Investors in John Laing Group (LSE: JLG) and Playtech (LSE: PTEC) are having a ball today, with the stocks up 8% and 11%, respectively, on positive half-year results. For the former, it’s a continuation of recent successes; for the latter, a much-needed fightback after a dramatic slump.
Both stocks are listed on the FTSE 250 and trade at bargain valuations of 5.9 and 8.9 times earnings, respectively. They are in favour today, but what does the long term hold?
John Laing is an asset manager that invests in greenfield infrastructure and has a market-cap of £1.54bn. Today’s results for the six months to 30 June show profits before tax of £174.3m, up from £36.6m in June 2017. Earnings per share (EPS) also multiplied, from 9.4p to 38.8p.
The group has also reported a 9.3% increase in net asset value per share since 31 December, together with a healthy £2.3bn pipeline of investment opportunities, including 12 shortlisted public-private partnership (PPP) positions worth around £325m. It also made realisations of £241.5m from selling its investments in project companies, up from £151.3m last year. Finally, its £1.26bn portfolio is up 18.2% since December.
The group is reducing its exposure to the UK, a good thing given the construction slowdown and post-Carillion PPP controversies, and expanding in Europe, North America, Asia Pacific, and beyond. It has a forecast dividend yield of 3.2%, with whopping cover of 4.9, which gives scope for progression. The stock trades at a forecast valuation of just 5.9 times earnings.
Earnings are forecast to rise 43% this year, although a dip of 5% is expected in 2019. Despite that, my colleague Roland Head recently rated it a long-term buy and investors are diving in today. Merits a bit more digging.
It has been a tough year for the £1.78bn online gaming firm Playtech. Its stock plunged last year as management warned it was set to miss performance targets, then crashed another 26% in July after a disappointing Asian performance triggered a profit warning.
No such worries today, as the stock surges despite a reported 15% drop in adjusted EBITDA to €145m, and a 34% drop in both adjusted profit before tax and adjusted EPS. The good news was a 4% rise in revenues to €436.5m. Clearly investors were braced for worse.
Playtech also reported net cash from operations up 51% to €222.5m and continued progress on balance sheet efficiency with the sale of its holding in Ladbrokes-Coral & GVC. The interim dividend per share was sustained at 2017 levels.
Chairman Alan Jackson reported “important operational progress and new licensee wins in key strategic markets, the UK, Europe and Latin America,” which led to “higher quality earnings for Playtech with Group revenue now 69% regulated.” Tough market conditions in Asia do not reflect on the core strength of the groups model, he added, while the recent Snaitech acquisition opens up the fast-growing Italian market.
Playtech is now valued at just 8.9 times forward earnings with a stonking forecast yield of 6.1%, and cover of 1.8. While earnings are forecast to drop 14% across 2018, next year looks brighter, with 14% growth pencilled in. By then, the yield could be 6.8%. It’s a gamble, but a tempting one.