Shares of DigiPlus Interactive Corp are up 145% so far this year, more than any other casino stock with a market value of over US$1 billion. The stock, which reached a record high on Friday, has surged twelvefold in two years with help from a pivot to the internet during the pandemic.
The gains stand out amid growing concerns over the impact of online gambling on society around the world. The Philippines last month banned offshore operations that cater to Chinese gamblers, as part of efforts to curb crimes including money laundering.
DigiPlus is benefiting from its prime position in the domestic online gaming market, which saw revenue surge 525% in the latest quarter compared with a year ago.
The company formerly known as Leisure & Resorts World Corp established a presence as a bingo hall operator before changing its name and shifting to target tech-savvy younger players with disposable income.
“We view its growth trajectory to be sustainable,” said Gabryle Aguila, equity research head at Unicapital Securities Inc. “Its move into the digital space with great execution translated into growing a brand that has already built decades worth of awareness.”
Financial success has also helped boost the stock’s appeal. DigiPlus’s second-quarter net income expanded about 400% year-on-year to 3.2 billion pesos (US$57 million). That’s more than double the profit posted by Philippine brick-and-mortar casino operator Bloomberry Resorts Corp.
DigiPlus has said it’s unaffected by the offshore ban, though lawmakers are also deliberating potential regulations on local online gambling due to questions over the social impact. Meanwhile, the company has been looking to diversify overseas, recently announcing that it applied for a license in Brazil.
The thinly covered stock has three buy ratings and no holds or sells, with an average price target implying an 22% rise over the next 12 months. DigiPlus is currently trading at 6 times estimated forward earnings, compared with the five-year average of 7.4 times. The shares rose as much as 2.7% Wednesday.
Strong profits should support further gains in the second half, according to Unicapital’s Aguila. “DigiPlus is undoubtedly on a strong growth trajectory and that it continuously backs up its stock price with sound fundamentals,” he said.