12th May 2014
Brokers are placing their bets on bookmaker William Hill despite the Government’s announcement to hike the duty paid on gambling machines.
Britain’s largest turf accountant, which has a market cap of £3bn and a chain of nearly 1,600 betting shops endured a swift and harsh fall in its share price directly after the Chancellor George Osborne unexpectedly declared in March’s Budget that the Government plans to introduce a new 25% rate of tax, up from 20%, on high stake betting machines.
It was reported at the time that the higher rate of tax would cost the bookie’s £22m a year.
The group, which has seen its shares dive by 17% over the past year has since announced that as a direct result of the new tax rate it has put in place a series of cost-cutting measure which will see it shut 109 shops, putting some 420 employees at risk of redundancy.
But despite the pressure William Hill and the overall sector is under, analysts have stood firm on their upbeat recommendations, with Panmure Gordon, Deutsche, Investec Securities and now The Share Centre all having reiterated their ‘buy’ recommendation on the group’s shares.
Sheridan Admans, investment research analyst at The Share Centre says: “We are optimistic that the attention William Hill has paid to its corporate structure and strategy in various segments of its operation is starting to pay off and recommend it as a ‘buy’ for investors.
“Additionally, the acquisition of three sports books in the US, to form William Hill US, offers investors the potential of a great growth opportunity should regulations there be relaxed. Alongside this a government report at the end of April on fixed odds betting machines in bookmaker shops was not as restrictive as feared.”
Admans points out that the global appeal of events that William Hill covers means they are involved with most major sporting events and investors will acknowledge that the football World Cup taking place in Brazil this summer should benefit the group.