NKTN - playing catch up30 May 2018 11:34
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Motley Fool
GVC is one of my favourite stocks on the London market today. The value this business has been able to create for investors over the past decade is just second to none.
Indeed, according to my figures, the company has produced a total return of 18.9% per annum for shareholders since 2008, that�s enough to turn an initial investment of �10,000 into �56,470, and I believe the group can maintain this track record.
Growing the business
Since inception, GVC has grown through acquisitions, and its most significant deal to date is the purchase of high-street bookmaker Ladbrokes at the end of March. According to a trading update published today, the merger is going well and is now expected to generate savings of �130m per year by 2021, from �100m a year expected previously.
This is not the only bright spot in the update. Total net gaming revenue (NGR) for the period 1 January to 20 May 2018 rose 7%. Online gaming is leading the way with online NGR rising 18% year-on-year in constant currency.
GVC Holdings plc
Sell: 999.50 | Buy: 1,001.00 negative 9.00 (-0.89%)
Graph
Prices delayed by at least 15 minutes.
Unfortunately, gaming revenue from GVC�s UK retail business declined 5% thanks to the cancellation of 12% of horse racing fixtures during the opening months of 2018. And while the company notes the new �2 limit on high stakes betting machines will dent income, management is more excited about prospects in the US where the sports betting market is tipped for take-off after a Supreme Court ruling this month. The group is already the leading B2B provider of sportsbook technology in Nevada, giving it a strong base from which to grow into the rest of the US market.
But despite the opportunities in the US market and the merger with Ladbrokes, shares in GVC currently appear undervalued. In 2018 the online gambling giant is predicted to report profit growth of 41%, placing the shares on a forward P/E of 14.1. Meanwhile, the shares support a dividend yield of 3.6%.
So, despite the headwinds to its operations here in the UK, as online gambling continues to gain popularity around the world, I expect shares in GVC will continue to surge.
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