Investment Column: Sportingbet is a gamble after Italian fiasco

Galiform; Sinclair Pharma


Our view: Sell

Share price: 56.25p (+1.25p)

There's nothing wrong with pulling the plug on an underperforming business, and in financial terms at least, Sportingbet's ignominious exit from Italy could be seen as a positive.

The operation managed to generate a pitiful £2m of net gaming revenue and lost £1.5m this year. Given that, it's perhaps no wonder the company is happily saying ciao to the business, even if the £7.1m exceptional loss it will have to report as a result does leave an ugly scar on the next set of numbers.

The company blames the failure of the business on product restrictions imposed by the Italian authorities, which reformed gambling regulation in a way that was not conducive to Sporting's model.

In effect, they called the market wrong, and the exit now raises some questions about Sporting's ability, as an offshore operator, to capitalise on and work within a liberalising, but still highly regulated, framework. Others may, after all, follow the Italian model, and to generate stable growth gambling companies really need to be prepared to accept the local restrictions in return for legal certainty in the territories in which they operate. Generally Sportingbet is doing ok, enjoying a good start to what is traditionally a quiet fourth quarter,. and unless the company settles its little problem with the US Department of Justice, things should be stable enough until October when full-year results are due to be reported.

Currently Sporting is priced at 10.4 times forecast full-year earnings. It is pretty good at bookmaking, but that is high enough given that it is an offshore operator with a high degree of regulatory risk whose earnings are not showing a great deal of growth. Collins Stewart notes that its top line has been flat for fully six quarters.

Given all this, those wanting exposure to the gambling industry should seek greener pastures. Sell.

Galiform

Our view: Buy

Share price: 46.5p (+9p)

Investors in Galiform, the group behind Howden kitchens that are sold directly to small builders, got a boost yesterday as the group published its first-half trading update.

The shares leapt 24 per cent as the group said that while sales were continuing to fall, they were doing so at a reduced rate. If the trend continues, the group would consider opening new depots in the autumn, it said.

That is good news indeed for shareholders, who have suffered somewhat from the company being association with MFI, a legacy that now includes just a handful of property guarantees.

This is also why the group trades at a discount to its peers, says the group.

Notwithstanding yesterday's share price jump, the discount is still significant, according to analysts at Numis, who argued before yesterday's update that "at the current share price Galiform trades at a 20 per cent plus discount to the merchanting peers on price earnings and enterprise value to Ebitda metrics (adjusting for the MFI legacy), which in our view is clearly illogical".

We agree that the group is a better bet than that and would still buy the stock, in spite of yesterday's price increases. Buy.

Sinclair Pharma

Our view: Cautious hold

Share price: 23.25p (-2.5p)

Sinclair Pharma, the speciality dermatology and oral healthcare group, issued its full-year trading statement yesterday, saying that Ebitda is up, and thanks to its "decisive and proactive steps to restructure and streamline the business," costs have been reduced, while the depth of management expertise has been increased.

Sadly, what it also mentions is that revenues disappointed – 15 per cent below analysts' consensus, say the experts at Piper Jaffray – sending the shares down 9.6 per cent.

The group blames "wholesaler de-stocking in the face of the economic downturn" for the drop in revenue, adding that the first data for 2010 suggests that sales are now returning to previous trends. While that is undoubtedly good news, the market is clearly waiting for more evidence, and we would suggest that investors consider taking profits from the last six months, which have seen the stock jump by more than 80 per cent, at this stage.

True, the Piper Jaffray watchers point to the group's "strong product portfolio", but argue that investors should be underweight on the shares, adding that the sales execution is disappointing and that they are "cautious on the outlook for the stock".

The group argues that significant product launches this year should help the stock, and we would give Sinclair the benefit of the doubt, for now. Cautious hold.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Lewis Hamilton walks back to the pit lane with his Mercedes burning in the background
Formula 1
Arts and Entertainment
The new characters were announced yesterday at San Diego Comic Con
comic-con 2014
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
PROMOTED VIDEO
News
i100
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
News
A rub on the tummy sprang Casey back to life
video
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
i100
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
people
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
Tovey says of homeless charity the Pillion Trust : 'If it weren't for them and the park attendant I wouldn't be here today.'
people
Sport
Rhys Williams
commonwealth games
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little