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FINANCIAL ANALYSIS OF BWIN


COMPANY

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Table of Contents
1. Introduction.................................................................................................2
2. Performance of Companys Slope Coefficient..............................................2
3. Bwin Share Price Efficiency and Performance..............................................3
4. Comparison of Share Price Volatility between Bwin & FTSE 250..................5
5. Impact of Fundamental Indicators on Share Price of Bwin...........................7
6. Conclusion...................................................................................................9
References.......................................................................................................9

List of Tables
Table 1. Profit and Loss factors of Bwin............................................................7
Table 2. Balance Sheet of Bwin........................................................................7

List of Figures
Figure 1: Four week moving average of Bwin..................................................3
Figure 2. Share prices of Bwin..........................................................................4

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Figure 3. Weakly adjusted closing prices comparison of FTSE 250 and Bwin. .5
Figure 4. Rebased FTSE 250 and Bwin price comparison.................................6

1. Introduction
Bwin Party Digital Entertainment operates in online gambling business and
formed in 2011 by the merger of Bwin Interactive Entertainment AG and
PartyGaming plc (Blitz, 2011). It is best known for its online poker room
Partypoker.com and its games wagering brand Bwin (authoritatively styled
Bwin). It is quoted in London Stock Exchange and its headquarter is in
Gibraltar (PokerScout.com, 2014). The new organisation turned into the
world's biggest traded on an open market internet gaming firm in 2010,
48.4% claimed by existing Partygaming shareholders and 51.6% by Bwin
shareholders. Norbert Teufelberger and Jim Ryan are serving Bwin as joint
CEOs (BBC News, 2010).
2. Performance of Companys Slope Coefficient
Laopodis (2009) gave the establishment to measure the security systematic
risk, which detail the allotment of singular stake's aggregate unpredictability
helped

fluctuation

of

the

aggregate

business

portfolio.

The

weekly

data/information about Bwin Party Digital Entertainment (shortly called Bwin


throughout this assignment) is gathered from January 2011 to February
2014. Also, FTSE 250 data is collected. Computed the returns utilising the
recipe of old cost partitioned by present value short one. From these returns,
the coefficient (beta) of business return over Bwin is calculated. They came
about beta was added up to 0.1 which demonstrates less reliance of Bwin
over the business. This shows the Bwin stock instability is practically free of
business sector unpredictability. Brigham and Ehrhardt (2013) demonstrated
that slope coefficient which holds the quality in the middle of 0.5 to 1 tag the
affectability of stock returns as stated by the data in the business sector and
these stocks move with the development of the business sector. Underneath
this point of confinement shows the less affectability of the stock. Over 1
beta quality shows that stock moves ahead of time to the data in the
business. That means these stocks are more unpredictable and push forward

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of the business. Banks are the brilliant case of these stocks that move before
the floatation of the data in the business. The analysis shows that Bwin has
exceeded from the information which is prevailing in the market. FTSE 250
lags behind Bwin as this stock move ahead of FTSE 250. The beta value of
1.1 indicates that according to Grundy and Malkiel (1996), Bwin moved faster
than FTSE 250 which indicates that Bwin made adjustments before the
change in the market and have an access to information much faster than
other companies in FTSE 250.
According to uk.rueters.com, the beta value of Bwin shows the value of 1.15,
which is quite close to the value which is generated from the data collected.
It is clear that the calculated value provide the pure picture of analysis. The
calculated value is 1.1 and published value is 1.15 which is very close to
each other indicating the same result that Bwin stock volatility is more than
the market volatility and stock moves according to the related information
before the market. Bwin is sensitive to the information provided by the
market barometer, which in this case is FTSE 250, and moved before the
information float in the market. Overall high beta value indicates the high
volatility and riskiness in the security. There is high systematic risk in Bwin
which indicates the high volatility of security.
3. Bwin Share Price Efficiency and Performance
Offer cost of Bwin from January 2011 to February 2014 shows the positive
pattern in returns at the end yet overall there is insecure execution of Bwin.
Figure 1 shows the four weeks moving normal returns of Bwin which shows
the unstable nature of the security. Offer costs of Bwin were not reliable and
there are negative and positive patterns.

BPTY
0.15
0.1
BPTY

0.05
0
-0.05
-0.1

Figure 1: Four week moving average of Bwin

Figure 2 indicates the performance of share price from 2011 to 2014. It


proposes the volatile trend in share price returns of Bwin. It starts from share
price of 206 and end up with 112. This figure shows the significant
decrease in the share price and shows the bad performance of the company
and also on the other hand as figure 3 shows the return from this security is
more volatile not stable. These findings raise concerns in the mind of the
investors before making investment in the company (Koop, 2006).

