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New Mergers Represent New Opportunities in 2016Published January 13, 2016 by Lee R
A new report identifies the best mergers to invest in or watch.
The gambling industry is set for quite a sea-change this year, with multi-billion pound mergers being closed left and right as a rapid shift to online sales takes place.
Investment Report Released
Motley Fool has released an update on the long-term investment appeal of the major competitors in this new merger race.
Paddy-Betfair Merger Intrigue
The report tabs the merger of Paddy Power Plc (LSE:PAP) and Betfair Group Ltd (LSE: BET) as the most interesting new player, with Betfair undergoing a transformation over the past three years to a technology-focused organization driven by exchange gaming, which pits punters against each other in a variety of games.
The newly formed group's profit margins have already surpassed all other competitors except the well established Bet365 in online revenue.
The second half report saw operating profit rise 12% with Paddy Power posting an overall gain of 33%.
This caused more than a warm response from investors, catapulting shares of Betfair up 150% and Paddy Power 78%. With Betfair currently trading at a mind-boggling 45 times earnings and Paddy Power at a 35 P/E, the recommendation to investors is to temper expectations before jumping in with the numbers seen as already reflecting potential growth.
Next to Watch
Another merger of note is Ladbrokes Plc (LSE:LAD) and Gala Coral, which the Fool calls “a high-street behemoth” in light of the 45% of physical betting shops the combined group now holds across the UK bringing in annual revenues of £2.1bn.
Despite the prodigious physical presence, the new company trails both William Hill and the newly combined Paddy Power Betfair online, with both online leaders having focused their resources on online operations.
As far as investments are concerned, the Fool informs that the Ladbrokes CEO has already cut all dividends with an advisory to investors that there will be no profit growth until 2017. Existing liquidity will be invested in expanding the online presence of the group, resulting in a recommendation that investors wait on the sidelines until more details are released. By the same token, online expansion has proven a key driver of growth in general so far.
More Info in Report
The report details prime choices for growth in further detail, providing interesting insight into the iGaming climate for 2016, whether one is looking to invest or not.