ENLABS Online Gambling segment is building up momentum. After a weak start of 2018, the segment had a 25% Q/Q growth in Q4 (Excluding land-based betting). The launch of Optibet has, so far, only had a minor effect on the growth. Meaning that the existing markets are performing very well. On the negative side, the Media segment underperformed with a negative Q/Q growth of 12%. Leading to a large drop in the EBITDA margin for the Media segment. However, this segment is only 9% of ENLABS total revenue, and the company sees clear signs of improvement in the KPIs.
Overall, ENLABS sales came in at approximately EUR 8.9m (estimated EUR 8.6m) which was 4% above our estimates. The gross profit reached 73% (estimated 75%), and the marketing expenses in relation to sales were 15% (estimated 15%). As a result, the EBIT margin reached 25% (estimated 23%), and the earnings per share amounted to, EUR 0.036 (estimated EUR 0.031). All in all, a very solid quarter that lowered the odds for a fantastic 2019.
With a strong position on the fast-growing Baltic market and with the launch of Optibet in Lithuania. ENLABS do not need to enter new markets or make acquisitions during 2019 to reach +25% growth. The underlying growth of Estonia and Latvia is still very strong, and success for Optibet in Lithuania can be a game changer. However, we believe that ENLABS are actively looking for the right type of acquisition to enter a new regulated market. Most likely markets are Sweden and East European countries. But finding the right acquisition can take time, so we would not be surprised if it takes until H2 2019.
However, ENLABS could also be a very attractive acquisition at the current valuation. For a larger operator, this could be the perfect opportunity to acquire a strong position on the fast-growing Baltic market.
Following the Q4 report, we will review the case and follow-up with a research update.
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