GVC Holdings Plc

GVC Holdings Plc (LON: GVC) is an FTSE 100-listed sports-betting and gaming Group. The Company is one of the largest sports betting and gaming Group in the world.

On 16 July 2020, the Company will release the H1 FY20 trading update.

Recent News

On 8 July 2020, the Group announced the second round of investment along with MGM Resorts International. Total investment has surged to US$450 million. ROAR, being traded as BetMGM and owned jointly by MGM Resorts International (MGM Resorts) and GVC Holdings (GVC). The increase in the second round of investment follows GVC’s and MGM Resorts’ total initial commitment of US$200 million and underpins their commitment to BetMGM becoming a leading player in the hastily growing iGaming and US sports betting markets. It is well-positioned to operate in 11 states in the United States by the end of 2020.

Q1 Trading Update (for the period from 1 January to 31 March 2020, as on 6 April 2020)

The Group has started the year 2020 well, with a surge in Online NGR (net gaming revenue) of 19% (driven by robust growth in all major territories), and Group NGR of 1% at a constant currency basis in the first quarter of 2020. In the period 1 January to 15 March 2020, mostly all division had performed well, supported by favourable sports margins. GVC anticipated that the cancellation of sports events and closure of retail outlets would result in a decrease in EBITDA of approximately £100 million per month before any mitigating actions. However, in GVC's gaming division, there would be a modest increase.

Share Price Performance


1-Year Chart as on July-09-2020, after the market close (Source: Refinitiv, Thomson Reuters)

GVC Holdings Plc’s shares closed at GBX 834.80 on 9 July 2020, up by 3.09% against the last day closing price. Stock 52 week High and Low were GBX 956.80 and GBX 292.70, respectively.

From the technical standpoint, shares were trading well above the short-term support level of 50-day simple moving average prices, which reflects an upward trend in the stock. The MACD indicator reading above the line of polarity with positive sentiments.

Valuation Methodology



Key Risks

The loss of personal customer data imposed the risk of prosecution. Moreover, there can be a material adverse effect on the amount of tax payable by the Company if additional taxes are levied by concerned authorities, thereby increasing the cost of the product.

Conclusion

The Company has shown an increase in financial performance for the first quarter of 2020, with an increase in total Group NGR of 1%. In the medium term, the Group is targeting double-digit revenue growth from the online business through underlying market growth and M&A activity. The Group is looking forward to international expansion through organic and non-organic growth.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing market price of GBX 834.80 (as on 9 July 2020) and will recommend fresh buying at the right time.

Ten Entertainment Group Plc – Operating with Strong Balance Sheet

FTSE All-Share listed Ten Entertainment Group Plc (LON: TEG) is a Bedford, United Kingdom-based tenpin bowling operator.

Financial Highlights (or the 52 weeks to 29 December 2019, as on 13 May 2020)


(Source: Company Website)

The Group reflected consistent growth (with an eighth consecutive year of like-for-like growth), showing terrific momentum and a great start to 2020. In FY19, the total sales increased by 10.2% to £84.1 million as compared with the previous year. Group’s adjusted EBITDA surged by 14.7% to £23.6 million (FY18: £20.6 million). Earnings per share climbed by 11% to 13.9 pence against the previous year (FY19: 12.5 pence).

Trading in the first eleven weeks of the year to 15 March 2020 was robust with total sales growth of 12.7% and like-for-like sales growth of 9.3%. The Group has a strong balance sheet with £21 million of cash and financing facility available.

Share Price Performance

1-Year Chart as on July-09-2020, after the market close (Source: Refinitiv, Thomson Reuters)

Ten Entertainment Group Plc’s shares closed at GBX 151.00 on 9 July 2020, down by 3.06% against the last day closing price. Stock 52 week High and Low were GBX 339.00 and GBX 110.00, respectively.

From the technical standpoint, 14-day RSI is currently in an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Valuation Methodology



Key Risks

The uncertainty about macroeconomic factors and change in consumer disposable income might impact the share of income which consumers would spend over leisure activities. Furthermore, the increased profile of the Covid-19 virus in recent months has been impacting the staff and customer base or restricting the ability to trade.

Conclusion
The Group is financially well positioned at a low level of gearing with a healthy balance sheet and also delivered an eighth consecutive year of like-for-like growth. The Company’s pipeline of new site opportunities continues to increase with acquisitions and new developments. The prospects are robust, with a clear ability to sustain a prolonged period of closure.

Moreover, the Company is well-positioned to operate in the “new normal” post Covid-19 UK scenario. The Group has a detailed reopening plan to ensure that the business operates smoothly. Overall, the Company is in a strong financial position with low debt and sufficient cash generation to self-fund the plans for growth.

Based on the decent prospects and supported by valuation done using the above method, we have given a “Speculative Buy" recommendation at the closing market price of GBX 151.00 (as on 9 July 2020) with lower double-digit upside potential, based on 2.50 EV/NTM Sales multiple (approx.) on FY20E sales (approx.).
 
*Dividend Yield may vary as per the stock price movement.
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.
* The “Speculative Buy” recommendation is valid for the current price as covered in the report as on 10 July 2020.

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