Entain valuation still attractive despite weak Q3, says Shore Capital

Entain, which owns brands like Ladbrokes, Coral and Sportingbet, said on Monday that pro forma net gaming revenues (NGR) are expected to be down by a "high single digit percent" in the third quarter due to adverse sporting results, regulatory headwinds and a slower-than-expected performance in Australia and Italy.

Shore Capital analyst Greg Johnson said he had been forecasting flat to modest growth in the quarter.

As a result, Entain said full-year online NGR would be see a "low single digit percent" decline, compared with earlier guidance of "low to mid single digit" growth. However, the company maintained its full-year EBITDA guidance of £1.0-1.05bn.

"We see a better than anticipated performance from Retail and acquisitions supporting this, although we question at this stagethe assumed Q4 performance and whether profit performance is also being supported by reduced marketing and investment, which would impact growth further out," Johnson said.

Nevertheless, Johnson said that valuation metrics still support his 'buy' stance on the stock: as of Friday's close, the stock was trading at 6-7 times 2023 EBITDA forecasts for the core platform, and 2-3 times NGR for BetMGM.

"Both valuation metrics are low compared to peers. [...]. Today is clearly disappointing in this journey although the implied sum-of-the-parts valuation remains attractive in our view."

The stock was down 8% at 975p by 1038 BST.