William Hill, a firm favorite

UK bookmakers like William Hill and Ladbrokes have one big thing going for them which most companies would love to have, an almost captive consumer.  Gambling is a habit that a little like smoking is hard to shake once it gets you. William Hill would qualify as a sin stock, a little like tobacco and defense companies, it may not be to everyone's investment taste because of its business model, but there is money to be made from gambling.

On Friday, the company got the green light to start operating in the the US.

After being awarded the gambling licence, Hill will go ahead with the $55m (£35m) acquisitions of three sports books businesses: American Wagering, Brandywine Bookmaking and Cal Neva, which it announced some time ago. 

This will see William Hill running roughly two-thirds of the 180 bookies within Las Vegas casinos. They will be rebranded William Hill over time and the group has also applied for an online gambling licence. 

Ralph Topping, chief executive, said: "We are delighted to have been awarded our licence to operate in Nevada. This now enables us to establish William Hill's first-ever US operation."

 http://www.independent.co.uk/news/business/news/william-hill-wins-nevada-licence-7876685.html

The US is an important market for a company like William Hill to get into, in part because despite the country being seen as a land of risk taking and free enterprise, gambling seems to be frowned upon.  US law, as can be seen in recent actions against online poker sites, was and is pretty strict when it comes to gambling.  This might seem strange coming from the country where stock trading on Wall Street often looks like gambling, but quite a few individuals and businesses have found themselves on the wrong side of US gaming laws in recent years.  William Hill now has a foothold.

Even better for William Hill is that despite 4-5 years of austerity in the UK, their home market has held up quite well and only recently has this been reflected in the share price.

UK Pre-tax Profits

2008   £293.3 million
2009   £120.9 million
2010   £193.3 million
2011   £187.4 million

Dividend Yield

2008   5.1%
2009   3.9%
2010   4.8%
2011   5.1%

Dividend cover is currently at 2.5.

Liabilities are also heading in the right direction.

2008   £1478.30 million
2009   £1094.10 million
2010     £972.60 million
2011     £908.70 million

Current net assets, £899.60 million.  Five years ago net assets were listed at approximately £233 million against total liabilities of almost £1500.00 million.

Its clear that William Hill is heading in the right direction, but it has had a good run recently, the share price being around 180p last December, 279p at time of writing.  Back in 2007 it almost got to 700p peaking out at around 670p. There may be a better buying opportunity ahead although the share price has held up quite strong despite the market volatility of recent months.  The company is one to watch, most gamblers would probably be better off buying into this than having a bet on the horses or football.

Data from DigitalLook