UK sports betting blue chip Entain PLC (LSE:ENT)’s acquisition of Polish betting leader STS for a total £750mln cash and equity consideration is a “sensible strategic move”, according to analysts at Shore Capital Markets.
Shore Cap noted that STS has approximately 40% of the market share in Poland, largely through its online business plus 400 retail outlets.
Earnings-per-share accretion is expected to be limited given the rate of equity dilution baked into the deal, but Shore Cap still sees Entain as a “significantly undervalued stock, especially in regards to its US assets”.
But analysts still struggle to justify the issuing of new shares on what they see as a heavily discounted valuation compared to Entain’s peers, “especially with cash generation expected to improve materially from next year”.
On the positive side, Entain’s acquisition of 365scores and entry into the regulated New Zealand market through a 25-year strategic partnership with TAB New Zealand are expected to generate an additional £50mln of underlying earnings by 2025.
Entain is “ultimately a value opportunity”, said Shore Cap, with the current valuation failing to reflect the favourable structural growth of the global gaming industry.