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William Hill upped to ‘outperform’ as RBC says stock offers ‘largest upside’ but also highest risk

The Canadian bank said the bookmaker had enough liquidity to "withstand 1 year of disruption" caused by the coronavirus pandemic

William Hill PLC - William Hill upped to ‘outperform’ as RBC says stock offers ‘largest upside’ but also highest risk

William Hill PLC (LON:WMH) has been upgraded to ‘outperform’ from ‘sector perform’ by analysts at RBC, who said the bookmaker offered the “largest upside” among the UK’s major gambling firms but also the “largest risk”.

In a note on Thursday, the Canadian bank said the FTSE 250 group has “enough liquidity to withstand 1 year of disruption pre any mitigating measures and 2 years of disruption with mitigation”, and that despite the shares having fallen due to concerns over its financial gearing and lending covenants, they believed banks were “likely to be flexible around corporates which are otherwise financially sound, given the unexpected nature of [coronavirus]”.

READ: William Hill picks up key execs from National Express and Flutter

However, the bank also reduced its target price for William Hill to 135p from 220p, adding that in the current environment they preferred Paddy Power owner Flutter Entertainment PLC (LON:FLTR) due to its “lower balance sheet risk and also lower exposure to the regulatory pressures in the UK”.

“Having said that, we reiterate our view that the gambling sub-segment is the best positioned with the wider Leisure sector and we believe this sell-off is an attractive opportunity to buy a basket of the stocks to benefit from the structural growth opportunity in the gambling industry – led by the nascent US opportunity”, RBC added.

Shares in Willian Hill rose 8.8% to 102.8p in mid-morning trading on Thursday.

Quick facts: William Hill PLC

Price: 149.2 GBX

LSE:WMH
Market: LSE
Market Cap: £1.3 billion
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