material estimate changes ahead of the Q3 report (due 21 November) and we stick to our DCF-based fair value range of SEK 33-42 per share. At 4x 2019E EV/EBIT the stock continues to trade at a seemingly large valuation discount to close peers Catena Media and Better Collective.

Commissioned Research: Valuation discount remains despite Q2 setback
Online gambling affiliate Raketech's Q2 numbers disappointed on the back of -9% organic revenue growth. This relates largely to Sweden, Raketech's largest market, where player values have declined following the new regulation introduced at the start of the year. However, based on trends so far in Q3 it is the company's assessment that player values will not decline further. We make negative estimate changes in this update, largely reflecting the Q2 miss. As a result, we trim our DCF-based fair value range to SEK 33-42 (35-44) per share after the Q2 report. Despite lower estimates it is worth highlighting that the stock still trades at a very large valuation discount to close peers Catena Media and Better Collective. These two stocks both trade above 10x 2019E EV/EBIT, whereas we find Raketech at ~4x. It should also be noted that Raketech was debt-free at the end of Q2.

Commissioned Research: Q2 expected to be similar to Q1
Online gambling affiliate Raketech reported a solid start to 2019 with no major deviations from our or consensus estimates for Q1. On the back of 22% organic growth, the group generated revenue of EUR 6.5m. Come Q2, we expect the company to deliver a similar revenue figure. Raketech's large exposure (~60%) to Sweden makes it difficult to generate sequential growth at this point, we argue. We make relatively small but negative estimate changes in this update. As a result, we trim our DCF-based fair value range to SEK 35-44 (36-45) per share ahead of the Q2 report.

Commissioned Research: A solid start to 2019 with 22% organic growth
Online gambling affiliate Raketech reported a solid start to 2019 with no major deviations from our or consensus' estimates for Q1. Revenues grew by 32% y/y, 22 pp of which was organic. The Swedish market, Raketech's largest by far, has yet to stabilise fully after the reregulation. With Q1 now behind us, however, the company has demonstrated that it can generate >50% EBITDA margins even with more than 50% of revenues from regulated markets. We make relatively small estimate changes and keep our DCF-based fair value of SEK 36-45 per share intact after the Q1 report. Marketing material commissioned by Raketech Group Holding

Commissioned Research: Temporary headwind turning to tailwind
Raketech is a fast-growing online gambling affiliate with a strong Nordic presence. It generates most of its revenue by funnelling new players to online casinos and sharing the profit. Because operators are determined to grow, this has become a lucrative business. Raketech takes an active part in consolidating the fragmented affiliation market, completing 22 deals since 2015. In 2018, it grew revenues by ~50% y/y, 30 pp of which was organic. There is some uncertainty about the net impact of re-regulation in its key market Sweden this year, but more established affiliates like Raketech will likely be the relative winners. Its trading update for January (+30% growth y/y), presented with the Q4 report, gave a comforting view. Marketing material commissioned by Raketech Group Holding

Equity analysts

Key persons

CEO: Michael Holmberg

CFO: Måns Svalborn

Chairman: Christian Lundberg

Numbers
Nordea
EURm
2015
2016
2017
2018
2019E
2020E
2021E
Total revenues
2.1
10.4
17.1
25.6
24.2
27.7
31.1
Ebitda (adj.)
0.07
8.07
9.67
14.40
12.14
14.54
16.93
Ebitda - margin
3.6%
77.3%
56.4%
56.3%
50.1%
52.4%
54.5%
EBIT (adj.)
0.1
8.0
9.0
12.7
8.1
9.4
11.6
EBIT (adj.) margin
3.6%
76.9%
52.5%
49.7%
33.4%
34.1%
37.5%
PTP (adj.)
0.1
8.0
6.3
6.3
7.2
8.9
11.3
Net profit from cont oper (adj)
0.05
7.64
5.95
6.06
6.80
8.46
10.69
ShareholdersĀ“ Equity
0.3
8.9
15.7
58.7
67.8
76.3
87.0
Net interest bearing debt
0.0
-0.1
25.0
0.4
-4.7
-9.4
-25.2
Net gearing
n.a.
n.a.
n.a.
n.a.
-7.0%
-12.3%
-29.0%
Net debt/EBITDA
-0.3
0.0
2.6
0.0
-0.3
-0.6
-1.5
Free cash flow to equity
-0.2
0.0
-23.1
-5.3
5.1
4.7
15.8
Diluted number of shares in issue, year-end (m)
37.9
37.9
37.9
37.9
37.5
37.5
37.5
Nordea Markets estimates published on Nov 22, 2019
Source: Company data, Nordea estimates
Per share data and multiples
Nordea
EUR and %
2015
2016
2017
2018
2019E
2020E
2021E
EPS (adj.)
n.a.
0.20
0.16
0.16
0.18
0.23
0.29
EPS (adj.) growth
n.a.
n.a.
-22.1%
1.7%
12.8%
25.1%
26.5%
DPS
0.00
0.00
0.00
0.00
0.00
0.00
0.00
BVPS
0.0
0.2
0.4
1.5
1.8
2.0
2.3
P/E (adj.)
n.a.
n.a.
n.a.
11.9
5.7
4.5
3.6
EV/Sales
n.a.
n.a.
n.a.
2.83
1.39
1.04
0.42
EV/EBITDA (adj.)
n.a.
n.a.
n.a.
5.03
2.77
1.99
0.77
EV/EBIT (adj.)
n.a.
n.a.
n.a.
5.71
4.16
3.06
1.13
P/BV
n.a.
n.a.
n.a.
1.23
0.57
0.50
0.44
Dividend yield
n.a.
n.a.
n.a.
0.0%
0.0%
0.0%
0.0%
FCF Yield bef A&D, lease adj
n.a.
n.a.
n.a.
-6.4%
33.0%
35.1%
41.2%
RoE
38.1%
n.a.
47.0%
12.2%
14.3%
11.7%
13.1%
ROIC
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Nordea Markets estimates published on Nov 22, 2019
Source: Company data, Nordea estimates

Source: Thomson Reuters