UBS Downgrades William Hill
UBS downgraded William Hill to ‘sell’ from ‘neutral’ and cut the price target to 240p from 295p, saying the market has not priced in the fixed odds betting terminal risk for the bookmaker.
UBS reckons the market is pricing in either no downside risk to Retail earnings before interest and taxes or a multiple for the Online business which it views as stretched given Online key performance indicators and the latest app download trends from its UBS Evidence Lab study.
The bank has cut its valuation multiple for the Retail business from 8x to 5x EBITDA to reflect the regulatory risk, and this drives the target price cut and rating downgrade.
“With increasing regulation and volatility of sports results, coupled with current valuations, we believe it prudent to have a neutral exposure to the sector with clear preference for Ladbrokes Coral,” UBS said.
UBS said data shows that for William Hill in the UK, the share of app downloads has fallen from 22% in the first half of 2014 to just 10% in the second half of 2016.
The bank said it continues to prefer Ladbrokes Coral, which it rates at ‘buy’.
“We see LCL as having more regulatory risk priced in, while the WMH shares fail to reflect this risk, and our data suggests WMH Online will not show a significant recovery in the near term.”