DigiPlus Q1 profit: P2.0-B (up 370%)

DigiPlus Interactive [PLUS 12.76, down 4.6%; 79% avgVol] [link] reported a Q1 net income of P2.0 billion, up 370% y/y from its Q1/23 net income of P0.4 billion. PLUS attributed its performance to revenue increases in all of its material business segments: retail games (+237%), casino rental income (+30%), hosting fees (+19%), and other leases (+12%). In the “FUTURE PLANS” portion of the Management’s Discussion and Analysis section, PLUS said that it “continues to execute on its... vision to be the number one digital entertainment group in the Philippines.” PLUS said that it is looking to boost customer retention through the use of “big data technologies” and plans to “embark on aggressive marketing efforts” to “enhance customer engagement.” The group’s Franchise Fees and Taxes expense grew 201% y/y to P6.8 billion, but this is the amount that PLUS pays PAGCOR and the government as a percentage of its gross gaming revenue.

MB bottom-line: It’s going to be interesting to see how PLUS handles the “problem” of making too much money. Will it treat these huge quarters like a windfall profit and distribute some large amount of it back to shareholders through a dividend, or will it look to put the money to work? If the management team wants to use the cash for something constructive, how will it configure its investment spend between research and development of its digital gambling platform and more conservative sources of recurring income like land and buildings? The FUTURE PLANS section tells me that they’re not finished building out PLUS into what it could be, so shareholders should probably expect the company to allocate a good amount to realizing that ambitious goal to become our “largest digital entertainment group”. 

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