Figure 2: Share prices of Bwin


Source: uk.rueters.com

Figure 2 shows the trends of share prices of Bwin. It is shown that there is
some setback from the start but from July 2012 there is an increase in share
prices of Bwin. To evaluate the market movement traders use pivot points to
see whether there is bullish or bearish environment in the market. Head and
shoulders pattern forms when with the support of the neckline the stock has
three successive peaks (reference). Middle peak becomes the highest peaks
then the almost equally heighted left and right peak two major head and
shoulders where identified for Bwin. Trend lines are drawn in between two or
more prior pivot points. Most common use of trend line is to draw diagonal
levels, which help in making decision regarding entering and exit investment
in stock market (Edwards and Magee, 2013).
In the completion there is an increased volatility in prices of Bwin while
analysing the market. Bwins negative performance is the representation of
larger beta which indicates the volatile nature of the security and put
concerns in the mind of the investors that stock is not going to perform well
in future as it shows too much ups and downs from 2011 to 2014. The

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consistent decrease in the share price indicates the long term decline of the
company. In both long and short runs, there is a shaky trend in the returns of
share prices which is shown in figure 1.
4. Comparison of Share Price Volatility between Bwin & FTSE 250
As past area demonstrated that Bwin proposed execution in long run, this
section provides a comparison of share price volatility between Bwin with
FTSE 250. When discussed corporate money, the most suitable measures are
industry balanced (Gregoriou, 2010). For stock returns examination with
FTSE gives the short investigation that whether the firm is moving with or
against the development of the business sector. What amount of business
sector is affecting the development of the organisation and what amount of
unstable is the firm stock cost against development in business sector
(Ghosh and Khaksari, 2005).
4000
3500
3000
2500
2000
1500
1000
500
0

BPTY Adj Close


FTSE 250 Adj Close

Figure 3: Weakly adjusted closing prices comparison of FTSE 250 and Bwin

Figure 3 shows the correlation of gathered feebly balanced value information


of FTSE and Bwin. The figure unmistakably demonstrates the contrast in
unpredictability of Bwin and FTSE 250. As stated by the information gathered
there appear to be less affectability of Bwin against the feebly balanced FTSE
250 list. FTSE business is more unpredictable as contrast with Bwin.

Figure 4: Rebased FTSE 250 and Bwin price comparison


Source: uk.reuters.com

Then again the distributed graph demonstrates the other path around. Figure
1 shows the distinctive examination of Bwin and FTSE 250 which
demonstrates the diverse site and does not speak to same comes about as
shown. This figure shows that the market was performing admirably against
the securing as from July 2013 the offer cost of the security was not up to the
business sector with the business execution. Likewise there is an enormous
crevice in July 2012 to January 2013 which indicates that FTSE 250 was
performing well and Bwin was not reacting admirably to this positive change.
With the rebased examination it is watched that Bwin stocks are going over
the business sector cost which gave an unwinding for investors. Vacillation in
offer value is commanded by the business sector which concerning the
legitimacy.
5. Impact of Fundamental Indicators on Share Price of Bwin
Market execution of the organisation dependably speaks to the essentials of
the association (Williams, 2011). Based on the above statement, Bwin is
focusing on long haul development in business sector and for attaining this
destination it need to perform in a far-reaching way (Edmonds et al. 2006).

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According to Morningstar, there is no audited financial statement available
for Bwin so the data is considered from 2009 to 2012.
Table 1: Profit and Loss factors of Bwin

Year

2009

2010

2011

2012

2009

2010

2011

2012

Turnover

275.3

306.1
4

577.2
6

650.1
2

100%

111%

210%

236%

Expenses

225.2
3

266.4
7

927.8
3

663.5

100%

118%

412%

295%

EBIT

51.14

44.38

8.18

-6.33

100%

87%

16%

-12%

EBITDA

77.33

77.97

130.5
5

88.4

100%

101%

169%

114%

Operating
profit

51.14

40.18

5.43

-8.92

100%

79%

11%

-17%

Profit after
tax

47.32

34.44

346.3
9

20.19

100%

73%

732%

-43%

Source: Morningstar Company Intelligence (2013)

Table 1 indicates the factors belonging to profit and loss statement of Bwin.
The reported factors can bring significant change in share price as investor
take these factors as strong consideration. First we come to the most
significant prospect i.e. turnover. The growth of turnover from 2009 to 2013
is phenomenal. Turnover in 2009 are 275.3m which has shown significant
236% increase in value to 650.12m. The negativity in share price comes
from expenses of the company which has increased with the pace of 295%
from 2009 to 2012 but the figure is alarming in 2014 when it showed the
increase of 412% and against this figure sales only increased to percentage
of 210%. There is a huge decrease in profit after taxation which shapes the
company downturn as it is analysed that the stock prices consistently
declining and there was more and more volatility in the data which shows
that company is in financial distress.

