STOCKHOLM (Nyhetsbyrån Direkt) Kepler Cheuvreux reiterates his buy recommendation for live casino provider Evolution but lowers the target price after the company’s report for the fourth quarter, which came in lower than the analyst house’s estimate.
Kepler lowers its target price to SEK 1,300 from SEK 1,400, which Nyhetsbyrån Direkt reported this morning.
Evolution reported an EBITDA result in the fourth quarter that was 2 percent lower than Kepler’s forecast due to lower revenue. In addition, the live casino provider lowered its forecast for 2025.
“Both the miss and the guidance were mainly due to sluggish growth in Asia, which continued to be affected by cyberattacks. Fortunately, revenues from unregulated markets are the least valuable and the share of regulated revenues increased to 41 percent of sales,” Kepler comments in his analysis.
On the positive side, Kepler highlights that Evolution distributed 58-59 to shareholders through a combination of buybacks and dividends.
“That said, we continue to see Evolution as a growth company suffering from temporary headwinds on the supply side, not as a cash cow,” the analyst house comments at the same time.
Furthermore, the analyst house writes that a gradual reduction in exposure to Georgia is seen in a small increase in the cost per employee, something described as a “minor issue”.
The problem in Asia is still attributed to the cyber attacks, a problem that Kepler had hoped would be resolved.
“Management still expects a recovery in Asia during the year. We continue to believe that revenues will continue to increase gradually from Q2, but from a lower level, with growth of 10 percent year-on-year. We see an improvement to 17 percent growth in Q4, when the comparative figures are lighter,” it says.
For 2025, Evolution is guiding for an EBITDA margin of 66-68 percent.
“We are at 67.3 percent, but we see a gradual improvement beyond 2025 towards 68 percent in 2027,” the research house states.
Kepler further notes that Evolution’s valuation is “record low”, which, according to the research house, partly reflects the low profit growth but also what the bank sees as unfounded concerns about a revoked UK license.
“If anything comes out of the UKGC investigation, we believe a fine is the most likely penalty. We expect buybacks to resume in the near term, which is likely to support the stock,” Kepler writes.
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