Focus on ‘sound’ long-term strategy overshadows in-line Q323

Entain reported largely in-line Q3 23 trading numbers, accompanied by an implied FY23 EBITDA downgrade. The latter was a result of unfavourable sports results as well as persistent regulatory headwinds. However, the bigger news was the update provided on the firm’s strategy and longer-term targets. While this means the near-term growth and margin trajectory will be slower than previously anticipated, the longer-term targets offer strong upside potential considering the currently-beaten-down valu

HMRC settlement overshadows the decent H1 23 showing

Entain exceeded estimates in 1H23 (revenue +2.8%, EBITDA +0.4%), driven by BetMGM’s US performance. Pro-forma revenue reached £2.38bn, up 8% including the US share, with retail compensating for soft online growth. BetMGM’s positive H1 showing with revenue up 55% to $944m, underlines its strong position in the US market. FY23 Group EBITDA is expected to come in at £1bn-£1.05bn. Regulatory challenges impacted ex-US markets, while a £585mn provision for the HMRC investigation settlement surprised t

Broad-based Q1 23 momentum; BetMGM continues to impress

Entain’s Q1 23 revenue was up 15% YoY, with double-digit reported growth in both the online and retail channels. US JV BetMGM registered 76% growth, putting it on course comfortably to achieve its FY23 guidance. The previously-flagged headwinds in the UK (affordability) and Germany (regulatory challenges) weighed on online growth (+1% pro-forma vs +6% ex-UK and Germany). We do not expect any significant changes to our estimates, given our above-guidance BetMGM estimates as well as the mostly in

Strong FY22 overshadowed by a soft margin outlook

Entain reported estimate-beating FY22 earnings. Net gaming revenue (NGR) increased by 12% in the year, driven by a 66% rise in retail. BetMGM performed strongly and is expected to be EBITDA positive in H2 2023. Entain completed five transactions during the year, further diversifying its revenue base. Underlying EBITDA was up 13%, and adjusted diluted EPS up 15%. However, the guidance was softer than expected and should result in a low single-digit cut to our FY23 estimates.

Good end to FY22, EBITDA target upgraded

Entain reported Q4/FY22 growth in line with estimates. Importantly, the online segment returned to growth, after four consecutive quarters of decline. The firm now expects FY22 EBITDA to come in at £985–995m (5%/3% ahead of consensus/AV, respectively). BetMGM continued to outperform expectations and is on track for EBITDA break-even in H2 23. We will be upgrading our estimates by low-to-mid single-digits to factor in the FY22 EBITDA upgrade as well as the stronger trajectory of BetMGM.

Q3 22: BetMGM shines amidst expected ex-US trends

Entain reported soft Q3 2022 trading numbers as retail growth (+10%) offset the 2% decline in online with the former maintaining its growth momentum vs the pre-Covid level (+8% vs +6% in Q2). In the all-important US market, BetMGM continued to perform well, with revenue up 18% QoQ to over $400m. Although the management maintained the FY22 EBITDA guidance at £925-975m, we will trim our estimates by mid-single digits to reflect the slower-than-expected momentum online.

BetMGM and M&A aspiration tide over H1 miss

Entain reported softer than expected H1 22 profit numbers even as BetMGM, on course for EBITDA break-even in 2023, continued to perform strongly. In other positive developments, Entain re-initiated dividends and also announced the setting up of Entain CEE, the firm’s acquisition vehicle focused on Central and Eastern European markets. FY22 EBITDA outlook of £925-975m is in line with consensus but ~3% below our estimates. Hence, we expect to trim our estimates marginally, largely on account of

Q2 22: Retail surprises in face of online turbulence

Entain reported soft Q2/H1 22 trading as revenue was up 6/18%, respectively, in cc terms. The expected retail recovery (79/244% in Q2/H1) more than offset the decline in online (-8/-7% in Q2/H1), which faced multiple headwinds. BetMGM maintained its number two position in the US with a 24% market share and same-state growth of >30%. We will trim our FY22 estimates by high single digits to reflect both the soft Q2 as well as the downgraded online growth guidance.

Q1 22: Solid retail recovery eats into online growth

Entain reported a strong start to FY22 with Q1 revenue up 34%, benefitting from a 10x increase in retail revenues as volumes reached within 5-10% of their pre-Covid levels. As expected, online growth (-6%cc) was hurt by the previously-flagged regulatory headwinds. BetMGM continued to gain momentum with market share at 24%. The JV re-iterated its target of reaching positive EBITDA in 2023. We will upgrade our FY22 estimates marginally, to reflect the stronger than expected retail recovery.

