DigiPlus slides on policy jitters

SHARES of DigiPlus Interactive Corp. plunged last week despite being the most actively traded stock amid panic selling across the market, analysts said.

Investor sentiment in the Tanco-led company was driven by concerns about potential regulatory actions in the gaming sector, despite news of its expansion in Brazil.

The listed digital gambling company had a value turnover of P6.72 billion, with 168.26 million shares traded from June 30 to July 4, data from the Philippine Stock Exchange (PSE) showed.

DigiPlus shares closed at P29.50 apiece on Friday, plunging by 48.2% from P56.90 on June 27, week on week. Likewise, the services index declined by 5.2%, while the benchmark PSE index inched down by 0.2%.

Year to date, the digital gambling company gained 8.7%, outperforming the 0.7% growth in its sector and reversing the PSE’s 2% decline.

The sharp fall week on week clearly reflects a sell-off driven by investor sentiment, which was triggered by legislative and regulatory worries rather than fundamental weaknesses in the company’s performance, Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

“[This] reflects how high-growth, high-risk stocks are vulnerable to rapid value erosion when policy risks increase,” Mr. Arce added.

On a yearly basis, he said that DigiPlus “outperformed due to strong fundamentals and a compelling growth story, while the broader index lagged due to macroeconomic pressures and underperformance in more traditional sectors.”

Last week, the company saw mixed trading patterns due to heightened regulatory risks and broader sentiment-driven volatility in the gaming sector, which alarmed investors and caused shares to fall.

For Jemimah Ryla R. Alfonso, equity research analyst at Unicapital Securities, Inc., DigiPlus “suffered a brutal sell-off” due to worries surrounding the proposed online gaming bill by Senator Sherwin T. Gatchalian.

Ralph Jonathan B. Fausto, research associate at China Bank Securities Corp., said that market sentiment on the listed digital gambling company was steered by snowballing concerns regarding potential regulations, in which proposals under consideration are generally aimed toward regulating access and taxation.

Additionally, Mr. Fausto said that the strong investor interest in the company is driven by its strong earnings growth trajectory given its wide market adoption, alongside expansion opportunities in new geographic markets.

The bill, filed by Mr. Gatchalian, seeks to implement stricter regulations for online gambling platforms to control the rise of gambling addiction among younger Filipinos.

The proposed measure includes raising the minimum cash-in requirement for online gambling platforms to P10,000, to discourage impulsive and easy access to gambling platforms. It will also ban gambling sponsorships of public events and campaign donations.

Following this, the Finance department also said it plans to impose a tax on online gaming, while the central bank issued a circular requiring banks and e-wallets to protect their users from potential risks of online gambling.

Mr. Arce said that the news worsened the uncertainty in the sector, with the overall market already cautious of economic headwinds and impending fiscal reforms.

“Traders should closely monitor updates on these bills and central bank circulars, as they could materially affect DigiPlus’ operations and valuations,” he said.

Last week, DigiPlus announced that it will debut its operations in Brazil by September as part of its strategic expansion program to its next phase of growth.

DigiPlus, best known for interactive gaming and sports entertainment, is the operator behind BingoPlus, ArenaPlus, and GameZone.

The company said it will deliver a fresh line-up of livestreamed games, slots, table games, and exclusive self-developed digital entertainment content designed to thrill local players in Brazil, which will be delivered through the company’s infrastructure, strengthened by its landmark migration to Amazon Web Services.

“The Brazil expansion represents a strategic pivot toward international diversification, offering a high-potential market,” Mr. Fausto said in an e-mail.

He added that the company intends to penetrate the Brazilian market by initially targeting the sports betting segment, which aligns strongly with local consumer behavior, particularly Brazil’s deep-rooted football culture.

“After establishing a foothold, we view the company to be well-positioned to deploy its proven strategy of digitalizing localized games which was the catalyst for its success in the Philippine market.”

For Ms. Alfonso, DigiPlus has a proven strategy and operational structure that they can effectively replicate in their Brazil expansion and that they have factored in the launch of their Brazil platform operations, which signals their readiness and suggests that the rollout could be smooth sailing.

The Brazilian government approved regulations for both online betting and gaming, providing clear guidelines for licensed operators, consumer protections, and fair taxation in 2024, which allowed the entry of foreign players such as DigiPlus.

But even so, adapting to the local dynamics of the Brazilian gaming market may entail an initial adjustment period, Mr. Fausto said, adding that changes in the regulatory landscape could provide an overhang, as this factors into profit growth prospects.

For Mr. Arce, this will benefit the company as its recent upgrades to responsible gaming frameworks aligned with foreign regulatory expectations, but he cautioned that DigiPlus must be wary of potential regulatory volatility.

“While Brazil’s new regulatory environment creates a welcoming gate for DigiPlus, sustained compliance, cultural alignment, and risk agility will be critical. The rewards are substantial, but so are the responsibilities,” Mr. Arce said.

In the first quarter, DigiPlus’ net income surged by 110.6% to P4.2 billion from P2 billion in the same period a year earlier.

Meanwhile, revenues climbed by 69.2% to P23.06 billion from P13.63 billion.

For Mr. Fausto, the top line was underpinned by sustained momentum in domestic gaming operations, which was further improved by the company’s initiatives in late 2024, while its bottom line was supported by continued cost discipline.

Mr. Fausto sees revenues reaching P102.9 billion, while net income is estimated to reach P18.4 billion, saying that investors are likely to continue monitoring the company’s ability to sustain its profit growth trajectory, especially in the context of its Brazil expansion and intensifying domestic competition.

“Immediate support and resistance are at P29 and P33, respectively,” he said.

For Mr. Arce, revenues could hit P24.5 billion to P25 billion, given that there will be no regulatory shocks, while net income is projected to reach P4.4 billion to P4.6 billion, with the Brazil operations factoring into investor expectations.

He listed that robust growth metrics, strong trading liquidity and price momentum, as well as sector leadership in a digital niche with high scalability and brand recognition, are among the few factors investors might consider with DigiPlus.

“Based on recent trading data, sentiment shifts, and technical patterns, support could fall between P35.20 to P31.35, while resistance may range between P40 and P47.85,” Mr. Arce said.

Ms. Alfonso, meanwhile, said that DigiPlus’ strong performance is reflective of the broader momentum in the e-gaming industry, as more Filipinos increasingly incorporate online gambling into their digital entertainment routines.

She added that potential catalysts for DigiPlus include the possibility that if the proposed House bill is not passed, it could help restore investor confidence as regulatory fears would simmer down.

“Second, a material share buyback by the company could serve as a strong signal of management’s confidence and further boost sentiment.”

Lastly, she said that the next release of quarterly earnings could underpin the growth narrative of DigiPlus.

She pegged the support level at the P24 to P28 range, while resistance is at the P33 to P38 range. — Abigail Marie P. Yraola