Believe it or not, but boxing could be behind the ongoing fortunes of William Hill shares. The gambling group has seen the bulk of its revenue growth to date stemming from punters gambling on the Mayweather-McGregor bout. It has been hailed as the richest fight in history.
But William Hill shares also stand to benefit from a rebound in UK retail gambling revenues, especially as income from fixed odds betting terminals continues to rise.
William Hill shares: online gambling could hold key
Online seems to hold the key for William Hill. It has been behind the curve compared with the success of some other digital only platforms, but in the 17 weeks to date in the second half of this year, the amounts bet rose by 13%.
The costs of winning and doing business are higher however and have been nibbling away at William Hill’s profit margins. The cost of sales is higher, particularly when you factor in the addition of a horse racing levy and point of consumption tax on gaming free bets.
But it is the Mayweather-McGregor fight back in August which has made an impressive impact on US numbers for William Hill. Amounts wagered rose 33% and net revenue was 28% higher.
“Undoubtedly we can put a large chunk of this improvement down to the Mayweather-McGregor fight in Las Vegas in August,” observes Neil Wilson, Senior Market Analyst with ETX Capital. “However, with the potential for US sports betting liberalisation next year, William Hill is looking very well-placed to exploit the opportunity when it comes.”
Merrill Lynch gives William Hill 55% of the Nevada sports betting business. YTD US revenues are 31% higher. Elsewhere things are tougher for William Hill: Australia, for example, is getting harder, particularly as the Australian government has passed a credit betting ban, which comes into force in February next year. Australian states are also mulling over the idea of a point of consumption tax.
Regulatory clampdown – real or imagined?
“With the regulatory clampdown it’s all about managing the decline and this means cost control is paramount,” adds Wilson. “Like the UK’s Triennial Review, however, the William Hill share price already reflects the worst of the Australian regulatory impact.”
There is also hope that the UK government will not be as tough on the whole fixed odds betting terminal business as some analysts might have first thought. This is what analysts at Barclays and Investec are obviously hoping.
A better picture of the future British gambling regime could considerably boost the William Hill share price. Investec also says William Hill shares could be boosted if the group decides to go shopping for other companies.
At the time of writing William Hill shares were trading in line with Friday’s close at 275.50.