Morgan Stanley upgraded its rating for the FTSE 250-listed bookmaker to ‘equal-weight’ from ‘underweight’, mainly on valuation grounds.

Morgan Stanley has turned more positive on gaming group William Hill PLC (LON:WMH) following a betting shop field trip by its analysts.

In a sector review note to clients, they upgraded their rating for the FTSE 250-listed bookmaker to ‘equal-weight’ from ‘underweight’, mainly on valuation grounds.

Overall, the analysts said: “While we continue to see Retail as a mature industry in steady decline, and we are concerned about a step change down in profits from the outcome of the Triennial Review, we think these concerns are close to being fully reflected in the share prices”.

They added: “The bright spots on the trip were the ongoing development of omni-channel, the long-term implications for value creation as Retail becomes a source of customer traffic for online, and the digitisation of the betting experience.”

For William Hill, they said: “We think the valuation now reflects most of the structural, regulatory and duty risks inherent in the Retail business and upgrade to Equal-weight.”

“In addition, the shares are supported by a 5% 2017e dividend yield (more than 2x covered by FCF) and a share buyback (4% to EPS).”

In early morning trading, William Hill shares were up over 2%, or 5.8p at 274.3p.

The analysts also reiterated their ‘overweight’ ratings on peers Ladbrokes Coral PLC (LON:LCL) and Paddy Power Betfair PLC (LON:PPB).

Ladbroke’s FTSE 250 listed shares were also up over 2%, or 2.8p at 127.10, but FTSE 100-listed Paddy Power was flat at 8,535p.