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William Hill wants its American boy way too much

By Chris Bailey | Sunday 5 August 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

I enjoyed Malcolm's piece on William Hill (WMH) yesterday.  I too had checked out Friday's results statement which included (inevitably) a Gareth Southgate picture on the cover of its analyst presentation document.  Goodness only knows what they would have done if we had actually won...
Anyhow, the shares shagged 8% on Friday which typically points towards a betting shocker due to the wrong type of sporting results resulting in the punters beating the House for once.  But no...World Cup punting was voluminous and generally to their favour (and for full disclosure i may have partaken in a bet or ten with them over the duration of the tournament - unfortunately not successfully enough to dent their disclosed profitability).  However as Malcolm noted a bunch of other stuff was happening too including write-offs, disposals, a regulatory noose in some places and a continuation of the 'very challenging' High Street betting conditions.  The interim dividend was unchanged too. 
Of course les dividend munchers will be frothing at the bit with the near 5% dividend yield and a current multiple of about ten times earnings.  Betting on a bookie though is not the sure bet it was a few years back, not with technological evolution and the like.  William Hill has an alright online portal but it is not - inevitably - as big a name online as that range of betting shops across the land used to command.  And there there is disruptive consolidation which you can see in (the names alone) of Paddy Power Betfair (PPB) and Ladbrokes Coral (owned by GVC (GVC)).   
But there is the Promised Land.  No...not the land of Job but the US of A.  For various ball-breaking reasons the Yanks are behind the times on the whole sports and internet betting thing.  However recent court cases have offered a glimmer of hope of liberalisation en masse...and so a feeding frenzy has started. This is reflected in a rather breathless article in today's 'Sunset Times' noting that 'William Hill is in talks with a US casino giant about a tie-up that would give the British bookmaker a greater share of a potentially multibillion-dollar sports betting market'.
Well woopie...but don't get too excited as Penn National Gaming only operates in 16 states but I guess this does complement a current reality for the company of being in six states by the end of the year and that it already runs 108 of Nevada’s 190 sports betting venues.  That sounds ok but with all the betting names in the world wanting a piece of the pie, any domestic US names that want to hook up will require a big old price/split of the revenues/profits.  At the moment all the betting companies want this way too much...and as an investor that does not excite me.  
The US will be a huge sports/interest betting growth market but that does not mean everyone gets to win...and when everything is up in the air in your home market in terms of competition and structural change, the wise investor does not take a bet.  Wait for clearer - but more likely to pay out - odds.  

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