Analyst: Entain betting on independent future with Enlabs bid, following MGM Resorts interest

Harry Barnick, senior analyst for leisure sector companies at Third Bridge, believes Entain's Enlabs bid shows signs of an independent future.

MGM Resorts International was in talks to acquire Entain but those talks broke down earlier this year, and Barnick believes Entain's plans to acquire Enlabs show it does not have a large US casino operator in its plans.

Barnick was commenting on Entain's Q4 results, after the operator reported profit of £113.8m ($157.7m) for 2020, compared with a loss of £131.2m in 2019; revenue was flat at £3.6bn.

In quotes sent to Gambling Insider, he said: "Having recently increased its bid for Enlabs to SEK 3.7bn ($440m), Entain is betting on its ability to lead its own future independent of a large US casino operator. MGM Resorts walked away from talks to acquire the company after Entain rejected the offer based it significantly undervaluing the business.

"Growth in the US is fundamental to Entain's long-term future. This increasingly competitive market has outperformed expectations and is the key growth pillar for the group."

On Entain's Q4/FY2020 results specifically, Barnick naturally notes the UK retail estate was a drag on results. While investors will also be relieved by its continued online growth, the ongoing review of the 2005 UK Gambling Act may pose another risk for Entain.

He added: "The UK retail estate was a drag on results, declining 36% year-on-year due to forced closures associated with COVID. Entain closed over 300 stores in the UK in 2020, more progress is needed in 2021 to continue to restructure the estate.

"These declines were offset by strong growth in the online channel, with total online NGR up 27% vs 2019. While this result will be a relief to investors, the ongoing review of the 2005 Gambling Act in the UK poses a significant risk to online revenues and profits."


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