Place your bets. Who is faring best out of Entain PLC (LSE:ENT), owner of Ladbrokes and Coral, and Flutter Entertainment PLC (LSE:FLTR), owner of Paddy Power and Betfair?
Both declare results in the first week of March and the smart betting is that both are doing pretty well in their core markets but it is their activities in the US that will likely garner the most attention.
Citigroup recently said the revenue generated in US states that have legalised online sports betting has been higher than it had anticipated and over the long-term, it is expecting the major players to generate a US EBITDA (underlying earnings) margin of 30%.
“Further, we expect Flutter and Entain's market dominance to continue, while [Swedish competitor] Evolution's product quality should drive its strong US positioning. As a result, the value we ascribe to the US has increased 40%/24%/45% for Entain/Evolution/Flutter, with the US now 38% of the value in our target price for Entain, 20% for Evolution and 50% for Flutter,” the broker said.
Flutter is first out of the traps on Tuesday and analysts are expecting the bookie to report turnover of £5.97bn for 2021, up 35% on 2020, and pre-tax profit of £628mln, up 530%, while underlying earnings are expected to rise 145 to £1.01bn.
“We are forecasting FY21 group revenues of £5,996mln, and group EBITDA ex-US of £1,267mln vs. guidance range of £1.24bn-£1.28bn, and a US EBITDA loss of £267mln vs. guidance range of c£250mln-£275mln,” UBS said.
“We expect the focus to be on the latest developments in the US and the path to profitability there, any potential update on the arbitration process with FOX and the UK’s review of the Gambling Act,” the broker added.
Dividends have been suspended since the dark days of April 2020 when the pandemic caused the cancellation of thousands of sporting events but the time must be fast approaching when the divi will be reinstated.
Entain announces its full-year results on Thursday having already divulged some of its key performance indicators.
“Entain’s already offered a preview of what to expect at the full year, and it looks promising. The group revealed that overall net gaming revenue (NGR) was up 8% for the year, driven by a strong online performance. As that’s a higher-margin part of the business, profits are expected to rise at a faster clip. Management’s guided for underlying cash profits between £875mln and £885mln,” said Hargreaves Lansdown’s Laura Hoy.
“Further growth is expected in online and management’s take on the direction of travel as we exit the pandemic. Online has been a profit driver, so hopefully, some of the lockdown-fuelled demand will stick around now that in-person betting has fully reopened. BetMGM will also be a key segment to watch, CEO Jette Nygaard-Anderson called it out as ‘a particular highlight’, so the market could be expecting big things. The recent acquisition of a Canadian sports betting firm suggests it could be open to planting more flags across North America,” she added.
The market consensus is for revenue of £3.84bn and EBITDA of £877.5mln. Analysts are predicting a dividend of 21.2p.