28-11-2017 03:31 PM - edited 28-11-2017 03:49 PM
I first tweeted about this share in November, when press speculation caused a spree of buying and very interesting price action.
I think this is the precursor for continued share price strength into December and the triennial review next year (http://www.telegraph.co.uk/business/2017/09/20/market-report-ladbrokes-rallies-hopes-benign-triennia...)
WMH’s share price collapsed from its 2013 high of 484p to a 2017 low 239p in August 217. William Hill is the age-old bookies, founded 1934, that accounts for 27% of OTC and retail bets placed. e.g. one in three bets placed on the high street are taken with WMH.
I have bought into WMH in the past for its reliable dividend, which has increased y-o-y since 2010, as we picked up from the 2008/9 FC. At the time, this offered a respectable 3% through 2012-15, and now stands at 4% covered almost 2x
I re-bought most recently August this year, buying again in September and October as the price appeared to bottom out and stall. It was then, and is now, -appearing very attractive.
The market cap stands at £2.4bn of which c£200m (eg 10%) is held as cash, WMH has an EV of £2.9bn owing to holding a bit of long term debt – which is nothing new to the company and is being paid down, amounting to around 3x PTP so nowt to lose sleep over.
Factors in its favour
a) Previous sector consolidation (Ladbrokes & Coral http://www.bbc.co.uk/news/business-33647635 ; 888 & Rank http://www.bbc.co.uk/news/business-37124207 ; ) William Hill has previously shaken off a £3bn takeover offer from Rank Group. (£3.50 p/s)
b) Industry M&A activity as recognised by WMH in their Annual Report ( https://www.williamhillplc.com/media/11250/wh-final-rev1-printall_2017-03-01_181358.pdf pg 14)
‘Consolidation and scale…is becoming increasingly important, with companies investing millions in marketing and technology as well as paying gambling duties. This, combined with the potential for substantial cost synergies, is driving sector consolidation’c)
c) Previous rebuffed merger proposals (Amaya http://www.bbc.co.uk/news/business-37600887)
d) Treasury pressure and increasing likelihood the Gambling Commission stake review being far less imposing than “worst-case scenarios” suggest.
e) International expansion. WMH is a UK heritage company, but also a global brand, and can be found in the US and Australia. In fact, most recently there is talk that is could be selling its AUS business to Crown Bet (https://www.ft.com/content/fbb79e7c-d0ea-11e7-9dbb-291a884dd8c6 ) this segment worth 7% of turnover or £114m.
On a fc PE of 12, this being the cheapest WMH has been since 2011, mostly owing to caution around the government review, is my suspicion. More typically, this trades on a PER multiple of 16x which seems far more befitting for a well-established high street brand with the heritage and pricing power that WMH commands. Looking at next years’ profit forecasts then, of 25.4p and averaging the company’s prior 3yr PER gives an implied value of £4.06p. Let’s call it £4 and that is scope for 38% upside.. yet a merger deal could take it a lot higher than that.
For those with patience, who don’t mind a flutter on the outcome of the commission’s review and looking for somewhere to earn 4% on their capital I think there are far worse things you can do with your money right now. The price continues to climb since my initial tweet, and the moving averages (for those into technical) are starting to align steady. There is a lot to play for.
07-12-2017 08:57 AM - edited 07-12-2017 09:22 PM
News out today which lifted the price further. Now 22% gain. https://www.investegate.co.uk/william-hill-plc--wmh-/rns/agreement-on-nyx/201712070701076617Y/
On April 4th 16, WMH announced a ten-year commercial agreement with NYX Gaming, including the building of a new back-end platform for William Hill over the next three years, and an investment to support NYX's acquisition of OpenBet. This transaction is on track to be completed shortly. Scientific Games Corporation (NASDAQ: SGMS) then sought to acquire NYX. In turn, this led to threats of litigation in the US and UK.
Today's RNS sonfirms that 'Scientific Games has agreed to acquire William Hill's ordinary shares and convertible preference shares in NYX with William Hill receiving CAN$2.40 a share for the 6.8 million ordinary shares it owns in NYX and circa GBP87m for its convertible preference shares.'
Price has responded encouragingly to this news.
EDIT 21.15pm, closed up over 8% on day.
