Unibet Slumps as SEB Cuts to Hold on Tax Rules: Stockholm Mover

Unibet Group Plc, the Swedish-listed, Malta-based online gaming company, fell the most in more than a month in Stockholm trading after SEB AB said new tax rules will hurt earnings and cut its recommendation to hold.

Unibet declined as much as 7 kronor, or 3 percent, to 229 kronor, its steepest intraday drop since Jan. 25. The stock was down 2.3 percent as of 12:24 p.m. Swedish time, with volumes at 26 percent of the daily average in the last three months.

“Recent multiple expansion implies that the market underestimates the adverse earnings impact and additional risks associated with upcoming regulation,” Stefan Nelson, an analyst at SEB in Stockholm, wrote in a note today. “We are concerned that Unibet’s share price will be burdened by the upcoming regulation in key markets, with a gradually lowered risk premium only partly offsetting an anticipated earnings decline.”

SEB, which cut its rating on Unibet from buy and kept its 250-krona price estimate on the shares unchanged, said today that it expects online gaming to be regulated in the Netherlands in 2015, Sweden in 2016 and in Norway in 2017. In Sweden, SEB forecasts a 61 percent decline in Unibet’s earnings before interest, taxes, depreciation and amortization in the first year after new online gaming tax regulation is introduced, it said.

“We see several risks associated with markets facing regulation: gaming taxes could vary from the 20 percent of gross winnings we assume,” Nelson wrote. “There is also the risk that casino games -- 40 percent of Unibet’s gross winnings -- will not be legalized in some countries, as it is considered a more dangerous product than sports-betting and poker.”

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