Netplay certainly delivered plenty of news to investors in the first quarter of 2009. Based on the reaction to several deals and some acquisitions, it would appear many are still trying to digest all of the information and understand how it applies to the company’s prospects going forward; though overall the reaction has been very favourable.
We were fortunate enough to meet with Martin Higginson, Chairman and CEO of Netplay and also the largest shareholder, with a 23.3% equity stake. Martin is no stranger to building businesses, starting up numerous companies in the past before selling them on, including Monstermob Group plc and Megafone. A similar game plan appears to be in place for Netplay, where the end game will be a bid for the company that the Chairman and CEO, and other shareholders cannot refuse. For the meantime however, the immediate goal is to roll out the business model and generate as much revenue as possible.
Netplay is a slightly unusual beast working in a not so unusual sector – gambling. We have covered other companies in this sector, including Probability PLC, which is focused on mobile phone gambling, but Netplay has a more encompassing outlook on the possibilities. No need to be bamboozled by technical speak on this one, Netplay is very straightforward.
Surf through the TV at night and you will come across some channels that allow you to bet on a live roulette wheel or black jack – this is Netplay TV. It’s incredibly straightforward, and it is very easy to open an account and start playing. Of course you can access these games via a website as well (Supercasino.com, Bingos.com and EuroTeleMillions.com) and there are other online games too, but the big push for Netplay TV in recent years has been to develop its format for TV. To many this may seem a bit odd, considering all the chatter about internet and mobile applications. It does in fact make perfect sense. What Netplay TV has focused on is proving the business model on TV. Now the second and third phase of the business model begin to unfold, and that is expanding the live gaming concept to both web based and mobile phone based applications. The other ambition of Netplay is to effectively manage other media groups’ gambling for them. This was perfectly demonstrated in a recent deal with Virgin Media.
Netplay TV will take over production of the 'Challenge Jackpot' brand, including its website and television channel. The channel airs 24/7 on Virgin Media and Sky, plus three hours per day with live presenters on Bravo 2 and Virgin 1, extending the brand into Freeview homes. The deal sees Netplay TV taking over virtually all aspects of the business for Virgin, and in return Netplay will receive a management fee plus a cut of the revenues from the business. This was the first deal announced by Netplay were it will manage another media group’s entire range of gambling products, but is almost certainly not going to be the last. As part of the deal, Virgin Media has an option to acquire a 9.9% stake in Netplay TV. As another part of the deal, NetPlay TV acquired privately owned Two Way Gaming Ltd to allow the smooth transfer of registered players and customer accounts as well as the required licences, servers and staff. The consideration for the deal is £2 million, paid in shares.
For Netplay the deal is a logical step. It has developed its own range of brands, and broadcasts them across various channels, and in the case of EuroTeleMillions, in partnership with Channel Five. Now it has added the management of another group’s gambling business into its own operations.
Clearly is will take time to integrate and maximise the potential of Virgin’s 'Challenge Jackpot' brand – the contract runs until 2013. However, in the meantime, Netplay TV continues to develop its own products and can look to talk with other possible media groups who are interested in moving into the space buy may not necessarily want to develop a product from scratch. Netplay brings the experience and know-how to help a large media group roll out a product far quicker than it could on its own.
Equally interesting is the continued development of the live TV product across the internet and mobile phones. The rate at which mobile phones are becoming mini-laptops with 3G capability is not short of spectacular. This opens up a huge opportunity for companies like Netplay to allow people to play live games from their mobile phone.
Martin Higginson sees the potential, and the company is keen to move into this arena. Perhaps more near term however, may be the appearance of live TV options via a website, almost like a white label solution where a large website could offer users the ability to sign up and play roulette, where Netplay and the website owner would share the revenues generated. It’s not hard to envisage some websites that would be very interested in this kind of product.
Panmure Gordon, house broker to Netplay , recently released an update, reiterating its ‘buy’ stance, noting that the Virgin Media deal could boost 2010 full year earnings per share by 20%. Panmure is forecasting EBITDA of £4.4m and £7.0m in FY09 and FY10 respectively, and EPS of 2.1p rising to 3p (assuming dilution from the new shares and the 9.9% Virgin share option). On the Panmure forecast, Netplay is trading on a forward 2010 P/E of 8.7 – hardly demanding.