View from the City: Market reacts to the UK's challenging regulatory landscape
Richard Stuber, director, travel and leisure research at Numis Securities Limited, analyses the impact of the UKGC's consideration on limiting online stakes
No love was lost between the APPG and the gambling industry on Valentine’s Day when it was reported that the Gambling Commission would consider limiting online stakes with a decision to be made within the next six months, in addition to potential bans on VIP accounts. Unsurprisingly, share prices took a dive, down 3-8% on the day.
The UK regulatory environment remains challenging with negative media reports creating repercussions on a near weekly basis; sporting bodies disassociating themselves with gambling operators (eg. ending shirt sponsorships) being a case in point. It all means that the gambling operators are (correctly) looking to diversify geographically and while the UK is not alone in introducing headwinds for the industry, it at least means that its share price by virtue of less exposure to a single market should be less volatile.
This is one of the reasons why more geographically diverse operators (Flutter, GVC) have significantly outperformed the less diverse (William Hill, 888, Gamesys) over the last year and why consolidation in the sector remains on most CEO agendas.
The US remains a big opportunity and, with the exception of the UK, most eyes are firmly on this. FanDuel has surpassed expectations, with leading market shares across the newly regulating states and the market is clearly rewarding Flutter accordingly (top performer year to date). However, it remains to be seen if its pending acquisition of The Stars Group will accelerate this or be a distraction in the year ahead, no doubt we will hear the former from management when it reports its full year results this week. And as soon as results season is behind us, the annual exodus to Cheltenham will be upon us where predicting winners is even harder on the turf than it is in the market.