Ladbrokes Gains as Investec Sees Advances Online: London Mover

Ladbrokes Plc, a U.K. operator of more than 2,000 betting shops, rose the most in six months after Investec Securities recommended buying the shares on growth prospects with its new online sportsbook.

The shares rose as much as 4.1 percent, or 9.1 pence, to 230 pence, their biggest intraday gain since August. The stock traded at 228.1 pence at 1 p.m, giving the company a market value of 2.1 billion pounds ($3.25 billion). About 2.8 million shares traded, 40 percent more than the three month-daily average, according to data compiled by Bloomberg.

“Ladbrokes should be putting the delay in its sportsbook relaunch behind it,” Investec analyst James Hollins wrote in a note today. “On balance we project that the digital platform driven by superior technology, a strong U.K. brand and margin enhancement can drive strong divisional earnings growth.”

Ladbrokes, scheduled to report full-year earnings on Feb. 21, has suffered technology delays to its online development. The company’s U.K. retail earnings before interest and taxes will increase by 17 percent as it benefits from new gambling machines and better yield management, Dublin-based brokerage Goodbody said.

Digital Weakness

“The weakness in digital has been well flaged,” Goodbody wrote in a note to clients today. “Expectations for online earnings before interest and tax are pitched very low at present. We would not be surprised if there was upgrades to this post Thursday’s numbers.”

Ladbrokes will probably report a full year pretax profit of 173 million pounds, according to the median estimate of 19 analysts in a Bloomberg survey. The company had a pretax profit of 134.6 million pounds a year earlier.

“Compounded by positive retail trends and increased shop estate roll out, the group earnings outlook and excellent cash generation now look undervalued,” wrote Hollins, who raised his recommendation to buy from hold and increased the share price target to 250 pence from 165 pence.

The shares have risen 15 percent so far this year while rival William Hill Plc is up 17 percent. Of 26 analysts who share data with Bloomberg News, eight recommend buying the stock, six advise selling it and 12 say hold.

To contact the reporter on this story: Colm Heatley in Belfast at cheatley@bloomberg.net

To contact the editor responsible for this story: Douglas Lytle at dlytle@bloomberg.net

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