weaker prospects for online gaming

Entain - weaker prospects for online gaming

No recommendation

No news or research item is a personal recommendation to trade. All investments can go down as well as up in value, so you may get back less than you put in.

Net income from games of chance increased by 18% in the first half. That reflected a 7% drop in Online as shoppers returned to stores after periods of lockdown last year. The weaker environment in online gaming meant customer spend rates fell and sports betting fell 3%, contributing to a drop in guidance. Online net gaming revenues are now expected to remain flat, compared to previous expectations of a mid-single digit increase.

Retail sales grew nearly 3.5 times faster than expected due to the store reopening. Strong performance in gaming and self-service gambling terminals pushed volumes in the second quarter above pre-pandemic levels.

Betting that MGM, the joint venture with MGM in the US, is on track for net gaming revenue of $1.3 billion this year and has a 24% market share.

After the announcement, the stock fell by 6.0%.

Check out the latest Entain share price and how to trade

Our view

HL Watch to follow.

Sign up for updates on Entain

Acquisition (June 14, 2022)

Entain has announced the acquisition of BetCity, one of the leading online sports and gaming providers in the Netherlands. The deal is expected to cost €300 million in cash on completion, plus up to €550 million in further performance-related payments.

The deal is expected to close in the second half of 2022 and should deliver approximately €28 million in cost savings by the end of 2026. Entain expects to fund the deal with cash, plus a portion of available credit.

Entain CEO, Jette Nygaard-Andersen, said: ”This acquisition will provide an even better experience for customers as we combine BetCity’s local expertise and brand with Entain’s market-leading, customer-centric platform. This transaction further supports our growth strategy to operate in attractive regulated markets.”

Trading Statement (all figures in constant currency, April 7, 2022)

Entain reported a 34% increase in Group Net Gaming Revenue (NGR) in the first quarter, excluding the effect of currency movements. The return of customers to stores helped Retail return within 5-10% of pre-covid levels. That helped offset a decline in the online NGR as the division had exceptional demand last year.

BetMGM, the US joint venture, now operates in 23 markets and remains on track to deliver positive cash gains (EBITDA) by 2023.

CEO, Jette Nygaard-Andersen, said: ”Given the strength and continued momentum of our underlying businesses, coupled with our proven ability to grow both organically and through M&A, we remain confident in our financial performance for FY22 and after that.”

Online net gaming revenue (NGR) decreased by 6%. That reflected lower volumes in Sports, with stakes down 4% and Gaming down 9%. These were expected declines as some of last year’s demand returned to stores. Over a period of 3 years, online NGR has grown at an annualized rate of 14% per year.

Retailers benefited from the reopening of stores with reduced restrictions, with performance within easy reach of pre-covid levels, despite a smaller retail area. The group had an average of 4,333 stores in the period, compared to 4,662 the year before.

BetMGM remains the second largest operator in the US with a 24% market share in the territories in which it operates. The company has the number one status for iGaming, with a market share of 29%.

The group completed 3 acquisitions over the period, Avid Gaming, Klondaika and Totolotek giving exposure to Canada, Latvia and Poland.

Remember important facts

  • Forward price/earnings ratio: 12.7
  • Ten-year average price/earnings ratio: 12.6
  • Expected dividend yield (next 12 months): 2.4%

All proportions are from Refinitiv. Keep in mind that returns are variable and not a reliable indicator of future earnings. Keep in mind that key figures should not be looked at in isolation – it is important to understand the big picture.

Learn more about Entain stocks, including how to invest

This article is original content from Hargreaves Lansdown, published by Hargreaves Lansdown. Unless otherwise stated, estimates, including expected returns, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so that investors can make a loss.

This article is not advice or recommendation to buy, sell or hold any investment. No opinion is made as to the current or future value or price of any investment and investors should form their own opinion on any proposed investment. This article has not been prepared in accordance with legal requirements to promote the independence of investment research and is considered a marketing communication. Non-Independent Investigation is not subject to FCA rules prohibiting pre-examination trade, but HL has put in place controls (including trade restrictions, physical and information barriers) to manage potential conflicts of interest created by such trade. See our full non-independent research For more information.

Leave a Comment