Source: Sharecast
Berenberg said Entain had delivered solid first-half results on 12 August, although it noted the group's share price has remained weak due to UK taxation noise, which it thinks is "overdone".
The German bank said Entain's H1 results gave it further confidence in Entain's ongoing growth and had reaffirmed its view that the shares should re-rate as this continues to be delivered.
"The solid results drive upgrades to estimates; however, the shares have been under pressure since the release due, we think, to heightened concerns over taxation in the UK. A report by a think tank, backed by ex-chancellor Gordon Brown, has called for higher taxes on gambling – online casino to 50% (from 21%); machine gaming duty to 50% (from 20%); and betting duty to 25% (from 15%) excluding racing – which led to a wider sector sell-off," said Berenberg.
"The impact of tax increases to this level would cull most industry profits and likely lead to a significant shift to the black market. We see this as unlikely. In reality, a more proportionate increase to c25% across the board, for example, could see a c10% impact pre-mitigation to group EBITDA, but evidently that would be a lower impact to group EBITDA including BetMGM."
Berenberg values Entain using a sum of the parts model, which yields a value per share of 1,200p comprised of 785p for the ex-US business and 415p for the US business.
Reporting by Iain Gilbert at Sharecast.com