ii view: Ladbrokes owner Entain hits a new high

by Keith Bowman from interactive investor |

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Online bets continue to grow while its high street stores have recently reopened. We assess prospects.

First-quarter trading update to 31 March

Chief executive Jette Nygaard-Andersen said:

“With some easing of Covid restrictions, we are delighted to be welcoming customers back into our shops. While it has only been a handful of days since the re-opening in parts of the UK on the 12 April, we look forward to returning to more normal trading across our whole business.

“In line with our expectations, the momentum from the end of 2020 has carried into 2021. Although Covid creates some near-term uncertainty, by maintaining our focus on the customer, providing them with great products and services, we remain confident and excited in our long-term prospects."

ii round-up:

Online and high street bookie Entain (LSE:ENT) today reported online net gaming revenue growth of 33%, its 21st consecutive quarter of double-digit growth. 

That beat City forecasts for nearer 25%, and comes just days after the owner of high street brands Ladbrokes and Coral reopened its UK outlets following an easing in pandemic restrictions. 

Entain shares rose by more than 2% in UK trading, lifting them to a new all-time high. The former GVC Holdings has seen its shares rise by more than 360% since pandemic market lows last year. In early 2021 it rejected a takeover bid from its still ongoing US trading partner MGM Resorts International (MGMRI) on valuation grounds.

US casino operator Caesars Entertainment previously agreed to buy William Hill (LSE:WMH) for $3.7 billion (£2.9 billion). Shares for fellow online gaming operators Flutter Entertainment (LSE:FLTR), 888 Holdings (LSE:888) and Gamesys (LSE:GYS) have all more than doubled over the last year. 

Entain’s total net gaming revenue during the quarter to the end of March, and including its closed High Street outlets, fell by 13%. With its stores closed for almost the entire quarter, customers have been switching to its mobile and online channels to place bets.  

Along with the trading update, Entain also announced the launch of a new ShareSave plan for its 22,500 plus employees. The move comes as investors broadly express increasing concern for Environmental, Social and Governance or ESG issues. It follows a recent shunning of Deliveroo's (LSE:ROO) stock market debut by some institutional investors given concerns for the reward of its gig employees. 

ii view:

FTSE 100 constituent Entain is a sports-betting and gaming company operating both online and on the high street. Its sporting brands include bwin, Coral, Crystalbet, Eurobet, Ladbrokes, Neds and Sportingbet. Its gaming brands include CasinoClub, Foxy Bingo, Gala, Gioco Digitale, partypoker and PartyCasino. It also operates in the USA with partner MGM Resorts International under the BetMGM brand.

Its operations over the last year have gone from 21 regulated countries, including the UK, to 27 following two recent acquisitions. Countries where it conducts business now include Germany, Spain, Portugal and its ongoing partnership in the US.  

For investors, tightening gaming regulations such as those introduced in Germany cannot be ignored. Gambling, as with alcohol and tobacco, is also an area in which financially stretched governments could look to raise further taxes going forward. Ongoing pandemic uncertainty has also left the dividend payment still suspended. 

But continued growth for its US joint-venture and ongoing international expansion underlies prospects. A forecast dividend yield in the region of 2% is also not derisory in an era of ultra-low interest rates, while analysts’ current estimate of a fair value target price of £17.49 gives scope for additional upside. In all, while it's never wrong to take some profit, momentum appears to remain on the company’s side. 

Positives: 

  • Diversity of business type and geographical locations
  • Looking to address ESG issues

Negatives:

  • Increased regulation
  • Industry target for increased government taxes globally

The average rating of stock market analysts:

Strong buy

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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