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Table 2 indicates the factors representing the balance sheet of Bwin and from
the table it is clear that company is not much involved in investment.
Investment has just grown from 2,421m to 2593m. Working capital
efficiency ensures growth (Preve and Sarria-Allende, 2010). Prospects of
debtors and cash has increased significantly over the years showing good
prospects of the company effecting the share price as company can do good
managing there working capital need. Total assets increased by 231% from
2009 and this growth are consistent throughout the years. Current liabilities
have increased by 164% which is less than growth of assets overall net
assets increased by 341%. Net borrowings also increased with the value of
114% but against debtor this value is quite low. Balance sheet shows a
better picture of the company and company meets the working capital
requirements. Theses Fundamentals of the company fully represents the
contemporary market conditions of the company.
Table 2: Balance Sheet of Bwin

Year

200
9

Net Non-Current
Assets

2010

2011

2012

200
9

201
0

201
1

201
2

214. 191.1
31
6

663.6 612.1
3
7

100
%

89%

310
%

286
%

Debtors

31.0 41.38
7

108.3 113.0
3
6

100
%

133
%

349
%

364
%

Total Current
Assets

167. 209.9
08
2

383.3 276.2
9
4

100
%

126
%

229
%

165
%

Total Assets

384. 402.9
94
6

1089. 888.4
88

100
%

105
%

283
%

231
%

Current Liabilities

132. 147.4
99
6

308.4 218.3
7
3

100
%

111
%

232
%

164
%

Non-Current
Liabilities

92.6 55.86
8

118.6 127.5
1
7

100
%

60%

128
%

138
%

Total Liabilities

225. 203.3
67
2

427.0 345.9
8

100
%

90%

189
%

153
%

Total Net Assets

159. 199.6
27
4

662.8 542.5

100
%

125
%

416
%

341
%

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Reserves

116. 157.1
83
4

- 544.2
184.8
5

100
%

135
%

158
%

466
%

Net Borrowings

94.4 131.6
6
1

213.6 108.1
7
1

100
%

139
%

226
%

114
%

Source: Morningstar Company Intelligence (2013)

6. Conclusion
Bwin is facing financial and operational difficulties as shown by both
fundamentals and market. Company beta provides the same picture as
provided by the published data but company is not performing well enough.
Beta represents market risk and it is important to see the fare value of beta
before investment in the stock market. Bwin represents high market risk and
company fundamentals fully support this finding. The market movements of
FTSE 250 and Bwin are quite different and according to market beta analysis,
Bwin is embracing FTSE 250. There are more expenses as compared to
turnover which has reduced both operating and net profits. Company
balances sheet is showing good prospects but overall company is in financial
distress which led to market price fluctuations.
References
BBC News. (2010, July 29). Gambling firms Partygaming and Bwin reveal
merger plan.
Berk, J., DeMarzo, P., & Harford, J. (2012). Fundamentals of Corporate Finance
(2nd edition). Prentice Hall.
Blitz, R. (2011, March). Gaming merger aims to outplay US rivals. Financial
Times.
Brigham, E. and Ehrhardt, M. (2013). Financial Management: Theory &
Practice. 14th edition, Cengage Learning
Chen, W., Wei, Y., Lang, Q., Lin, Y., & Liu, M. (2014). Financial market volatility
and contagion effect: A copulamultifractal volatility approach. Physica
A: Statistical Mechanics and Its Applications, 398, 289300.
doi:10.1016/j.physa.2013.12.016

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Edmonds, C., Edmonds, T., Olds, P., & Schneider, N. (2006). Fundamental
Managerial Accounting Concepts (3rd editio.). New York: McGraw-Hill
Irwin.
Edwards, R. D., & Magee, J. (2013). Technical Analysis of Stock Trends. 10th
edition, CRC Press
Ghosh, D.K. and Khaksari, S. (2005). Managerial Finance in the Corporate
Economy. Routledge
Gregoriou, G.N. (2010). Stock Market Volatility. CRC Press
Grundy, K., & Malkiel, B. G. (1996). Reports of Beta death have been greatly
exaggerated. Journal of Portfolio Management, 22, 3644.
Koop, G. (2006). Analysis of Financial Data. John Wiley & Sons
Laopodis, N. T. (2009). Real investment and stock prices in the USA.
Managerial Finance, 35(1), 78100. doi:10.1108/03074350910922609
Morningstar
Company
Intelligence.
(2013).
Morningstar
Company
Intelligence. Retrieved April 10, 2014, from www.hemscott.com/guru
PokerScout.com. (2014). Online Poker Traffic & News Since 2006. Retrieved
from http://www.pokerscout.com
Preve, L. and Sarria-Allende, V. (2010). Working capital management. Oxford
University Press
uk.rueters.com.
(n.d.).
No
Title.
Retrieved
http://uk.reuters.com/business/quotes/analyst?symbol=BPTY.L

from

Williams, R.T. (2011). An Introduction to Trading in the Financial Markets:


Technology: Systems, Data, and Networks. Academic Press

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