Davy Research

Paddy Power Betfair

Updating forecasts for regulatory and tax changes in Australia and UK; US assumed to broadly break-even over next 3 years
Gaming
Paddy Power Betfair

DAVY VIEW

We update our forecasts for the regulatory and tax developments announced in the UK and Australia over the last month. Our revised figures reflect the Q1 trading update in early May as well as the cash flow implications of both the FanDuel acquisition and the commenced share buy-back programme. Our new estimates imply that, absent US sports betting or further M&A, the group is unlikely to materially grow earnings between 2017 and 2020, with gaming taxes and regulatory changes offsetting underlying EBITDA growth of 6% per annum. By any historic measure, the group’s valuation now looks expensive (15.6x 2019 EBITDA, 21.1x 2019 P/E) but this obviously excludes the value of the US option. What that option is worth depends entirely on shareholders’ investment time horizon.

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  • RATINGS AND PRICE CORRECT AT TIME OF ISSUE


  • Paddy Power Betfair

    Closing Price: 864500p

  • RATING 29/08/17

  • PREVIOUS RATING 18/09/15

    Outperform

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