ii view: Flutter makes fortune from Q3 betting boom

The former Paddy Power is now growing in the US, but is the good news now in the price? 

Third-quarter trading update to 30 September   

• Revenue up 27% to £1.32 billion
• Sports revenue up 32% to £798 million
• Gaming revenue up 21% to £527 million

Guidance:

• Expecting higher full year adjusted profit excluding its US business
• US business adjusted loss now expected to be bigger 

Chief executive Peter Jackson said:

"Flutter's performance in the third quarter exceeded our expectations in both sports and gaming.  Our strong trading continued as we grew market share in key regions while retaining our commitment to safer gambling practices.

“We are very pleased to have retained our position as the number 1 online operator in the US, where FanDuel has made significant progress against each of its key priorities. We are now a truly global business with significant scale. As such we are in a unique position to respond to the many opportunities we see across our growing markets. 

“Looking ahead, whilst the outlook with respect to Covid-19 remains uncertain, we are confident that our business is well positioned to capture further growth in a sustainable and responsible way."

ii round-up:

Flutter Entertainment (LSE:FLTR) is a global sports-betting and gaming company. 

It operates through the core segments of online, Australia, the US and retail. 

Group brands include Paddy Power, Betfair, SkyBet, Adjarabet, PokerStars and FanDuel. Its operations also encompass over 600 betting shops in the UK and Ireland. 

For a round-up of this latest trading update, please click here. 

ii view:

Flutter previously outlined a number of initiatives to generate growth, including growing Betfair internationally and strongly targeting the US market place. Its October 2019 acquisition of Canadian online bookie and owner of Sky Bet and PokerStars greatly accelerated its ambitions. Its UK stock market value of over £20 billion dwarfs Ladbrokes owner GVC Holdings (LSE:GVC) in second place at just under £6 billion. 

For investors, progress being made in the US is extremely pleasing. The revenue gain in this latest quarter surpassed many analysts’ forecasts. An upgrade of full-year adjusted profits, minus the US division, by around 5% also underlines the good work being done here. But heightened regulation in places like Germany plus potential tax increases offer some reason for caution. So does an estimated forward price/earnings (PE) ratio comfortably above the three- and 10-year averages, suggesting the shares are not obviously cheap. 

Positives: 

• Diversity of both business type and geographical location
• US revenue up 82% 

Negatives:

• Gaming taxes in both Ireland and Australia have recently increased
• Elevated valuation 

The average rating of stock market analysts:

Strong hold