Entain PLC (LSE:ENT) could return more than half its current market value to shareholders in the form of dividends and buybacks by the end of the decade, according to a note from Shore Capital that points to a sharp rise in cash generation.
The owner of Ladbrokes, Coral, Foxy Bingo and a 50% share of BetMGM is forecast to deliver a “step-change in cash generation", analyst Greg Johnson said, with £500 million targeted annually from 2028, driven by profit growth, contributions from BetMGM and the unwind of its deferred prosecution agreement.
Johnson argued that this shift is underappreciated by the wider market.
“This opportunity, we believe, is yet to be reflected in either forecasts or valuation,” he said, highlighting a potential free cash flow yield of around 14% at current levels.
Operationally, recent trading supports the case. First-quarter online volumes rose 10%, despite weaker sports margins, with revenue growth tracking within full-year guidance of 5-7%.
Cash flow is expected to rise from about £150 million last year to more than £450 million by 2028, helped by the end of DPA payments and growing dividends from BetMGM.
On Shore Cap’s estimates, falling leverage could allow around £2 billion to be returned via dividends and buybacks over the medium term, equivalent to roughly 300p per share.
If the £500 million target is delivered, the broker sees scope for a rerating, noting that even a lower yield could imply a share price closer to £10.