Ladbrokes and Coral owner GVC Holdings (GVC) said third-quarter trading was strong across the group, leading management to upgrade full-year earnings expectations. The shares advanced 4.5% to £11 and are within spitting distance of the all-time high of £11.48 reached in July 2018.
GOOD MOMENTUM
Net gaming revenues grew 14% in constant currencies driven by continued strong online trading, up 28% and volumes are now reported to be ahead of pre-Covid-19 levels. Online sports wagers are ‘well-ahead’ of the prior year benefitting from a busy sports schedule.
Market share gains in Australia with online gaming ahead of pre-Covid levels resulted in a 64% increase in net gaming revenues. UK and European stores opened as soon as permitted and volumes have bounced-back to 90% of levels before the closures.
STRONG US PRESENCE
GVC is now live in eight US states where it has achieved a market share of around 17% and continued momentum has prompted management to upgrade its full-year expectations for revenues to be between $150 million and $160 million.
The company estimates the US market to be worth approximately $20.3 billion by 2025 based upon the anticipated number of states going live.
GVC operates in the US through its 50/50 joint venture with BetMGM which has access to 21 states where regulations have been, or are being, enacted, representing some 51% of the eligible US population.
EARNINGS UPGRADE
Continuing momentum has prompted the company to upgrade its full year expectations for EBITDA (earnings before interest, taxes, depreciation and amortisation) by around 7% to between £770 million and £790 million, up from £720 million to £740 million in July.
Current analysts’ consensus forecasts are £737 million according to Refinitiv, suggesting scope for more upgrades over coming weeks. Gregg Johnson at Shore Capital is one such analyst looking to upgrade following today’s update.
Johnson said the implied value of GVC’s stake in BetMGM of $750 million is at a ‘marked discount to recent valuations in the sector, notably William Hill (WMH), and would equate to just 10 times expected full year revenues.’
