Report backs companies adapting to new landscape

Report backs companies adapting to new landscape

Tuesday, September 1, 2015 Totally Gaming
It has been "an exciting year" for the gambling sector, according to Shares Magazine

Shares Magazine has tipped 32Red, GVC, Ladbrokes and Playtech as four companies to watch in its Gambling Sector Report.

The investment publication chose to focus on the gaming sector in response to the consolidation that has taken place throughout 2015, as well as looking at the effect of changes to technology and market trends.

In particular, it pinpointed 32Red for its “strong growth and cash generation”, bwin.party suitor GVC for its “highly attractive dividend yield”, Ladbrokes for its “long-term turnaround potential and bombed out share price” and Playtech because “it is expanding into new markets”.

“2015 is turning out to be an exciting year for gambling stocks,” said the report. “New taxes and regulations introduced at the end of last year have created an acquisition battlefield with companies racing to gain scale in an increasingly competitive market.

“The industry has also seen a huge shift in the number of customers turning their backs on traditional high street bookies in favour of online gambling, which is private, more convenient and better suited to today's smartphone generation.

“Gambling companies aren't for everyone but there are several stocks which we think deserve consideration.”

The report backs Ladbrokes’ “aggressive growth plans” including the possible merger with Gala Coral, while Playtech was praised for the purchases of Plus500 and AvaTrade which “give it a strong foothold in the rapidly growing direct-to-consumer online CFD market, further diversifying the business”.

32Red was seen as being established enough to snap up weaker rivals struggling to afford the UK’s Point of Consumption Tax, and added that “the £58m (€79.1m/$88.9m) cap is highly cash generative and it's using this to increase its marketing spend, pay dividends and make acquisitions”.

The report also backed GVC, regardless of whether the Sportingbet owner is successful in beating 888 in the battle to buy bwin.party.

“Even if GVC doesn't win the bid for Bwin we think the stock would be a good portfolio addition for income-seeking investors,” the report said. “It yields 8.2 per cent, which makes it one of the highest yielding dividend payers on the AIM market.”

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