Berenberg slashes Playtech target price following Asian profit warning

On the positive side, Snaitech, Italy's leading betting and gaming machines operator, will be consolidated in Playtech's accounts from June, contributing an estimated €70m to the firm's EBITDA this year and an additional €150m on a full-year basis in 2019.

Berenberg felt Playtech's €846m acquisition of over 70% of Snaitech, would afford the group "much greater exposure to B2C business in regulated markets", as well as the potential for synergies, even if the broker thought that regulatory evolution in Italy was "not devoid of risk".

As well, stronger competition seen in Asia had led Playtech to issue a "sizeable" profit warning, with management lopping €70m off their forecasts for the company's EBITDA from Asian markets in the current year.

Berenberg included the warning in its estimates and also assumed no recovery in the Asian business beyond 2018.

"Following all of the above mentioned changes, our price target on Playtech comes down significantly," the broker said as it slashed its price target on Playtech from 950p to just 600p.

"We acknowledge that with the share price plummeting, Playtech now looks very inexpensive on most metrics," the analysts said.

"However, we must point out that the company has issued two profit warnings on the same problems (first one in November 2017), and that it is quite difficult for an external observer to come to terms with the suddenness and magnitude of the last warning."

As a result, Berenberg opted to "remain cautious on the stock", and maintained its 'hold' rating.