Web betting boom could spell worldwide wins
Take a look at the form, and if you like the odds, take a punt, says Jenne Mannion
Saturday 08 April 2006
The forthcoming World Cup is set to give a huge boost to all sectors of the UK gambling industry, which is already growing at 3 per cent a year. But even without this fillip, investment professionals are identifying opportunities in booming internet gambling companies such as PartyGaming, Betandwin, 888 and Sportingbet.
Although the share-price performance of internet gambling stocks has gone up and down of late, the margins remain solid. In 2005, PartyGaming, Sportingbet and 888 all grew their earnings per share by 50 per cent or more. According to the investment bank Dresdner Kleinwort Wasserstein, at least 20 per cent growth is forecast for 2006.
Sceptics believe that internet gambling is largely a fad, but Simon Murphy, the manager of the M&G UK Growth fund, has a large holding in Sportingbet, and is confident the industry will continue to grow. Internet gambling accounts for only 4 to 5 per cent of the industry worldwide, yet he believes that, thanks to broadband, this is set to grow to around 10 per cent.
A cloud hangs over internet gambling firms, however. They have a big US customer base, and factions in the Government are trying to stamp them out, though the latest attempt to change US law to crack down on American punters was thwarted this week .
James Ridgewell is the manager of New Star's UK Special Situations fund, almost 7 per cent of which is dedicated to internet gambling stocks. He sees the regulatory risk in the US as anopportunity, because investors have shied away from these stocks, creating cheap valuations.
"Because of the perceived risk, there have been few new entrants to the market," he says. "Existing players have been able to build up their client base in an industry where companies benefit from the first-mover advantage."
He points to Betonsports, which, alongside Sportingbet and 888, is one of the companies that he holds. Betonsports is trading on a price-earnings ratio of nine times for 2007, but has a high yield of 4.2 per cent and earnings per share growth of 46 per cent. He believes that the US anti-internet gambling factions will not succeed.
Andrew Lee, a research analyst at Dresdner Kleinwort Wasserstein, agrees. His firm has ranked PartyGaming and Sportingbet as a buy, and 888 as a hold.
But these stocks will get a bumpy ride as regulatory pressures mount. In March, the shares of PartyGaming, 888 and Sportingbet were hit by up to 9 per cent in early trading after the approval of a US bill to ban the use of credit cards, cheques and electronic fund transfers for internet gambling, losses that were, however, quickly reversed.
Not everyone is so confident. Andy Brough, the manager of the Schroder UK Mid 250 Fund, does not hold any internet-gambling stocks and believes that the high operating margins are unsustainable in the long term. Barriers to entry are also low, he adds - it only costs about £30,000 to buy a fully operational poker site. "There is already evidence of margin pressure. For example, many companies are offering sign-up bonuses and loyalty bonuses in a bid to be competitive," he says.
In terms of traditional casinos, the picture is certainly rosier after the Gambling Deregulation Bill was passed last year. An important facet of the Bill was the dropping of a rule stating that casino users had to become members at least 24 hours before they visited the premises. Under deregulation, casino owners will also be able to promote themselves through advertising from the end of 2006.
Simon Murphy, who holds Stanley Leisure and London Clubs International in his fund, is optimistic.
Before the the removal of the 24-hour rule in October last year, it was estimated that only 2.7 per cent of adults had visited a casino. Now any adult can visit one. "It will become commonplace to end up at a casino on stag nights, or after football and clubbing. Although these visitors would spend less per head than hardcore gamblers, it will not cost the casino any more to attract such new business," Murphy says. One advantage for existing casinos is that, from this month, the rights to build new casinos under a 1968 Act will be lost.
But it is not all good news. London Clubs International has announced that profits would be flat this year (it blames a slump in visitors after last summer's attacks on London), and it suffered from a low win percentage, while some unpaid debts remained outstanding.
Murphy believes that these developments will not seriously affect the group's longer-term fortunes, though, as they relate to the group's most exclusive club, Les Ambassadeurs (which is to be sold).
Meanwhile, back on the high street...
* Traditional high street bookies are still providing investors with good opportunities.
* These companies suffer when several favourites come to fruition, which means that they must pay out big sums, leading to a profits warning and consequently a fall in the share price. For instance, William Hill issued lower full-year profits this year after too many winning favourites came in.
* James Ridgewell, the manager of New Star's UK Special Situations fund, cites Ladbrokes, which he describes as being valued very cheaply, as one of his long-term holdings. Ridgewell expects that Ladbrokes could be the subject of a takeover or that the business will recover.
* "When this happens, the share price falls back and it provides a good chance to buy shares cheap," Ridgewell says. "There may be a profits warning, but the company ultimately recovers and the share price responds."
* Certainly, with the upcoming World Cup, the bookies can be confident about a surge in business amid the flurry of excitement surrounding the event.
* Simon Murphy, the manager of the M&G UK Growth fund, says: "The fact that the World Cup is being hosted in Europe and that the England team is one of the favourites will also help boost interest. There will be an increase in the numbers of people placing bets. This is the case with all major sporting events, and the World Cup will be no exception."
Under new state pension rules we will all be much worse off
Budget 2015: George Osborne is set to get tough with further cuts in public spending
Bargain Hunter: Our exclusive deal cuts the cost of buying foreign currency by 20 per cent
Dirty tricks in a divorce can cause some nasty surprises
Make money as a mystery shopper
- 1 Humans of New York image of crying gay teen receives best response yet from Ellen DeGeneres
- 2 What supermodels really think about posing in the nude
- 3 North Korean defector flees to Finland 'with evidence of chemical testing on humans'
- 4 Black teen in critical condition after store employee 'shoots him for stealing 79-cent pack of cookies'
- 5 Swedish minister gives strongest case yet on why EU should stop turning away asylum seekers
More Britons believe that multiculturalism makes the country worse - not better, says poll
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Osborne to cap family benefits at £23,000 – announced ahead of his post-election Budget
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
iJobs Money & Business
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...
Day In a Page
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.