logo-loader
Retail & consumerLeisure, gaming and gambling
viewRank Group

ShoreCap upgrades Rank to 'buy' as Stride takes digital earnings higher

Casino operator Rank announced agreed 151p per share offer for online bingo specialist Stride last week

bingo
Shore Capital upped its recommendation on Rank to ‘buy’ from ‘hold’

Rank Group PLC’s (LON:RNK) offer for online bingo specialist Stride Gaming PLC (LON:STR) will bring big benefits to the casino operator’s earnings and digital capabilities, said Shore Capital as it upgraded its rating on the shares.

The broker upped its Rank recommendation to ‘buy’ from ‘hold’ as it predicted Friday’s agreed 151p per share offer would effectively double the group's digital revenues, provide “significant synergy benefits” and bring improved technology in-house through Stride’s proprietary platform to support further UK and international growth.

READ: Rank Group confirms around £115mln recommended cash offer for Stride Gaming

Based on ShoreCap’s current pre-Stride estimates, Rank is forecast to generate earnings per share of 14p in the year to June 2019, increasing to 15.8p in the following year thanks to digital growth and the benefits of a current transformation programme.

While Stride has “had a difficult year or so” as the online gaming industry as a whole has dealt with increased compliance and due diligence measures, “the majority of the impact from these compliance measures was in the first calendar quarter” and will “annualise” in future.

Once all of the £13mln identified synergies are in place after three years, Stride is forecast to add circa £15mln to Rank’s PBT, after depreciation, amortisation and interest, boosting EPS by 3p, as well as a highly experienced senior management team who will manage the enlarged digital operation.

“We see this earnings accretion, the remixing of the revenue stream and the opportunity to use acquired technology to accelerate growth, including international, as a catalyst to upgrade,” ShoreCap wrote in Wednesday’s note to clients.

Rank shares were down a penny to 156p on Wednesday.

Quick facts: Rank Group

Price: 212.5 GBX

LSE:RNK
Market: LSE
Market Cap: £830.2 m
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Remote Monitored Systems' Gyrometric hails two significant new contracts for...

David Orton, chief executive of GyroMetric Systems, which is 58% owned by Remote Monitored Systems PLC (LON:RMS), talks Proactive London's Andrew Scott through their 'novel and disruptive' technology which measures the parameters of rotating shafts. The firm's recently entered agreements for...

2 hours, 35 minutes ago

RNS

Trading Statement

10 hours, 16 minutes ago

Acquisition

1 week, 4 days ago

Stride Gaming

2 weeks, 4 days ago

Notice of AGM

2 weeks, 5 days ago

Offer Update

3 weeks, 4 days ago

2 min read