More forecast upgrades possible at Entain, says Shore Capital

(Sharecast News) - Shore Capital has kept a 'buy' rating on Entain following the company's raised guidance for its BetMGM operations, suggesting that there could be more upgrades to come at the sports betting and gambling group. The company, which owns a 50% share of the US joint venture BetMGM with MGM Resorts, said net revenue growth (NGR) in the second quarter so far was consistent with the 34% year-on-year surge seen in the first three months of the year.

As a result, BetMGM revenues are now expected to be "at least $2.6bn", up from the previous $2.4bn-2.5bn range, and EBITDA is forecast to be "at least $100m", compared with earlier guidance of above breakeven.

Shore Capital said that, after such a strong first quarter, an upgrade to full-year NGR was to be expected, and while comparatives get tougher in the second half, "a beat to the $2.6bn is likely".

Entain said the trading momentum at BetMGM reinforces its confidence in future growth prospects and its $500m EBITDA target for the division in the coming years - something that Shore Capital said isn't yet reflected in the current share price.

"Entain trades on a current year PER of 15x and an EV/EBITDA of c7.5x excluding BetMGM. Valuing BetMGM at c2-3x NGR would value "core" Entain on a single-digit PER. The current valuation failing to reflect the improving trends at both "core" Entain and its 50% stake in BetMGM. BUY," the broker said.

Entain shares were up 13.6% at 853.2p by 1449 BST.