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NetPlay - City brokers upbeat on interactive gaming firm

NetPlay TV reported first half year results today to 30 June 2011 revealing it had turned the corner into profitability following the restructuring of the business. City brokers Daniel Stewart and Panmure Gordon were upbeat about the firm
NetPlay - City brokers upbeat on interactive gaming firm

City broker Panmure Gordon was upbeat on NetPlay TV's  (LON:NPT) half year results today and upgraded its rating from "hold" to "buy" saying the share price could increase by around 31 percent.

The broker upped its earnings forecasts for the interactive gaming company and increased its target price to 11 pence from 9 pence (current price: 8.75 pence).

Daniel Stewart analyst Michael Campbell also liked what he called a "strong" set of results, adding that he saw a strong case for earnings upgrades given the momentum of the business.

The company told investors this morning that it had turned a corner, into profitability, during the first six months of 2011, having endured a tough 2010 in which it had to restructure its business.

A new gaming format had failed to live up to expectations and NetPlay then refocused its business on its core ‘live’ casino products.

During the period to 30 June, NetPlay said its revenues came in at £10.59 million, which was in-line with the same period last year. However, eye-catchingly, earnings (EBITDA) and profits were much improved.

The group reported earnings of £1.69 million which represents a significant turnaround compared with the 0.84 million loss in the first half of last year.

Similarly pre-tax profit came in a £0.37 million, compared to a £9.8 million loss in H1 2010.

The company's chairman Clive Jones had said: "The return to profitability, cash generation and growth in our KPIs are a clear illustration of the benefits the restructuring has brought, and is a testament to the strength of the team that we now have in place.

"We are looking to the future with confidence and continue to explore opportunities to leverage our industry expertise and TV production facilities to facilitate further expansion in both the UK and overseas."

Panmure analyst Simon French said he had upgraded his estimate for 2011 EBITDA from £2.1m to £2.5million and EBITDA for 2012 from £2.8 million to £3.1 million.

"The group’s performance has been transformed in the UK market and it is exploring expansion opportunities in Italy, Spain and Holland," he said.

He added that casino had delivered around 93 percent (£9.8mln) of first half revenue, casino sign-ups had  increased 20.4 percent to 40,134 and active casino players increased 13.9 percent  to 35,689.

French added that current trading was strong, with July's key performance indicators significantly ahead of July 2010, as was revenue.

"We expect the group to up weight marketing spend in H2 and explore expansion opportunities in Italy, Spain and Holland. Nevertheless, the group is confident of delivering a strong set of results for the full-year."

In today's statement, chief executive of NetPlay, Charles Butler said: “The second half of the year has started well with July revenue significantly ahead of July last year. The group continues to see the benefits of the restructuring and focus on the core live casino product with strong KPIs and continued investment in effective marketing.”

Daniel Stewart analyst Michael Campbell added: "Given the strong set of 1H11 results we believe the FY11 consensus EBITDA £2.1 million is achievable.

"In fact we see a strong case for earnings upgrades given the momentum in the business. This combined with the robust results today we believe should lead to an improvement in the rating of the stock."

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