William Hill, Ladbrokes and 32Red, where next?

It's been a while since I looked at the UK gambling sector (for anyone interested in previous posts click on the labels below) and it seems to be a sector that continues to recover, although some companies appear to be hotter and more in favour than others. I came across this analysis today that is worth a read and it does save me the time of going into the fundamentals.

http://bulmerinvestments.com/betting-on-gamblers/

It covers William Hill, Ladbrokes and AIM tiddler 32Red, which was flagged up here some time ago as one of the few potential smaller company takeover targets left in the sector. Naked Trader Robbie Burns seems to have bought it with a view to holding it in the hope of a takeover at some stage.

These three can actually be compared to a three horse race, William Hill being the class of the field, Ladbrokes, the underachiever who promised so much but has failed to deliver and 32Red a complete outsider with bags of potential. Bookies would probably have William Hill as the odds on favorite, with Ladbrokes and 32Red vying for some long shot money.

William Hill's recovery in the last couple of years seems to go on and on. The share price is now heading towards 500p and there is a lot of good news and expectation in that price going forward. They are no longer cheap and it would be easy to imagine a bad set of results hitting the share price hard, but so far the company has delivered.

Ladbrokes is the opposite.  They have everything to prove and will hope that their deal with Playtech leads to an improved bottom line from their online offering. If they are finally putting things right then compared to William Hill they are cheap. The article above makes a case for the upside if Ladbrokes has finally got its act together.

32Red has the attraction of perhaps being an eventual takeover bid from one of the bigger players. In the meantime it is a decent company in its own right and from next Monday as an AIM share it can be put in an ISA. It's more of a gamble than the other two, but if it attracts the interest of a bigger player it won't be sold for its current forward P/E of around 10.

William Hill gallops into the FTSE100

The pending merger between Xstrata and Glencore has left a space for a new entrant to the FTSE100 and William Hill after some pretty impressive momentum in the last 6-9 months sneaked up to take it on the line. Trouble is, it is another momentum stock with stretched fundamentals now joining the 100. A year or so ago it had an impressive dividend yield of over 4% which is now around 2.5%.

Meanwhile, Ladbrokes has raided William Hill to fill a position where they are playing catch up with their FTSE100 rival.

British bookmaker Ladbrokes has hired Jim Mullen from William Hill to run its online operations as it tries to make up lost ground on its larger rival in the sector.

Ladbrokes' attempts to galvanise its digital business are borrowing heavily from the success enjoyed by market leader William Hill, which entered the FTSE 100 index of leading companies on Wednesday.

Mullen will have the title of director, digital when he starts work in November, Ladbrokes said on Wednesday. He worked as chief operating officer at William Hill's online operations.

Ladbrokes has formed a partnership with software developer Playtech to develop its online business, a fast expanding part of the gambling market. The companies launched a digital marketing services operation on Wednesday, to be based in the Israeli city of Tel Aviv.

http://au.news.yahoo.com/technology/news/article/-/16967171/ladbrokes-recruits-william-hill-man-to-run-digital-unit/

The Week Ahead 2 - 22nd to 26th April 2013

The week ahead.

Data:

22nd April 

EU Consumer Confidence Indicator 

23rd April 

US House Price Index 
US New Homes Sales 

25th April 

UK GDP (Preliminary) 
US Bloomberg Consumer Confidence
US Continuing Claims   
US Initial Jobless Claims 

26th April 

US GDP (Advance)  
EU M3 Money Supply  
US Personal Consumption Expenditures, Income, Spending  
US U. of Michigan Confidence 

Company Announcements

24th April 

Finals - Home Retail Group. Been going well recently but the fundamentals are looking quite generous for a retailer. Will be interesting to see what effect if any the March/April winter weather has had on business. Note - my mistake this result is due next week.

Finals - Brown N Group. I first mentioned Brown in this post, Retailers Under The Cosh as one to watch in the FTSE250, potential takeover target and probably undervalued. Back then it was around 242p, today 420p as of Friday's close. Be interesting to see if it can maintain this momentum once it announces its finals. Didn't give anything away back in March as to what to expect.

25th April 

Interim Management statement - Playtech. Has done well lately out of doing business with William Hill and has also recently agreed a deal with Ladbrokes.

Markets and charts

William Hill delivers the knockout punch?

There couldn't be a bigger contrast in market sentiment in action than comparing today's response to William Hill's results with Ladbrokes downbeat report delivered on Monday.  As of writing the company is up around 5% on the back of its statement, so has William Hill delivered a knockout blow to its rival?

In fact, reports suggest that William Hill are seeing moderating growth, yet the market still seems to like what it sees. However, when it comes to presentation it would appear that William Hill knows better than Ladbrokes how to hide any bad news in its statement as can be seen by what it reported about its Cheltenham results.

Cheltenham results were not as good for us this year but just after the quarter end, Auroras Encore made the Grand National a major success for William Hill, even beating our record win achieved on the race in 2009 when Mon Mome romped home at 100-1. Both of these big meetings proved to be significant attractions for mobile bettors. Our app was downloaded 45,000 times on Grand National day and 51,000 times during the Cheltenham Festival, putting us at the top of the downloads league for both events.

http://www.digitallook.com/news/rns/20838794-14283/WMH-Q1_Interim_Management_Statement_html?ac=,&username=,

Note how the bad Cheltenham results are glossed over by mentioning the Grand National success and the continued growth in digital players. Ladbrokes made no mention of any improvement in trading after Cheltenham, although surely they did well out of the National meeting as well? Ladbrokes statement left enough to doubt that going forward the company is still struggling, whereas William Hill are now seeing the benefits of its investment online, takeover of Sportingbet and relationship with Playtech. Judging by the two statements released this week, Ladbrokes could learn a lesson to be more upbeat about future prospects, unless of course it really is bad.

Going forward William Hill seems to be projected highly on growth company numbers compared to rival Ladbrokes, which increasingly looks like a value play. Of the two its the latter that has more potential upside, assuming of course that management has got it right on the recovery plan that they have.

Here's the numbers before today;

Online shopping - don't get left behind, a lesson some struggle to learn

There has been much written about the growth of online shopping and the effect that this has been having on the High Street. In the UK companies like HMV have seriously suffered from most of its products now being offered either cheaper online or simply in the form of a new technology that makes the old way of doing things, selling a physical product, almost defunct.  HMV is now in a serious battle to survive, which to a large degree is down to its own failure to adapt to change earlier.

In the gaming sector, companies like William Hill have stolen a march on rival Ladbrokes, with its involvement with Playtech and takeover of Sportingbet in order to enhance its online offer. Ladbrokes, turning down the opportunity to buy Sportingbet itself got left behind, it's web presence being seen as inferior, something it has now resolved to put right, the latest being a deal with Betdaq.

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/9786343/Ladbrokes-nears-deal-with-Betdaq.html

Yet despite all the evidence of the importance of an online presence, some companies still seem to think that they can get by without it. It's even more amazing when the company happens to be in the FTSE100 and is still largely sitting on the sidelines while its competitors are enjoying massive online growth.

So, let's talk about WM Morrison.