William Hill Plc

William Hill Plc (LON: WMH) is a London, United Kingdom-based Company, which is engaged in the gaming and betting business.

The Company will release a trading update on 11 November 2020.

Investment Highlights - William Hill Plc – Expensive at GBX 312.20

• As per valuation metrics, EV/EBITDA, Price/Earnings and Price/Book Value multiples of the William Hill Plc are currently higher as compared to the corresponding multiples of the Hotels & Entertainment Services industry, reflecting overstretched valuations.
• The Company has a Debt/Equity ratio of 1.53x in H1 FY2020, reflecting an increase in the debt in the capital structure, and is ahead of industry median of 1.03x.
• From the technical standpoint, 14-day RSI is currently supporting downward movement (around 90 level – overbought position), which means the stock price could decline in the short term.

Key Risks

• COVID-19 has presented short-term challenges. It mainly causes the risk to footfall in the retail operations in the US and UK.
• The Company’s operations are impacted negatively due to uncertain political and economic climate for short to medium term.

Recent News

On 25 September 2020, William Hill confirmed the receipt of separate cash proposals from Apollo (Apollo Management International LLP) and Caesars (Caesars Entertainment Inc). The discussions between the parties are going on, but there is no certainty that any offer will be made.

Financial & Operational Highlights – H1 FY2020

(Source: Interim Report, Company Website)

• In the first half of the financial year 2020, the Company had shown a decent trading before COVID-19, driven by effective cost control measures taken and good recovery post-lockdown.
• Due to COVID-19 disruption to sporting events and temporary closure of retail activities, the net revenue declined by 32% year-on-year basis, while online net revenue surged by 1%, driven by the progressive resumption of sports events, successful product launches and growth in International business.
• Driven by swift actions to control costs and new Online content, the adjusted operating profit of £11.8 million was ahead of expectations in H1 FY2020.
• The Company has raised £218.6 million from the equity placing and had £205 million of the RCF (revolving credit facilities) drawn on 30 June 2020.

One Year Share Price Chart

Daily Chart as of 25 September 2020, after the market close (Source: Refinitiv, Thomson Reuters)

Valuation Methodology: Price/Cash Flow Approach (NTM) (Illustrative)

Conclusion

The underlying profits decreased by 85% for the period, due to the impact of the COVID-19 lockdown on live sport. WMH has made decent started to the second half of the FY2020 driven by a strong performance from the online business. The Company was trading decently, with a swift recovery of retail. The Company could not provide financial guidance for FY20, primarily due to the uncertainties created by COVID-19. Moreover, the company’s share price is trading near 52-week high, which raises doubt over its upside potential. The stock made a 52-week low and high of GBX 28.63 and GBX 313.00, respectively.

Based on the factors as highlighted above, we believe the stock of William Hill Plc is “Expensive” at the closing price of GBX 312.20 (as on 25 September 2020), with support from few catalysts needs to be evaluated at a later stage such as the growth of online business and benefits from cost control measures. 

*Dividend Yield may vary as per the stock price movement.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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