Kindred Group plc (Unibet)

Stocks
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Many companies in the same sector have been discussed here, but Kindred has remained relatively under the radar. I thought I’d bring the company to the forefront now to see if others might be interested. I’ll try to keep this brief and update/add more information as I have the time.
This is indeed my first opening post, so please don’t lynch me right off the bat :wink:

“Kindred might be the best-managed European billion-class B2C gambling company, though it is also on the more expensive side.” @ Aki Pyysing 6.7.2017

Kindred Group is a gambling company registered in Malta, specializing in sports betting, casino games, poker, and bingo. The shares are traded on the Nasdaq Stockholm Large Cap list.

Kindred Group plc (‘the Company’) and its subsidiaries (together, ‘the Group’) is an online gambling business with over 29.1 million registered customers worldwide as at 30 September 2020 and is one of the largest publicly quoted online gambling operators in the European market. The Company is a public limited liability company incorporated and domiciled in Malta. The Group’s most significant subsidiaries can be found in Malta, the United Kingdom, Sweden, France, Italy, Gibraltar, Australia and the USA.

IR Pages:
IR

The company operates through its nine subsidiaries, of which Unibet is by far the most well-known.
Brands

Unibet plays a key role as Kindred Group seeks a foothold in the markets gradually opening up across the pond. The brand has good visibility in sports through several partnership agreements. Notable among these are the Philadelphia Eagles (NFL), New Jersey Devils (NHL), Paris Saint-Germain (Ligue 1), Aston Villa (Premier League), and Astralis (esports).

Excerpts from Q3:

us_expansion

activecustomers

Q3highlight

gwr

ebitda

summary

Kindred Group in the $BETZ ETF:
https://www.roundhillinvestments.com/etf/betz/full-holdings

Largest Shareholders:
https://www.kindredgroup.com/investors/the-share/largest-shareholders/

Latest price targets:
Pareto 171 SEK (133)
Kepler Cheuvreux 145 SEK (120)
ABG 150 SEK (130)
Nordea 140 SEK (115)
SEB 150 SEK (115)
DNB 170 SEK (105)

The company issued a positive profit warning on January 12, 2021
https://www.kindredgroup.com/media/press-releases/2021/kindred-group-unaudited-trading-update-for-the-fourth-quarter-2020/)

Kindred Group Q4 February 10, 2021:
https://www.kindredgroup.com/media/press-releases/2021/kindred-group-plc–year-end-report-january–december-2020-unaudited/

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Kambi Group - Skaalautuvaa B2B urheiluvedonlyöntiä
Sijoitusfoorumin liputuskeskustelu ja liputusten jälkipuinti
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{“content”:“Yeah, I’ve been eyeing this and actually opened a position yesterday. Should have noticed it earlier, but I still see potential. Of course, this year is a bit of a question mark, but sports betting is already recovering nicely as restrictions have been lifted and games continue.”,“target_locale”:“en”}

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The potential cancellation of the Olympics and the European Football Championship would significantly affect sports betting. I had a Betsson position, but I gave up my ownership for the reasons mentioned above.

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I personally don’t believe that the European Championships will be canceled. They’ll probably be played, even if it’s in empty stadiums if there’s no other way. The Olympics, however, look more concerning.

Why has the stock price been declining for two years since its 2018 all-time high, until now, after the corona dip, it has turned upwards again? Were there too high growth expectations that didn’t materialize in 2019?

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Does anyone have information on Kindred’s market share in relation to its peer companies? I tried digging with Google, but I can’t seem to find anything.

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This is certainly a threat to many companies in the betting industry. In the long run, however, we will (hopefully…knock on wood) be able to organize competitions and so on normally, once we get through this pandemic.

From the Q1 report, I was able to dig up this regarding events closed due to the pandemic:

Kindred has been negatively impacted by the COVID-19 pandemic as the majority of leading sports events have been suspended. The full impact of cancelled sports events was largely effective from 16 March 2020, which has resulted in lower sports book turnover, however partially compensated by solid growth in revenues from other products.

