Entain earnings on track alongside takeover bid
ENTAIN, the global sports betting and entertainment group, has confirmed it is still expecting full-year cash profits to come in between £850million and £900million.
The past 18 months saw more people at home with nothing to do, boosting its online gaming businesses – which include Ladbrokes, partypoker and Foxy Bingo. That trend continued in the third quarter, with online net gaming revenue (NGR) up 10 per cent.
Online is the more profitable area for Entain. It doesn’t cost nearly as much to run web games as it does to pay for physical betting shops. That said, a return to in-person gambling is undoubtedly positive. UK volumes in the retail estate are returning to prepandemic levels, with retail NGR rising one per cent in the last quarter.
We saw debt creeping up a couple of months back in the half-year results, owing largely to the group’s acquisitions in Portugal and the Baltic. But it’s not uncomfortably high, and leaves room to squeeze in further acquisition opportunities should they arise.
The biggest area for growth is the joint venture, BetMGM, which is run with casino operator MGM across the pond. It’s estimated the US sports-betting and gaming market will be worth approximately $20.3billion by 2025.
Last week’s update put BetMGM as having a 23 per cent market share.
We suspect this opportunity was a factor behind the takeover bid from US fantasy sports giant DraftKings, which sent Entain’s share price soaring.
The proposal reflects a significant premium to the share price before the offer was announced. Unlike previous attempts to buy the business, Entain management are considering the offer. If talks fall through, the share price reaction could be severe. And until we know anything concrete, investors should think about the core business.
As it stands the prospective yield for the next 12 months is 1.7 per cent.
While deal-making talks rumble on, we think Entain remains in a strong position. But ups and downs are likely in the near term, if things don’t go to plan.
“This article is designed for investors who make their own decisions without advice, if unsure whether an investment is right for you, you should seek advice. Shares can rise and fall in value so you could get back less than you invest.”