A fifth consecutive year of double-digit growth sends shares in online casino operator 32Red (TTR:AIM) 9% higher to 45p this morning. The £30 million cap’s trading update shows annual net gaming revenue reached a record £31.1 million in 2014, 26% higher than the previous year.

Its core casino product was the key driver of growth with revenue up 27% year-on-year on the back of increased investment in marketing.

This caused the cost of player acquisition to rise by 18% but the company achieved a 17% increase in the number of new players and a 5% increase in the yield per active player to £510.

TTR - Comparison Line Chart (Rebased to first)

Net gaming revenue in Italy is up by an impressive 74% year-on-year, albeit from a lower base to £1.1 million. The growth in Italy has been achieved on the back of limited marketing spend there, but the company has committed to increase this in 2015 with a new series of TV adverts airing from 2 January.

32Red’s focus on Italy is important because it should help to mitigate the impact of the 15% UK Point of Consumption tax, which came into effect on 1 December.

Chief financial officer Jon Hale says the company wants to increase its 4% share of the UK market and will look at potential acquisitions to achieve this.

Early trading in 2015 looks strong with revenue for the first 20 days in January 31% higher than the corresponding period in 2014. The stock trades on an undemanding 2015 price to earnings ratio of six times, with a 6% dividend yield.

Numis’ target price is 80p, implying a potential upside of 78%.

Issue Date: 22 Jan 2015