Proactive Investors - Run By Investors For Investors

Numbers come up for William Hill, GVC and Paddy Power as brokers turn positive on bookies

In a note, analysts at Shore Capital upgraded William Hill to a 'buy', saying 2019 would be the "nadir" of its earnings
Both Shore Capital and Jefferies said the three firms also had catalysts in the US market

Blue-chip bookmakers William Hill PLC (LON:WMH), GVC Holdings PLC (LON:GVC), and Paddy Power Betfair PLC (LON:PPB) received a boost on Monday as multiple brokers turned positive with upgrades and initiations.

In a note to clients, analysts at Shore Capital upgraded FTSE 250 William Hill to a ‘buy’ from ‘hold’, saying they expected 2019 to be the “nadir” of earnings for the firm as its underlying profits continued to grow, supported by its acquisition of Swedish gaming company Mr Green & Co and a proposed reshaping of the UK retail offering.

READ: William Hill blames UK high street as annual profits plunge

The broker also said that the group had seen “an encouraging start to US sports betting” and that the opportunity in the market “outweighs regulatory risk”.

The sentiment was echoed by broker Jefferies, which initiated William Hill at a ‘buy’ with a 230p price target on the grounds that the increased visibility of the US sports betting partnership was a “re-rating catalyst”.

Jefferies’ analysts added that the “financial pain” would hit in 2019 and 2020, although this was now largely reflected in consensus estimates for the firm.

In a trading statement in January, William Hill said it would “remodel” its in-store offering after blaming a decline in footfall on Britain’s high streets for a 15% slump in annual profits.

The firm has also moved into the US to seek growth opportunities, signing a partnership deal last year with multi-billion-dollar casino chain Eldorado Resorts.

Jefferies also initiated bookies GVC and Paddy Power Betfair with ‘buy’ ratings as analysts saw re-ratings now that a “regulation-driven downgrade cycle” was largely complete.

For GVC, which was also pegged with a 1,100p target price, Jefferies said the FTSE 100 firm was “well placed to take advantage of Online gaming growth” while its joint venture with Las Vegas casino operator MGM Resorts International (NYSE:MGM) “should position GVC well to exploit the legalisation of sports betting in the USA”.

READ: GVC jumps as 2018 update comes in ahead of expectations

“We think the share price fall through 2H18 reflects regulatory-driven downgrades which we believe are now mostly complete. Benefits from recent corporate activity should partially offset regulatory headwinds,” analysts said, adding that the recent share price decline meant the valuation was “too low”.

Meanwhile, Paddy Power was given a 7,900p price target as the broker said the group had “a broad spread of leading positions, both online and retail, in regulated gambling markets”.

READ: Paddy Power Betfair moves into Georgian online betting market with acquisition of Adjarabet

The company was also suffering from a low valuation following a share price decline, Jefferies said, adding that there was currently “little value attributed to the US upside”, more specifically a deal to merge Paddy’s US operation with fantasy sports firm FanDuel in May.

In late-morning trading Monday, William Hill shares were up 0.3% at 180.7p, while GVC was down 0.15% at 663.5p and Paddy Power was up 0.5% at 6,410p.

View full WMH profile View Profile

William Hill PLC Timeline

Related Articles

Oil pollution
July 02 2018
A name change might be in order if PCG pulls the trigger on two investments it is mulling
Theme Park
March 28 2019
Canaccord Genuity upgraded its rating for accesso to ‘buy’ from hold’ following the e-ticketing and guest experience firm’s recent full-year 2018 results

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use