Mobile gambling is expected to grow 19 % CAGR 2018-2022. LeoVegas had 68 % of customer depositions from mobile platforms (2017). Since it’s LeoVegas ambition to increase their share of mobile revenue, their strategy are positioned towards the most lucrative part of the gambling market.

LeoVegas has a high number of Returning Depositing Customers (RDC). With a sequential growth of 15% QoQ (75% YoY) LeoVegas are trying to achieve a loyal and sustainable customer base. There remains disputes among investors whether online gambling operators are able to retain customers. With a solid growth of RDC, LeoVegas has shown ability to achieve the contrary. This is a sign of quality.

Customer lifetime value (CLV) has a positive upward trend ranging from €220 to €280 implying 27% growth in two years, although Q3 showed a decrease to €244. In addition to this, reduction in customer acquisitions costs (CAC) are decreasing from  €285 to €199 LTM, a decrease of 30%. As this trend continues so does profitability.

Risk related to regulations and Acquisitions. Since LeoVegas recently acquired two assets in the UK: Royal Panda and Rocket X, they face regulatory risks since the UK are showing stricter regulatory demands for the gambling sector. Sweden will regulate operators from 1 January 2019. Governments can change regulations in the gambling industry unexpected and without warning, this poses a risk to all operators including LeoVegas.

Base case indicates an EBITDA-margin of 12,5% 2020E, below LeoVegas’ long term target of 15%. This would imply a share price of 55 SEK.

Analysts: Filip Roos and Robin Sardella

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