Entain PLC (LSE:ENT) received a boost from its 50% owned joint venture BetMGM after the US business raised its full-year EBITDA guidance on the back of strong trading in the second quarter, but analysts at Shore Capital said they did not feel this was being fully reflected in the FTSE 100 group's valuation.
BetMGM now expects to deliver at least $150 million in EBITDA for the year, up from the previous $100 million target, as first-half revenue rose 35% to $891 million, with the second quarter up 36%.
EBITDA for the half-year swung to a positive $109 million from a $123 million loss in the prior period, attributed to strong revenue growth, improved contribution margin from marketing efficiencies, and operational leverage.
Full-year revenue is now expected to reach at least $2.7 billion, implying around 20% growth in the second half.
Shore Capital said, "From an Entain perspective, we see the EBITDA uplift as equivalent to an incremental circa 3p per share to EPS.
"Importantly, we see the continued momentum as supportive of the medium-term EBITDA target of $500 million (circa 25p per Entain share) and potentially worth circa 500p per share at that juncture." This valuation excluded the prospect of the dividend remaining flat in the coming periods.
Despite the recent rally in the share price, with a 60% rise in the past four months, the analysts said they "do not believe" a headline 2026 forecast p/e ratio in the mid-teens "fairly reflects the ongoing value creation in BetMGM and the underlying momentum across the broader group".
Noting the recent deal by Flutter to buy the remaining 5% of US arm FanDuel at a valuation of 4.5x revenue, the analysts said valuing BetMGM at two times net gaming revenue, equivalent to 320p per Entain share, would value the rump of the business on a p/e ratio of 10x and an EBITDA multiple of 6x.
Shore Cap maintained its 'buy' rating on the shares.