William Hill upgraded by Morgan Stanley
Morgan Stanley has adopted a more positive outlook on William Hill PLC following a series of betting shop visits by its analysts.
In a sector review note to clients, Morgan Stanley upgraded their rating for the bookmaker on the grounds of valuation to ‘equal-weight’ from ‘underweight’, commenting: “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).”
However, the analysts remained cautious about the retail sector of the industry: “While we continue to see Retail as a mature industry in steady decline, and we are concerned about a step down in profits from the outcome of the Triennial Review, we think these concerns are close to being fully reflected in the share prices.
“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.”
William Hill shares were up over 2% – or 5.8p at 274.3p – during early morning trading.
The shares of Ladbrokes Coral PLC, who was given ‘overweight’ ratings by Morgan Stanley, were also up over 2%. However Paddy Power PLC, who was given the same rating, was flat at 8,535p.
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