The Private Investor: Gamblers rejoice at Gordon's bingo call

Nigel Thomas, one of the leading fund managers at Framlington, was rubbing his hands with glee at the prospect of bingo duty being abolished when I met him for a pre-Budget drink this week, and he was happily shouting, "Full house!" by the time the Chancellor sat down. Ditching the 10 per cent bingo duty should encourage player-pulling higher prizes, and more profits on which to stick a 15 per cent gross operating profits tax.

Nigel Thomas, one of the leading fund managers at Framlington, was rubbing his hands with glee at the prospect of bingo duty being abolished when I met him for a pre-Budget drink this week, and he was happily shouting, "Full house!" by the time the Chancellor sat down. Ditching the 10 per cent bingo duty should encourage player-pulling higher prizes, and more profits on which to stick a 15 per cent gross operating profits tax.

Rank has been among Mr Thomas's recent share picks, and as the owner of Mecca it is a gainer from the end to bingo duty. As usual, he was right, although he is as happy with Rank on his proven long-term investment strategy. He likes the way Rank is building its regional casino business, developing its Hard Rock restaurant brand into casinos. Gaming liberalisation allows outlets to stay open later, with alcohol and live music. So Rank is marketing its venues as an all-round evening out rather than just for betting.

With just about all future gaming liberalisation going Rank's way, the forecast from broker Merrill Lynch is for earnings per share (EPS) to rise from last year's 20p to nearer 22p this year and 25p next. Goldman Sachs expects slightly less, but put a 323p fair value price on the stock. And there is nice 5 per cent yield to go for at the current price of 251p.

Bingo has a penny stock play, too, in the form of the bingo hall owner Top Ten Holdings. Launched by the Weston family on the alternative investment market (AIM) last year, this little company from St Albans, Hertfordshire, is now the fourth largest in the UK bingo business, and plans to grow by snapping up more of the many privately owned halls. Sales and profits rose to £3.7m and £267,000 at last September's interims. At present. it is easier to get into the game than the shares, with the Westons holding 65 per cent. But at only 4p the chances of winning look excellent.

An interesting punt is Sportech, owner of the Littlewood brand. Pools are in long-term decline, but Sportech is using its football pool money to build a phone and online betting business and has tie-ups with BSkyB and ITV. The broker WestLB Panmure is forecasting pre-tax profits before goodwill and exceptionals to rise from £14m to £18m this year, giving earnings up 12 per cent at 2.2p.

Nasty tumbles have been taken recently by the mainstream gamblers. Stanley Leisure plunged more than 20 per cent after the bookmaker and casino operator warned that it had had disastrous outings at Aintree and Cheltenham. That helped depress Hilton, Ladbroke's parent, and William Hill. It also knocked the promising Irish contender, Paddy Power.

Still, Paddy Power is worth watching. It is growing its UK betting shop operation, (129 are in Ireland) and its phone and online businesses. NCB Stockbrokers expect EPS to rise from 31c to 38.3c this year.

Another likely looking gamble is Wembley, although this needs to be watched until the impact of a spot of legal bother is clarified, possibly this month. Retired from football, the once-proud owner of England's national stadium has found a new life across the Atlantic.

It has a hi-tech business there, with the big money-spinner a gaming parlour at Rhode Island's Lincoln Park Racecourse near New York. Video lottery terminals offer jackpot games, and even video poker. Legislation is relaxing in Rhode Island, too, and Wembley is being allowed almost to double its number of one-armed bandits there.

The odds for the investor should be attractive. Wembley has £4m net cash and adjusted earnings rose from 54.2p to 63.4p last year. EPS, Merrill Lynch says, are to rise a further 15 per cent this year, to 70.6p, and by at least 18 per cent in 2004. That puts the forward rating, with the shares on 519p, at only seven times.

It is a nice story. Wembley certainly thinks so: it has bought 8 per cent of its shares since last March, which does the price no harm at all. While signalling caution until the legal position is clear, Merrill has maintained a price target of 1400p. Make a diary note that November's Queen's speech should reveal the gaming liberalisation programme.

Sean O'Grady is away.

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