Proactive Investors - Ladbrokes owner Entain PLC (LON:ENT) saw its shares sink 6% on Thursday after it said it would suffer a £40 million hit in 2024 due to changes to slots in the Netherlands and the UK.
Stake caps on online slot games are set to be introduced in Britain as part of the government’s gambling reform, while in the Netherlands tighter deposit limits are set to be introduced within the coming months.
Entain therefore predicts underlying earnings will drop by £40 million in the 2024 financial year.
Shore Capital analysts have kept their forecasts unchanged despite the hit, predicting underlying profits of £1.03 billion.
It follows the betting operator reporting underlying profits of £974 million for 2023, lifting ahead of analysts’ estimates of £970 million, but falling back on 2022’s £994 million.
BetMGM, the group’s US-focused joint venture with MGM Resorts, recorded a loss of £43 million, marginally beating out forecasts and improving on the prior year’s loss of £194 million.
Total net gaming revenue lifted 11% to £4.76 billion, while the US sportsbook generated US$1.96 billion, a 36% year-on-year increase.
Analysts estimated a 14% market share for BetMGM, with it now available in 28 states and via a newly launched app.
Shore Capital predicts it will produce underlying earnings of US$500 million by the end of 2026.
Analysts believe to lift Entain shares it needs digital growth to return to market rates of around 6-8%, while also making market share gains in BetMGM.
“Although we concede this leaves it a bit jam tomorrow as an investment case, today’s update does offer some encouragement against these targets, on a much-depressed valuation,” said Shore Capital.
The UK broker rates the stock a ‘buy’ despite the share price tumble.