Broker Round-up: William Hill, Ladbrokes, Next, Sports Direct, Greggs, ITV, BG …


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William Hill (LON:WMH) emerged as the winner in UBS’s round-up of British bookmakers after the Swiss broker warned that competition is hotting up in the betting sector.

A new law means those based in tax havens such as Gibraltar and Malta will no longer be immune to taxes, but UBS reckons this is already being accounted for by the market.

It thinks as competition ramps up, the race will be won by the company which manages to harness the rapid growth that is being seen in the mobile space.

“The online gambling industry is set to become increasingly competitive as we head towards the introduction off the tax, with more TV advertising and free bets,” the broker said.

“At present, we assume that the bookmakers will absorb the full impact of the tax, but we do see upside risk if affiliates and software suppliers absorb some of the impact to make their own offering more competitive.”

William Hill, up 2% to 388p, was added to UBS’s ‘buy’ list with a higher target price of 450p, prompted by a weak performance from the share price, which UBS thinks was not warranted.

Despite a tough year that saw predictable sports results, UBS said William Hill is “well placed to benefit from the UK recovery”.

Innovations such as ‘cash in my bet’ and ‘bet in play’, as well as marketing opportunities including push notifications to mobile devices, will help sustain the growth in the broker’s view.

Finally, it pointed out that the “strength and usability” of the sportsbook will help it pick up plenty of new punters during next year’s World Cup in Brazil.

The broker is also a fan of Playtech (LON:PTEC), having kicked off coverage of the betting software group with a ‘buy’ rating and 820p target price (currently 694p).

It sees Playtech’s high growth rate continuing driven by the spread of industry regulation, supporting geographical expansion, the potential to cross-sell more games to existing customers, and the potential of the mobile gaming market in emerging markets.

It is not time to play Ladbrokes (LON:LAD) yet though, UBS added.

It has a ‘neutral’ stance and 180p target, which is slightly higher than before. UBS does not think the chances of a leveraged buyout are very high at the moment due to the industry changes, operational challenges and the recent tie-up with Playtech.

Next (LON:NXT) topped the FTSE 100 leaderboard on Tuesday after Oriel Securities gave investors something to cheer with an upgrade to ‘buy’.

The clothing retailer’s stock can still rise some way yet in Oriel’s opinion.

International online sales are set to double in the next two years, which could see the shares climb as high as 6,200p from their current levels of 5,535p, up 135p on the day.

A bullish note on the retail sector lifted Sports Direct (LON:SPD) towards the summit of the benchmark index with the stock boosted by an 850p target price by Liberum Capital.

Mike Ashley’s sporting goods retailer is joined by designer men’s label Ted Baker (LON:TED) and kitchen supplier Howden Joinery (LON:HWDN) on the top ranking stocks on Liberum’s ‘buy’ list, joined by Halfords (LON:HFD) and Greggs (LON:GRG) as recovery plays.

The broker is seemingly also a fan of the media sector, slapping buy tags on free-to-air broadcasters ITV (LON:ITV) and STV (LON:STV), advertising giant WPP (LON:WPP), and publishing heavyweights Trinity Mirror (LON:TNI) and Daily Mail (LON:DMGT).

BG Group (LON:BG.) is another which merits Liberum’s top ranking after being upgraded from ‘hold’.

The broker is anticipating a return to growth in 2014, lifting its target price to 1,475p to reflect growth rather than asset values.

Elsewhere, RBC Capital still likes the look of Aberdeen Asset Management (LON:ADN) after the SWIP deal, while Oriel started covering medical devices specialist Medgenics (LON:MEDG) with a ‘buy’ recommendation.

BAE Systems (LON:BAE) has convinced RBC to remove its ‘underperform’ stance with a higher target of 450p, while SpeedyHire (LON:SDY) is now a ‘sell’ on Cantor Fitzgerald’s books.

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