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Bingo! Stride Gaming setting a fast pace

Last updated: 07:44 28 May 2016 BST, First published: 14:44 28 May 2016 BST

Online bingo.
Bingo is a pool business so, unlike the bookies, Stride can never have a bad result

Anyone who took a punt on Stride Gaming PLC (LON:STR) when it floated at 132p is sitting on a pretty profit.

That's probably more than can be said for most of the customers of the online bingo operator, although few people have claimed that bingo is a fail-safe investment pursuit.

The name of the game is to have a bit of fun with the added thrill of the possibility of a win to spice things up.

The shares currently trade at twice the level at which they were floated, and to go with the eye-popping capital appreciation shareholders can now forward to some income as well, as the board held good to its promise to start paying a dividend.

Bad-a-boom, bad-a-bingo

Investors will receive 1.1p a share in June after the company weighed in with a 21% increase in net gaming revenue to £21.6mln in the six months to February 29, which pushed operating profits (EBITDA) up 29% to £5.6mln.

The company was sitting on £9.9mln in cash as at the period-end.

The owner of the Kitty Bingo, Lucky Pants and Jackpot Liner sites said the number of bingo players almost doubled in the half-year period to 60,561, while yield per person remained “consistently high” at £114.

Chief executive Eitan Boyd said the company was positioned to deliver “exceptional results” for the full-year as he described the outlook as “very exciting”.

Currently valued at £263mln, the company's aim is to become a £400-£500mln company within five years of floating on Aim. So … having doubled in value one year after listing, it is well ahead of plan on that front.

The company was founded by Eitan Boyd and Darren Sims, with the support of two previous financial backers, Tal Harpaz and Sean Rose.

Members of the Stride team have an impressive record for building businesses. In 2007 they sold Globalcom to 888.com for £27mln, while two years later 888 paid them £60mln for Wink Bingo.

The company pays out

The company's ability to generate cash has enabled it to declare a progressive dividend policy, and chief executive Boyd hopes this will see the stock become a favourite of income funds.

“With organic and acquisition-led growth it should be a good one for the growth funds too,” Boyd said.

It has certainly delivered the organic growth, and its acquisitions have been shrewdly judged too, with the purchase of InfiApps expanding its footprint overseas into the area of mobile social gaming, while the acquisition of the trade and assets of Table Top Entertainment bagged it the brands Jackpot Café, Jackpot Liner and King Jackpot.

Another acquisition, Nextec Software Inc, brought it the company's propriety gaming platform and underpinned the company's technological base.

Owning the technology that drives the sites makes it easier to expand into new territories and allows Stride to optimise what it makes from its existing crop of customers.

“In the past we’ve had a platform where we didn’t own the customers and a company where we didn’t own the platform – now we own everything from start to finish,” said Boyd.

It should be remembered that online bingo is a pool business, which means business is essentially risk-free.

Some 2.5mln play the game in the UK and it is part of the growing online gaming industry that will generate around £3bn this year, with bingo accounting for more than half.

The taxman cometh

Stride sees an opportunity where many of the UK market’s smaller brethren see as a massive impediment in the form of the point of consumption (POC) tax that has been introduced in the UK.

The tax is likely to put the squeeze on the marketing spend of the smaller operators, impairing the ability of these minnows to snare new customers.

Stride hopes to be able to continue spending sensibly on acquiring new players. In fact it hopes and expects the process to become much cheaper than it is today.

CEO Boyd reckons as much as 20% of the market will be up for grabs as a result of the POC levy.

It has spied a number of acquisition opportunities “that support our existing operations or that allow us to expand into complementary verticals”.

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