Playtech shares plunge one-fifth after Asian market “impact”


playtech-shares-plunge-malaysia-online-gamblingGambling technology provider Playtech saw its share price plunge by more than one-fifth on Thursday after the company issued a warning regarding its black-market Asian operations.

On Thursday, Playtech issued an update on its trading to date in H2, during which the gaming division’s daily average revenue “accelerated” and is “currently higher” than the average reported in the company’s interim results.

However, the company also warned that it had suffered “an impact from recent changing market conditions in certain parts of Asia.” Playtech said that while it had expected that activity at its Asian-facing licensees “would return to normalized levels in a relatively short timeframe, we are now not expecting any significant improvement in 2017.”

This impact is believed to be related to Playtech licensees’ significant online gambling operations in Malaysia. In September, Malaysian authorities announced their intention to “wipe out illegal gambling once and for all,” with a particular focus on stamping out online gambling.

In 2012, when Playtech was plotting its move to a listing on the main London Stock Exchange, it revealed that Malaysian-facing operations accounted for 8.4% of its total revenue in 2011. More recently, Playtech’s 2016 annual report showed its Asian operations accounted for 40% of its revenue, five points higher than the year before.

Playtech’s 2012 announcement also noted that 3.6% of its revenue came from China, which prohibits all gambling on the mainland except for its state-run lotteries. Numis analysts Richard Stuber claimed Playtech had been having “internal issues with a key licensee operating in China.”

Playtech said its strategy remained focused on “both organic and inorganic revenue growth in regulated and to-be-regulated markets” and expects that its overall share of revenue from Asia “will consistently reduce over time.” But the company’s H1 2017 report credited a “particularly strong performance” by its Asian licensees for boosting its overall revenue.

Compounding matters, Playtech warned that its contract with UK-facing Sun Bingo “remains challenging due to lengthier seasonality and the relaunch of the new Sun Bingo site.” These problems, along with its Asian woes, led Playtech to say it expects its FY17 performance will come in “around 5% below the bottom end of market expectations.”

Following Playtech’s announcement, investors ran for the hills, pushing the stock down nearly 22% to 770p. Playtech is hosting an event for investors and analysts at its live dealer studio in Riga, Latvia on November 14, and Latvian customs officials will likely be scanning all tourists’ luggage for extra torches and pitchforks.