Been out all day but just seen LCL up 29% on day due to RNS. Snippet:
The board of Ladbrokes Coral and the board of GVC (the "Boards") announce that they are in detailed discussions regarding the possible combination of the two businesses, following the receipt by Ladbrokes Coral of a non-binding proposal from GVC regarding a possible offer for the entire issued and to be issued share capital of Ladbrokes Coral (the "Possible Offer").
In my opinion, this increases the likelihood and almost certainty that WMH will be taken out later this year. It won't be a lone sitting duck. I'll look into the valuation proposed with GVC and LCL and infer what this means for WMH
03-01-2018 07:51 PM - edited 03-01-2018 09:21 PM
ok, let's update this trade. From the first post the share has now gained 13%, which, given its been in play for a month is credible.
What's been happening:
Consolidation x2 (circled blue) these periods were chances to enter the stock or to increase the position.
Increased volumes traded (circled red) this provides increased confidence that the price is moving on volume alone and not the result of market maker activity, moving the price.
Stock continues to trade above its 20 day MA, and the 20, 50 and 100 are in positive formation.
Looking at the RSI, the stock is starting to look marginally overbought, and so we could see the price come off in the short term, as the run has been fair to say the least.
You will note I have been buying this earlier in the year, building a stake of five tranches of shares since around July 17.
Anyone interested in gambling stocks will have a vested interest too in the upcoming Government gambling review. This will limit the stakes that can be gambled by [its] customers. Stakes could be cut to as low as £2 and although this is a worst-case scenario consensus seems to suggest that the value will arrive nearer £20. This outcome will have a significant impact on the businesses, and this is best understood by the proposal of GVC in buying Ladbrokes: here the base offer of £3.1bn has scope to move to £3.9bn based on the review, so a window of £800,000,000 at stake. I think the government will not reduce stakes below £20, based on arguments I have read (they need the gambling derived duty) so any surprise t the upside will be reflected in share prices.
Additionally, this leaves WMH vulnerable to more takeover offers this year. As stated in previous posts, merger deals involving WMH have been around before and rarely is there smoke without fire. Sterling has devalued since the Brexit vote so a US suitor would on that basis alone be getting a discount to previous offers. Consolidation is almost inevitable and the fact competitors are getting eaten-up will only make this more and more probable, imo.
So we could now see the share stagnate - we have a trading update on the 18th January, although I expect this will be rather mooted as the real news is the outcome of the DCMS review.
05-01-2018 05:05 PM
Is anyone else covering this company?
Results expected Thursday 18th January 2018.
The broker cites cases we have covered above:
'views point firmly to a £20 max stake as a worst case scenario'
'the GVC bid for Ladbrokes Coral demonstrates that bids can be structured to cover the multiple potential Triennial outcomes'
'WMH as an obvious participant in the next wave of inevitable industry consolidation, in our view'
So is a takeover on the cards later this year. I continue to hold.
11-01-2018 09:27 AM
WMH this morning moves up 8p or 2.5%
Since I posted it has risen over 21% in little over a month.
My overall gain here is 35% on purchase and healthy profits in more than one account. I am tempted to sell some and lock in profits, and ordinarily would. However our analysis of this was several factors colluding that would likely operate in its favour. Most recently the imminent announcement on US gambling laws. We know Trump is a Casino man.
Instead I will follow the adage 'run your winners' and hold on. I believe there is more to come here yet...
14-01-2018 06:41 PM
Market is expecting an update this week on 18 Jan from WMH.
The previous strength in price is enough to convince me to continue with the hold. In the event of any material weakness I would (will) add to this position on the open. Howevevr I expect the results will be rather muted as the major outcomes of the future largely hangs in the balance of the Gambling Commission review.
I will add commentary to the results on the 18th.
15-01-2018 08:18 AM
- Full year profit £290m expected
- 11% up on 2016
- ahead of expectations
'We are excited about the opportunities ahead in 2018 - a World Cup year - with our competitive position reasserted in the UK and with the potential for sports betting to open up in the US.'
A very encouraging statement.
22-01-2018 10:32 AM
well the WMH dog has its tail between its legs today and is down 12% currently, picking up a bit fro the low of day of 285p now trading at 295p.
