Ladbrokes owner Entain PLC (LSE:ENT) could still be in the sights of US partner MGM Resorts International (NSX:MGM), according to industry experts.
The FTSE 100-listed bookmaker published results on Thursday that hit the top end of guidance, which disappointed markets and led to the shares falling almost 4% by lunchtime.
Having risen more than 50% over the past three years, shares in the group are now down around 15% since the boss of MGM last month ruled out a bid.
This morning, after collating the views of a number of executives in the gambling space, Lara Martinez, analyst at Third Bridge said they "suspect MGM might still harbour some interest in acquiring Entain but it will be waiting on the UK’s White Paper before making a decision".
A white paper outlining proposals to shake up the UK gambling regulations, which was promised by the government in December 2020 but has been much-postponed, could be published by Easter, according to the new culture secretary.
She added that Entain has been "facing mounting investor pressure" as well as rising player protection regulations in Europe, meaning the business opportunity in America "looks much brighter".
Entain and MGM's 50-50 joint venture, BetMGM, increased net gaming revenue 781% to US$1.4bn (£1.2bn) out of the group total of £4.35bn last year and a contribution to net income of a £194mln loss.
For the current year, guidance is for the JV to generate NGR of US$1.8-2bn.
With profitability achieved in several states, Entain said this morning that BetMGM is expected to be EBITDA-positive in the second half of 2023, with a long term target EBITDA margin of 30-35%.
In the most recent quarter BetMGM had an 18% market share of gross gaming revenue in the sports betting and iGaming markets and has a current iGaming market share of 29% and Entain said the JV is "on track" for an expected market share of 20-25% over the long term.
Last week, rival Flutter Entertainment PLC (LSE:FLTR) said its US business, FanDuel, had an iGaming market share of 21% and a fourth-quarter online sportsbook market share of 50%.
At the end of January, 33 states and the District of Columbia had so far made sports betting legal and were operational.
Looking at the next catalysts in the US, Nebraska and Maine are likely to go live by the second half of 2023, with Georgia, Kentucky, and Minnesota also possibilities, but Martinez said Missouri and North Carolina "could stall".
This could deliver 15-20% growth in the total addressable market, she said.
Analyst Greg Johnson at Shore Capital said reaching profitability this year and moving towards a sustainable margin are "key catalysts" to the Entain investment case.
Valuation-wise, at the last closing price of 1,380p, Johnson estimates the market is discounting an implied 2023 forecast EBITDA multiple of 7-8x for “core” Entain and circa 3x NGR for BetMGM.
"To put the BetMGM valuation into context, Draftkings trades on 3x FY23F NGR (despite being materially loss making), Fanduel at 5x (based on circa 9x Flutter EBITDA ex-US) and 4x NGR arguably more applicable on steady-state market basis."
Valuing “core” Entain at 8-9x EBITDA and BetMGM at 4x NGR "would equate to fair value of over £18/share, which we would see as a base to build from", he said.