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As a former head of Scotch whisky group William Grant, Entain’s new interim chief Stella David should be familiar with the works of Walter Scott. She and Entain shareholders may struggle to look back on perils past and smile, however.
David has been parachuted in to the top job at Entain following the immediate departure of Jette Nygaard-Andersen. Nicknamed “private Jette” for her reliance on non-commercial flights, she had been under pressure over a 38 per cent fall in Entain’s share price this year. Investors had also questioned a costly bolt-on M&A strategy. David will have a rough journey herself to restore confidence.
London-listed Entain’s shares now trade nearly 40 per cent lower — worth some £5bn — than the 2021 level that an MGM Resorts’ all-stock offer had valued it. Just as painful, later that year DraftKings had examined a deal that had valued Entain’s equity at £16.4bn.
To be fair to Nygaard-Andersen, fixing Entain has not been easy. It still suffers a hangover from its former strategy, where it operated in unregulated markets. Entain expects exits from so-called grey markets to shave £100mn off ebitda this year. It will take a £295mn hit from stricter regulation and licensing conditions in its mature UK and German markets.
In December, Entain also agreed to pay £615mn for failing to prevent bribery at its former Turkish business. The payments over four years will hamper its ability to deleverage. Net debt to ebitda, around 3.2 times, should stay there in 2024.
That explains why its forward price/earnings ratio of 15.6 times sits below its five-year average and peer Flutter on 26.5 times.
David must reverse market share losses in key markets, including the US. Its 50/50 US joint venture BetMGM was slower than some rivals to upgrade its technology.
At least punters can use the same account. Previously they had to use a different wallet if crossing state lines. Improvements should pay off, although BetMGM will not generate ebitda above $500mn before 2026.
Those with steady nerves might smile, seeing a buying opportunity in Entain. But they will need to be convinced the losing streak is over.
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