Entain Draws Analyst Praise, Seen as Top 2021 UK Takeover Target

Posted on: September 7, 2021, 11:48h. 

Last updated on: September 7, 2021, 02:43h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Entain Plc (OTC:GMVHY), the owner of the Coral and Ladbrokes betting shops, is earning positive reviews from some sell-side analysts and continues to be viewed as a prime takeover target.

Entain takeover
Entain CEO Jette Nygaard-Andersen, seen above. Analysts love the stock and some believe the company is still a takeover target. (Image: The Guardian)

In a note to clients today, Jefferies analyst James Wheatcroft reiterates a “buy” rating on the UK-based gaming company, while boosting his 2021 earnings before interest, taxes, depreciation and amortization (EBITDA) forecasts on the name by seven percent.

The analyst adds that Entain, half owner of the BetMGM business, is compelling on a standalone basis and attractively valued relative to peers. Wheatcroft’s bullishness on the stock is the result of double-digit growth in online gaming, in-house technology, and US catalysts from the fast-growing BetMGM business.

At its investor day last month, Entain said it believes North American internet casinos and online sports wagering markets could be worth $32 billion in the coming years. It adds that BetMGM is targeting a market share of 20 percent to 25 percent.

Entain Still Takeover Target

In January, MGM Resorts International (NYSE:MGM), Entain’s partner on the BetMGM unit, made an $11.06 billion takeover offer for the PartyPoker owner, which the target ultimately rebuffed.

However, rumors regarding this potential marriage didn’t die down. They remain persistent, with some analysts saying it’s simply a matter of time before MGM brings forth another offer. Not only are UK equities considered inexpensive, which alone could trigger a fresh round of mergers and acquisitions activity across all industries, but a recent survey of Bloomberg terminal subscribers — primarily professional investors — indicates Entain is viewed as the most likely UK takeover target for 2021.

When MGM made its all-stock offer for Entain in January, the British company’s US-listed shares traded around $19. Today, the stock is flirting with $27, indicating a new pitch from MGM would certainly need to be higher than the one previously rejected.

Owing to the rapid growth of BetMGM, the casino operator could be compelled to up its offer, because it may be tired of sharing the economics of that business with Entain. Additionally, while Entain’s share price is soaring, so is MGM’s cash position. Plus, the operator has other avenues for more financing, should it opt to make another run at Entain.

Entain OK on its Own

Formerly GVC Holdings, Entain, and its stock could be just fine even if MGM or another suitor doesn’t make an offer.

Entain would still control half of BetMGM, it enjoys an enviable market share in mature sports betting regions, including Australia, the Eurozone and the UK, and CEO Jette Nygaard-Andersen is widely viewed as one of the savviest executives in the industry.

She’s pursuing avenues for Entain to create shareholder value as a standalone entity, including the recent acquisition of Unikrn Esports, which puts the operator into the fast-growing esports space.