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I’m going to throw out a bit of a guess on this and try to dig up more specific information with sources later… I recall that there were issues with regulations in both Sweden and the Netherlands in 2018, and these had a negative impact on the results. I do emphasize the “guess” part of this answer.

I myself became a holder after the August 2019 dip, when the main focus started to shift towards the United States.

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From the 2020 Q1 report, I found this about the Swedish market:

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What happened to the share price 5 years ago? 800kr—100kr. A split?

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News.

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I’ve been looking for a similar company for my portfolio, I need to research this further and possibly take a small slice.

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I couldn’t find a match for that unit price, but investing.com shows a 4:1 split occurred on 01.06.2005 and an 8:1 split on 04.01.2016.

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Yesterday’s news on Kindred’s actions in tackling problem gambling. Of course, one can have many opinions on these :smirk:

https://igamingbusiness.com/kindred-group-publishes-harmful-gambling-revenue-figures/

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I, for one, see that addressing problem gambling is also a good long-term strategy for investors. The recent discussion surrounding our own Veikkaus is a living example of what happens if a betting company cannot regulate itself in a way that satisfies the rest of society.

While in the short term, a stronger intervention in gambling problems than required by law will certainly cause the company to lose revenue, in the long run, it significantly reduces the risk of external regulation.

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Same lines of thought. Also some kind of transparency regarding these matters (problems?) is likely a plus in the long term.. but that remains to be seen.

Looking at the sector in general, here’s some interesting analysis:
https://www.investors.com/videos/ark-invest-analyst-on-why-firm-is-bullish-on-draftkings-online-sports-gambling-market/

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Thanks for the great opening @alona!!!

I’ve owned varying amounts of Kindred over the past few years.

I don’t understand why the company is as cheap as it currently is.

ESG seems to affect this quite a bit, in my opinion. Large funds and investors have started to look down on gaming companies a bit, just like tobacco companies back in the day. Well, look at the returns of tobacco companies over the past few decades. Steady killers, both in terms of results and health.

I believe Kindred’s ESG reputation is generally better than the industry average, and recent news will further improve it.

I am certain that betting and gambling will not disappear.

Regulation, however, is a major threat, which indeed materialized in previous years. I see that since then, investors have feared new regulations, which is why valuation multiples are at rock bottom.

Now to the actual matter, the numbers:

5-year average ROE-%: 35%!!!

2020 ROE-% forecast: 56%!!!

5-year average EBIT-%: 16%

Revenue: In 2013 268 MGBP → 2020e: 1130 MGBP

320% growth, or simply calculated, about 45% annual growth historically (320% / 7 years)

So it generates really good returns on capital, has grown well, and operates in a defensive industry.

The 2020 results will be really good. According to the Q4 pre-announcement, 115 MGBP EBITDA on 365 MGBP revenue, taking into account 15 MGBP depreciation, operating profit could be 100 MGBP, meaning the company would make a 27% operating profit margin in Q4!!!

For the full year 2020, the company’s revenue looks to be 1130 MGBP, a 24% increase!!!

Operating profit 228 MGBP or 20% of revenue.

This in a year when sports events were canceled.

Forecasts expect 2021 revenue to grow by over 10% and the operating profit margin to be at its historical level of 16%.

This year there are the Olympics, major football tournaments, and next year again the Olympics. There are plenty of growth drivers.

And if something is canceled, people play casino games or poker, as has happened with Kindred.

Well, the valuation for this company is probably really expensive…

2020 P/E is now 11x, EV/EBIT: 10x
2021 P/E is 13x, EV/EBIT 10x

Historically, when I looked at how this has been priced before:

EV/EBIT 17x and P/E 20x (5-year averages)

!!!

This is outrageously cheap in my opinion, and I don’t know why.

Tomorrow the results will be released, and I believe the company will once again surprise analysts, and target prices will be raised. A dividend will also surely be distributed much more than expected.

That’s why I’ve been buying the dip.

EDIT: expanding rapidly into the US, where there isn’t really an online betting culture yet. supports growth.

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This also looks quite strong to my eyes.

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kindredQ4
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