Analyst Says Entain Offers a Wider Range of Sports Betting Options for BetMGM

Entain owns half of BetMGM
Investors are pushing for value creation through strategic transactions
Analysts see increased M&A opportunities

Discover more about [N/A – Quick Run]. Shares of Entain Plc (OTC: GMVHY) have witnessed a remarkable rise, increasing nearly 38% year-to-date. This performance places it among the top contenders in the sports betting sector, with greater potential for growth as investors anticipate the company may engage in value-generating activities.

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According to Jefferies analyst James Wheatcroft, Entain’s mergers and acquisitions (M&A) potential has seen significant growth, though this is not yet reflected in the stock price. The company’s capable technology stack and consistent earnings performance suggest that Entain is now in a position to consider new deals.

Entain has demonstrated a reliable track record of achievement in recent quarters, which should redirect investors’ focus back to M&A opportunities,” observes Wheatcroft.

Wheatcroft has rated the stock as a “buy,” and his sum of the parts (SOTP) analysis indicates a potential upside of approximately 55% based on recent trading prices. Notably, this projection does not incorporate any acquisition offers for Entain, which would necessitate a premium over the current share price.

Exploring Options for BetMGM

Entain shares joint ownership of the thriving BetMGM business with MGM Resorts International (NYSE: MGM), a partnership that has sparked considerable speculation about possible consolidation.

It’s widely acknowledged that MGM is interested in acquiring full ownership of BetMGM, a move that would yield substantial capital for Entain. Previous management has hinted that joint ventures are not indefinite, and with Entain navigating successfully through recent challenges, it may now consider its stake in BetMGM.

“The presence of activist investors in Entain’s shareholder base signals a desire for enhanced value realization,” Wheatcroft believes. “As such, investors will likely turn their attention towards a SOTP valuation, particularly emphasizing BetMGM. The potential for standalone operations leveraging Entain’s technology stack diminishes the necessity for a complete acquisition. Various strategic options for maximising BetMGM’s value, including a potential US listing and M&A, should intensify valuation scrutiny.”

Individuals like Ricky Sandler from Eminence Capital and Keith Meister from Corvex Management play influential roles in the boardroom. Meister, also a director at MGM, has a vested interest in both firms.

Alternative Options for Entain

While a beneficial deal regarding BetMGM garners significant attention and could lead to the most substantial capital influx from divestitures or a US market launch, Entain is equipped with additional strategies to enhance shareholder value.

Recent reports from Australia indicate that Betr might be considering a bid for Entain’s operations down under, an area that has posed challenges for the company due to regulatory issues.

“Persisting challenges in the Australian market combined with an isolated technology platform and a series of management resignations lead us to believe that Australia could be a viable disposal choice. Our SOTP analysis suggests a valuation of approximately £660 million ($890.1 million) for Entain Australia,” concludes Wheatcroft.

Summary

In conclusion, Entain’s current strategic positioning indicates a strong potential for growth and value identification, particularly concerning BetMGM. As the company navigates its joint venture with MGM and explores new avenues for capital generation, shareholders remain cautiously optimistic about the increased M&A activity and potential opportunities in various markets.

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