Interactive Investor

ii view: Ladbrokes owner Entain puts on brave face after shares dive

This stable of betting and gaming brands is down around a fifth over the last month. We assess prospects.

5th October 2023 15:39

by Keith Bowman from interactive investor

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Trading update from 1 July to 22 September

  • Lowered online gaming revenue forecasts for both the third quarter and the full year
  • Continues to expect full-year 2023 adjusted profit (EBITDA) of between £1 billion and £1.05 billion

Chief executive Jette Nygaard-Andersen said:

"We continue to see good underlying growth in our online business and are reiterating our EBITDA guidance for the year despite softer than expected revenue growth in Q3 and the ongoing roll-out of industry-leading safer gambling measures.  

“We remain confident in our ability to deliver on the vast opportunities ahead of us, and look forward to sharing more detail about the changes that we are making alongside our Q3 trading update in November."

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ii round-up:

Sports-betting and gaming company Entain (LSE:ENT) operates both online and on the High Street. 

Its sports brands include Ladbrokes, Coral, bwin and Sportingbet. Gaming brands include CasinoClub, Foxy Bingo, Gala and PartyCasino. 

The FTSE 100 index constituent is tax resident in the UK with licenses in over 40 regulated or regulating markets. It also operates in the USA via a 50/50 joint venture with MGM Resorts International (NYSE:MGM) under the BetMGM brand. 

For a round-up of this latest trading update announced on 25 September, please click here

ii view:

Formerly known as GVC Holdings, Entain today employs over 23,000 people. During its last full financial year, the UK generated its biggest slug of sales at almost a half, followed by Italy and Australia each at just over a tenth, the balance of Europe at close to a quarter, and the rest of the world at just under a tenth. Group competitors include Paddy Power owner Flutter Entertainment (LSE:FLTR) and William Hill owner 888 Holdings (LSE:888)

For investors, adverse sports results hindering margins, as most recently seen, remain an ever-present threat. The implementation of safer gambling measures to help tackle problem gambling and the continued possibility of tighter government regulations, particularly in the UK, should not be ignored. A cost-of-living crisis globally is likely pressuring Entain's customers available free cash to use for gambling, while the industry arguably presents an easier political target for possible future government tax increases than many others. 

More favourably, a diversity of brand names, products, and geographical markets are held, including its joint venture in the US. Management self-help actions including likely cost savings are expected to be announced at its Q3 trading update on 2 November. Bolt-on acquisitions have remained ongoing including its previous move into Croatia, possible future industry consolidation cannot be ruled out, while a forecast dividend yield in the region of 2% compares well to rivals.  

Risk takers may try their luck picking the bottom of the market for Entain shares, betting that the selling has been overdone. However, that's a gamble, and more cautious investors will likely keep their powder dry, especially ahead of November's trading update.

Positives: 

  • Diversity of business type and geographical locations
  • Exposure to the USA

Negatives:

  • Uncertain consumer outlook
  • Potential for increased regulation

The average rating of stock market analysts:

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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