This is due to hearsay rumors that the impending GC review will limit betting fees to £2 on those routlette-style terminals.
Personally (even as a WMH shareholder) I largely agree that the stakes right now are too high, and there is a lot of documented evidence that some people abuse them, and in turn get addicted to them. I don't really want to discuss principles in this piece, only to say that a £2 stake does appear to be taken negatively by the market, but equally this figure is not official until announced.
I sold a few off last week, see above post ^, and continue to hold..
24-02-2018 11:29 AM - edited 25-02-2018 05:27 PM
So a quick update on results and the price reaction yesterday.
Initial reaction saw WMH open 2.8 percent lower, but the share actually ended up on the day. Buying seems to be relentless in WMH, the previous drop was bought back, and is now again returning to its previous highs. It seems like the momentum may be set to continue, of course the impinging review will have the major impact, so we could expect volatility when this is published, but I would personally be buying into any more shake outs.
So onto the Friday results.
One of the main aspects I noted the release was an exceptional charge of over 238 million pounds on its Australian operations for 2017. William Hill expanded in Australia in 2013 through acquisitions, and it looks like this division os going to be divested soon enough.
William Hill is currently carrying out a strategic review of its Australian business, which is due to be completed by mid-2018, and Investec say they see a sale as “very likely” probably for a price of between 112 million pounds to 84 million pounds.
This write down resulted in reporting a pre-tax loss of £74.6m for 2017, compared with a profit of £181.3m the year before.
So this looks quite negative (hence the initial drop perhaps) but if we regard this as exceptional, then the picture looks quite different:
- Underlying performance had improved.
- Net revenues rose 7% to £1.7bn, while adjusted operating profit climbed 11% to £291.3m.
- Revenues from its online business rose 13%, which bode well given the investment MWH has been making into its online proposition.
- Adjusted operating profit for the 52 weeks rose to £291m, up from £261m previous.
- Growth at both online and high street retail businesses was above market rates.
This leaves us looking at a historical reported EPS that has grown 24%, over the 12 months, to 27.6p. Put that on a 3yr average PER of 17 and we get a price of £4.69. and if the 2018-19 year can provide a 24% EPS growth then who knows. (we could speculate but there is little point, inherent value has been shown)
No doubt potential suitors are eying-up these figures and biding time for the review announcement.
05-03-2018 03:11 PM
Took a tough decision and exited one position of WMH today, a total gain of about 26% was achieved. The remainder of my hlding will remain as the case above has not changed, and I think this will re-rate based on the outcomes described in the original post.
So why sell? Well there is a sense that the market is ever more toppy and I wanted to have some cash around should we see further weakness in the market.
For that reason, I sold a few thousand WMH shares today. Incidentally, it has not just been WMH that I have sold, but other shares where I am disproportionately invested, and where I have fairly stagnant or smaller holdings.
06-03-2018 09:44 PM
typically, WMH closes 2.7% up today, after I part sold some yesterday *rolls eyes*
So in a nutshell then, the Australia division - which as we saw was being pressured by regulatory imposition, has been sold off, or an agreement in place to do so to CrownBet.
I like this because it helps to simplify the business in line with its Strategic plans, and also releases capital the group can deploy to further its vision. The proceeds - some $300m AUD works out as £169m GBP, so about 10% of 2017 revenue.
Clearly, the market welcomes this news.
19-03-2018 08:19 PM
WMH jumped 4-5% today on news the gambling commission produced its recommendations in a paper on the future of the industry and changes it advises the industry adopts.
The key points to note are:
- Advising that electronic machines should be capped at £30 per play (it is widely accepted the current £100 figure is too high)
- Slot machines (fruit machines) to have a maximum £2 stake.
- Other measures for the industry to demonstrate improved compliance and cooperation to protect consumers.
The case is now in the hands of DCMS – to advise on these recommendations, to either adopt them or decide if they are too far one way or another.
It is suggested that the Treasury obtain upwards of £1.8bn of tax income, and therefore are the government is in a bind really: implement reduced caps and obtain less tax receipts or leave as it is and be viewed as being unsympathetic to gambling consumers and not strong-armed on the industry.
In terms of an investment proposition, clearly the risk is present, both Ladbrokes Coral and WMH gained today, which tells us the outcome of these measures will affect the whole industry, and the prospect of more regulation is making investors tetchy.