FY 21: online momentum and resilient retail leave us hopeful for 2022

Entain reported a 5% rise in FY21 EBITDA, resulting in a 1.4% surprise. Importantly, retail operations in various regions were within 5% of pre-COVID-19 levels. BetMGM continued to gain share and expects revenue of $1.3bn in FY 22 (+53% yoy) with EBITDA breaking-even in 2023. The board decided against a dividend, which was the only sore spot of the FY 21 performance. We do not expect any significant changes to our estimates, following the largely in line showing (vs AV estimates).

In line Q4 21 even as BetMGM momentum accelerates

Entain reported a largely in line Q4/FY 21 trading update, registering cc growth of 6/8% for Q4/FY21, respectively. As expected, online revenue was down 6% in Q4, while retail was up 62%. BetMGM performance was well ahead of consensus as well as our expectations. Entain now expects FY21 EBITDA to come in between £875m and £885m (vs £850-900m previously). We will raise our BetMGM estimates as well as the valuation to factor in the strong US momentum.

Q3 21: expected German headwinds; BetMGM powers ahead

Entain registered Q3 21 top-line growth of 6%, driven largely by online (10%). In the all-important US market, BetMGM surged ahead with a further expansion in market share of (23% in three months to August vs 22% in Q2 21). FY21 EBITDA guidance of £850-900m was re-iterated, a positive given the recently announced headwinds from Dutch regulations. We do not expect any significant change to our estimates, given that the performance was largely in line with our estimates.

Well positioned for future success

Strong performance against tough market conditions

LIBERUM: The Liberum Leisure Digest: NLW increase - pricing power is key

Initial Equity Trading Comments - 19 February 2024

Pinewood Technologies (PINE LN) - Driving growth in automotive software

Pinewood’s transition to a pure-play automotive SaaS business is now largely complete. Today we introduce summary forecasts out to FY26 and reiterate the investment case. We see significant opportunity for Pinewood to grow its user base in the UK and internationally whilst generating high EBITDA margins and cash conversion. With a 24.5p special dividend embedded in the current price (payable Q1/Q2), the effective price today is 12.3p. Based on the Group’s FY27 target of £27m EBITDA, we estimate

Domino's Pizza - Growing the base

Domino’s Pizza Group’s (DOM’s) new CEO has set an ambitious long-term growth target, including an acceleration in its net store opening programme. With better alignment between the company and its franchisees, management believes DOM should be capable of generating improved profit growth, versus that achieved in recent years, and potential higher returns.

Marks & Spencer+ (MKS, House Stock at 255p) - 7Y FS HSBC UK tie-up– another brick in the wall

Zeus Top Picks for 2024 - 2023 review and outlook for 2024

On 9 January last year, we set out our ten top stock picks for 2023, for what turned out to be another relatively poor twelve months for UK equities due to two wars, stubbornly high inflation and further tightening of monetary policy. This was even as other major markets, such as the US, largely recovered in the year. In the 2023 calendar year, the AIM All-Share index fell 8.2% and is still 42% off its 2021 high. From the release of our 2023 top picks note, the average total return (assuming div

PROGRESSIVE: Vertu Motors: Traction control

Vertu is the fourth largest automotive retailer in the UK, with 188 sales outlets and a track record of cross-cycle growth, principally through businesses it has acquired, funded by equity, debt and most importantly cash generation. Vertu operates across the entire vehicle lifecycle, including new and used vehicle sales, and vehicle servicing, repair and parts. Service and repair is a 40+% gross margin repeating business. With economic headwinds, the transition to electric vehicles, recent overs

LIBERUM: Safestay: First management contract opens up new revenue stream

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

React Inititation of Coverage

React Group is a well-managed, growing UK services business with a high degree of recurring revenues (c87%).

SSP Group+ (SSPG, House Stock at 218p) - Further progress expected in H1

PROGRESSIVE: Zoo Digital: Recovery underway and a significant contract

Today’s trading statement from ZOO highlights a ramp-up in demand following the end to the industry-wide strikes of last year. ZOO struck a note of caution in its January update regarding the timing of orders. However new productions are starting to translate into a healthy order pipeline, with a good recovery in revenue anticipated in H1 FY25. The update guides to revenue of at least $40m for the year to March 2024, ahead of our estimate at $36.8m. We have improved our adjusted EBITDA loss marg

ME Group - Modernising and growing the estate driving growth

During 2023, ME Group commenced the deployment of its next generation photobooths, which are integrated with the group’s newly developed proprietary software, gained market leadership in the Japanese photobooth market with an acquisition, continued to roll out laundry units with existing and new location partners, commenced a share buyback programme and gained entry into the FTSE 250. 2023 was a year of significant strategic and financial progress, with sales up 15%, EPS up 31% and net cash main