Kindred Group - KIND SDB

Investment case
Swedish reregulation pressured margins in 2019, revenue declined and the dividend was cut. Leaving 2019 behind and looking at the longer term, we argue that the new regulations (not only in Sweden but across Europe) will lead to consolidation, benefitting big players like Kindred. M&A will be a vital share price driver for Kindred going forward. Major sporting events should support revenue in 2021. The company is also gearing up to enter new markets. It is now live in New Jersey and Pennsylvania in the US, with four more states due to come live by the end of 2021. This should help fuel growth for 2020 and beyond.

Main risks
The key downside risks include lower-than-expected gambling activity, unfavourable sports results and unfavourable regulations in key gambling markets (primarily Sweden, the Netherlands, France, Belgium and the UK). Estimate and valuation changesWe make quite significant positive revisions for 2021E-23E. These largely reflect Kindred continuing to show strong momentum across almost all of its markets and products while maintaining firm cost control and keeping marketing and administrative expenses low. In total, we increase our net sales estimates by 6% for 2021, by 5% for 2022 and by 2% for 2023. This leads to a similar percentage increase in our gross profit estimates, which together with mostly unchanged operating expenses explains our 15% uplift to EBITDA for 2021E and 12% uplift for 2022E. We find Kindred attractively valued and stick to our Buy rating, raising our multiple-based target price to SEK 170 (140), which represents a slight premium (5%) to a broad peer group on 2022E EV/EBITDA. We believe this is warranted as 2022E is heavily impacted by regulation in the Netherlands, marking a low point in earnings. Our DCF-based fair value using a 7.5% WACC stands at SEK 174. We view Kindred as a high-quality operator with more than 61% of GWR coming from regulated markets with a strong position in the US.

KINDRED
PARETO HÖJER RIKTKURSEN TILL 209 KR (171) (Direkt)
2021-04-19 06:55
STOCKHOLM (Direkt) Pareto Securities höjer riktkursen för Kindred till 209 kronor från 171 kronor. Rekommendationen köp upprepas.

Det framgår av en analys.

Aktien stängde på 153:65 kronor i fredags.

Börsredaktionen +46 8 51917911 https://twitter.com/Borsredaktion

Nyhetsbyrån Direkt