I continue to think WMH is attractive from an investment perspective, and a 4% hike in the price today suggests the gloom is exaggerated.
- Market Cap is now £2.86bn
- f/c Yield at 4% or 13.5p in 2018 rising to 22.8p in 2019
- Est 2018 PTP @ £286m and 2019 @ £254m (clearly these estimates may be reviewed as the guiding figures emerge from the review. I say this because clearly profit growth is currently forecast to be flat in 2019, but forecasting out this far is pointless given the situation) (EG PER of 10 this year)
Lastly, don’t forget we also have a review of US gambling laws under a Trump administration and the prospect of a takeover surfacing again.
21-03-2018 12:34 PM
"Analysts had previously speculated that a maximum £2 stake could have reduced earnings for William Hill and Ladbrokes by as much as 28%."
a 30% profit cut is tangible.
18-04-2018 10:24 AM
Something is brewing here. Up 2% today and nearing those highs again.
The average daily traded volume of WMH is about 6-7m shares. Look at the spike in volume yesterday, in the chart below. This is looking back eight months.
Additionally, looking at a table of volume, we see yesterday 57.18m traded, compared to around 4-5m in the prior days.
I don't have much time to write at the moment as busy on committee for a large investor conference and holding down a job, but to me this is probably not insignificant!
4 weeks ago
Been a while posting here as really hectic elsewhere in my life(!) but not the chart below @elle and yes, seems to always dip back to significant levels. This time is was a news triggered announcement that Treasury may accept the DCMS proposal of reducing betting terminal limits to £2 per play, the lowest of the possible price points, and lower than the GC recommended which I wrote about above ^
Well it seems as this may be the preferred stance for any would-be investor to take: better to err on the side of caution and be proven wrong to the upside, than be a dflated optimist, imo. And Until we know the likely outcome then we are all jsut speculating. My position is held (minus those where I top sliced as reported above ^) and I continue to hold *tempted to actually re-buy.
I spotted a Paddy Power RNS yesterday in their Q1 update which is relevent:
"Ahead of the expected introduction of new taxes, competition remains intense and market consolidation has commenced. We have reviewed our investment plans and see an opportunity to compete more aggressively to take advantage of the potential disruption to competitors. As a result, we are increasing investment in promotional generosity and marketing activity."
his was the original rationale and nothing has changed.. we wait.
Did anyone here attend Mello 2018 event in Derby? It was a fantastic event.
3 weeks ago
So WMH updated the market today.
It is also worth noting that they hold their AGM today at 11am, which is central London, near Tottenham Ct Rd. I thought about going but cannot due to other commitments.
We can take some reading from the trading update and I expect the AGM will also influence the direction later in the day.
Key points to note are:
Trading to 17 April has seen 3% growth in Group net revenue with strong Online and US performances, partially offset by Retail IE shops are a drag on performance.
Online net revenue up 12% with Sportsbook up 17% and gaming also up 8%. Retail net revenue is down 4%, with Sportsbook down 9% and gaming flat. I note WMH also sponsored the big boxing fight at the weekend where Haye got knocked down two or three times by Bellew. - WMH are still influential in the retail sportsbook market and events like this help them realise their strategy.
The comments state "positive start to 2018, making further progress against our strategic priorities to grow UK market share, drive international revenues and deliver key transformation projects."
There is some talk of the impending legislative influencing factors: ‘while we await the outcome of the UK Triennial Review and the Supreme Court's decision on US sports betting legislation, we remain focused on continuing to deliver a great customer experience, particularly ahead of this summer's World Cup.’
Intra-day the price has bobbed about a bit. Note as our contributor @elle has pointed out, WMH seems to stick closely to key levels and these were tested today. Overall the commentary is good and the balance sheet and business model simplified by the Australia disposal. Let's see what happens rest of the day..
3 weeks ago
You are a great example of a quality poster, nothing is copied and pasted from internet in your posts, no commercial links or advertising, I always like the quality of your posts.
Thank you for quality posings.I like and read.
