Ladbrokes

Thursday, 23rd March 2017 16:06 - by Rajan Dhall

Ladbrokes have been performing very well so far in 2017 but as you can see from the chart there is still some way to go before we reach the highs of last year. 

Even though the company has been doing well it may have to make some provisions in its upcoming earnings next week. The UK government may be looking to change rules regarding slot machines. Fitch analyst's note  “The UK government is likely to propose changes to the regulation of gaming machines in the next few months, following the completion of its triennial review,”. The machines, which have a maximum stake of £100, and these machines account for half of Ladbrokes’ profits.

Ladbrokes chief executive Jim Mullen, for his part, stated slashing the stake limit will have a “drastic impact” on London’s 1800 betting shops, which employ more than 9000 people.

Also of note, Ladbrokes must fork out GBP 71mln to the HMRC after losing a long running legal battle over a tax avoidance scheme promoted by one of the Big Four auditing firms and this could be another factor to consider when the earnings report is released.

In spite of all the problems I still feel the company are still in a great position to be profitable and 8/12 analysts have given the stock a buy rating with the average 12 month price objective of GBP 159.91. Also at some stage the Co. may position itself away from the UK as many of the other gambling firms have done in Malta and Gibraltar and this would lead shares to rise even further. From a technical standpoint the 137.50 level may be a sticking point but you can see the upward channel has been well respected so this is a good sign. Following that it seems price has rejected the most recent value are and is looking to establish a higher base maybe at around the 140 area. 

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.