Market minnows: why gambling firm Nektan could be worth a punt

A flotation can make or break a company. Just ask gambling firm Nektan, which made a terrible start to its life on the public markets.

Nektan floated in late 2014 at 256p with a value of £50.1 million but it quickly became apparent that the firm had oversold itself and its stock nosedived to 134p within a year.

Gary Shaw, who was chairman at the time and has just finished a spell as interim chief executive, blamed the bad start on an over-excitable broker from Panmure Gordon and the appointment of David Gosen as boss in January 2015.

Shaw says: “It was a disaster. We brought in Panmure Gordon, which was in a state of flux following its merger with Charles Stanley. The broker who looked after the process was hyper-excited. Then we brought in Gosen, who was very ambitious but was overpromising. We clashed badly.”

Gosen, who could not be reached for comment, left in January 2016 and since then the company has undertaken the slow and painful process of turning its fortunes around.

Nektan, which will be run by former US gambling veteran Lucy Buckley from next week, has grown its revenues from just £500,000 in 2015 to £13.2 million last year and is on course for £19.4 million this year.

The firm makes bespoke casino gambling platforms for customers which include BetVictor and The Sun.

Brokers at Stockdale believe the firm has made rapid progress in the past three years and that it is moving towards becoming “investable”.

The company’s major growth markets are in Asia and Africa but there are also signs activity is taking off in the US after the Supreme Court this year struck down a federal law banning any sports betting.

Stockdale analyst Robert Sanders says: “Though there has been progress in the US, it has taken longer and cost more than previously anticipated notwithstanding the announcement of a trial with a Tier-1 casino operator due to go live shortly.” But the online gambling space is crowded and it is hard to know which companies will emerge victorious over the next few years. Investors looking for specific exposure to the US gambling market may prefer Gan, which has launched regulated internet sports betting for PaddyPower Betfair’s enlarged US business FanDuel. Gan reported a 28% jump in income in the six months to June 30 to €26.7 million.

That said Nektan’s revival is working and now is the right time to buy.