2 weeks ago
11% gain today which was triggered around 3pm (when the US market opened)
The intraday price actually went a lot higher than the 11% close, as shown in the chart below, the price touched £3.25 but closed at £3.13
If we look back to our original investment case we had two main triggers for a re-rating in the price, and the third rationale was potential M&A activity. Concerning the two price triggers these were regarded as:
- UK government review of spend limits to betting terminals
- US decision on gambling laws
Today the second of those decisions came in. The US Superme Court has decided to overturn the ban on US sports betting – announced today, and this was positive to WMH who has a large sports betting book in Nevada presently, but the price has responded to reflect the opportunity this brings for increased US activity. This is particularly helpful to WMH as it has an established presence in prime locations and now we await the company to guide the market on this new chapter in the coming months.
Equally I understand we will, later this week, likelty get the other decision we are awaiting – the UK position on retail terminals. Recall that the price dropped quite significantly a week or so ago, which I documented above. And this seemingly priced in the ‘almost certain’ limit on these machines to the lowest value under consideration of £2 Therefore we have today a) reversed that decline in the price from the prior week but importantly, I would argue, we are now pricing in the worst case scenario for the UK market. EG any value above the £2 that is announced is going to result in upside, in my opinion.
So let’s see what happens. My posiiton is back to about 28% gain, which is a healthy gain to date. I have not sold. I think the UK decision could come in at a rate higher than £2 as the press reports are a bit spurious, and based on “an insider tells us” type story.
I also think the opportunity in the US, where WMH is an established and well regarded operator, far outweights the negatives attributable to the UK issue. The worst case will see WMH (and others) close off loss making shops, reduce their estates, offer more incentives for online gaming, and run a more ofused retail network than at present. I also think the probability of a takeover is more likely now the US has repealed its gambling decision.
So, in a word:
Downside= probably negligible or nil in short term,
Upside= surprise (eg not worst-case) decisino from UK, US expansion and more likely US takeover.
2 weeks ago - last edited 2 weeks ago
Hi @PandaFace do feel free. I am happy for anyone to post contributory information. This can be anything you feel comfortable with both positive and negative information is welcomed to balance the investment case. Pick an area of focus (gaming market consolidation in USA for example..? I know nothing about it) do some digging and see what you can come up with. For example I just found this:
"Roger Devlin, chairman of William Hill, has warned that slashing maximum bets on fixed odds betting terminals will leave the company at risk of a takeover from overseas rivals."
We are already assuming we are to expect this to be slashed to a minimum (£2) so takeover looks to be the best of a worst-case scenario, which I find absurdly funny, given the previous T/O was around the £4 mark IIRC.
.. bring on a takeover
2 weeks ago - last edited a week ago
yes, initially price was pulled 8% down i think. But buys outweigh sells. see the areas i highlighted red (these obvs changing a lot since img taken) we did say the worst case looked baked-in.
From -8% open to flat (11am) my account has seen a lot of change this morning.
We did say the worst case looked priced-in, so an easy 8% could have been made on that initial open. I didn't change my position.
If someone wants to go through the RNS and pull out pertinent points then feel free. I am struggling to find the time. But I am not sure if there is guidance when these changes are to be enforced (anyone?) and then working out the imapct to bottom line. However the price movement today tells me the market is not overly concerned (as I am not, either)
I think it is good that the industry is guided to behaving in a responsible manner, as there is a moral stance to all this, people should not be allowed to gamble to the point where their jobs, homes and security is at risk. Moderation is the key to the future here, so I welcome these changes.
It would be easy to sell now for 28% gain (I believe the share is also trading ex div) so there is income to be received too in the meantime. And I do think the patient here will be rewarded with a payout in the form of the very least bid rumors and more likely an agreed deal before the year is over. As to me, I will likely wait it out unless an opportunity arises forcing me to free up cash. But I am in no hurry to sell. Today's RNS reinforced the dividend would continue to reflect a payout of half profits, and that should provide reliable income should the markets lurch down.
I doubt I'll comment much more here in the short term, unless I get time to go through the RNS (I am hoping someone else will do that.. @PandaFace, maybe..)
We still have TWTR going on here, as well as NXR and WGB. I am doing well on HUR (having been buying from 11p) and SPD seems to be creeping up day by day. Has anyone else noticed that.
ITV and BOO are also going well and I want to look at SDRY at some point. So much to do.