European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 4 January <a href="https://www.smartkarma.com/entities/entain-plc" target="_blank" data-smartkarma-citation="entities:23926:1" rel="noopener">Entain (ENT LN)</a> (formerly GVC Holdings) confirmed in a <a href="https://entaingroup.com/newsrelease/statement-in-response-to-press-speculation/" target="_blank" rel="noopener">statement</a> that it had received proposals from <a href="https://www.smartkarma.com/entities/mgm-resorts-international" target="_blank" data-smartkarma-citation="entities:16227:1" rel="noopener">MGM Resorts International (MGM US)</a> regarding a possible offer. The combination could create an operator with a large both online and physical presence through retail shops and casinos.
<ul>
<li>The last offer has been 0.6 MGM US x 1 ENT LN.</li>
<li>
Based on closing prices on 31 December 2020 (last trading day prior to the announcement), the proposal represents 1,383p per Entain share.
<ul>
<li>Valuing the equity of Entain at c. £8,092 mn, implied EV of c. £10,206.2 mn and a premium of 22% to Entain’s share price.</li>
<li>13x EV/Fwd EBITDA.</li>
</ul>
</li>
<li>
Entain's shareholders would own approximately 41.5% of the combined company.
</li>
</ul>
The shares of Entain closed on 4 January at 1,420p, 25.3% higher than the previous close.
The move comes just a few months after Entain’s UK rival William Hill agreed to be taken over by its Las Vegas-based partner Caesars Entertainment. Entain shares shot up 25% over 2020, and if that rally continues, MGM or any other prospective buyer would be forced to pay up for Entain.
The key is the valuation of BetMGM and its future prospects in a in a very competitive market populated by deep-pocketed players.
The proposed offer price represents c. 8.0-9.0x trailing EBITDA, vs. 10.0x for comps and c. £3.5 bn for the stake in BetMGM.
<ul>
<li>This offer, as the Board says, seems to undervalue the business.</li>
<li>I view MGM's move as an opening gambit, and believe there is room to sweeten the offer.</li>
</ul>
By using the median of comparables 14.6x EV/Fwd EBITDA, the implied valuation for Entain would be 1,537p.
<ul>
<li>This is 11% above MGM's offer.</li>
<li>Let us keep in mind that BetMGM does not currently contribute to the bottom line, for now, it is a wild card.</li>
</ul>
By using Entain's projections for the US ($20.3 bn by 2025, and expected market share 15-20%), I will use the mid point, 17.5% share for a total revenue of $3.55 bn by 2025. By applying a 2.8x EV/Fwd Revenue multiple, in a blue sky scenario, the valuation of the JV could reach $9.94 bn, of which $4.97 bn for Entain (equivalent to £3,658 mn, not too far away from MGM's implied valuation, or 625p per share).
Therefore my valuation for Entain would be between the base case of 1,537p and 2162p. Taking the mid point would give a longer-term TP of 1,850p.
Recommendation is LONG Entain, or set up the spread in the usual way, although the offer is likely to improve. I would not rule out a dawn raid by private equity.
By using the last closing price of MGM, the shares of Entain are trading 6.9% above the indicated terms.

On 4 January Entain (ENT LN) (formerly GVC Holdings) confirmed in a statement that it had received proposals from MGM Resorts International (MGM US) regarding a possible offer. The combination could create an operator with a large both online and physical presence through retail shops and casinos.

The last offer has been 0.6 MGM US x 1 ENT LN.

Based on closing prices on 31 December 2020 (last trading day prior to the announcement), the proposal represents 1,383p per Entain share.

Valuing the equity of Entain at c. £8,092 mn, implied EV of c. £10,206.2 mn and a premium of 22% to Entain’s share price.
13x EV/Fwd EBITDA.



Entain's shareholders would own approximately 41.5% of the combined company.


The shares of Entain closed on 4 January at 1,420p, 25.3% higher than the previous close.
The move comes just a few months after Entain’s UK rival William Hill agreed to be taken over by its Las Vegas-based partner Caesars Entertainment. Entain shares shot up 25% over 2020, and if that rally continues, MGM or any other prospective buyer would be forced to pay up for Entain.
The key is the valuation of BetMGM and its future prospects in a in a very competitive market populated by deep-pocketed players.
The proposed offer price represents c. 8.0-9.0x trailing EBITDA, vs. 10.0x for comps and c. £3.5 bn for the stake in BetMGM.

This offer, as the Board says, seems to undervalue the business.
I view MGM's move as an opening gambit, and believe there is room to sweeten the offer.

By using the median of comparables 14.6x EV/Fwd EBITDA, the implied valuation for Entain would be 1,537p.

This is 11% above MGM's offer.
Let us keep in mind that BetMGM does not currently contribute to the bottom line, for now, it is a wild card.

By using Entain's projections for the US ($20.3 bn by 2025, and expected market share 15-20%), I will use the mid point, 17.5% share for a total revenue of $3.55 bn by 2025. By applying a 2.8x EV/Fwd Revenue multiple, in a blue sky scenario, the valuation of the JV could reach $9.94 bn, of which $4.97 bn for Entain (equivalent to £3,658 mn, not too far away from MGM's implied valuation, or 625p per share).
Therefore my valuation for Entain would be between the base case of 1,537p and 2162p. Taking the mid point would give a longer-term TP of 1,850p.
Recommendation is LONG Entain, or set up the spread in the usual way, although the offer is likely to improve. I would not rule out a dawn raid by private equity.
By using the last closing price of MGM, the shares of Entain are trading 6.9% above the indicated terms.

Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

Equity Bottom-Up

<ul>
<li>LVS stock is undervalued compared with best peers even after a nice 4Q167 earnings beat.</li>
<li>The sale of its Bethlehem, PA property liberates US$1/3b toward its growing Japan cash stockpile.</li>
<li>Continued strong numbers out of Macau and ever-growing sentiment that it stands as leading candidate for Japan IR license should begin showing more dramatically in the trade.</li>
</ul>Theory of this exponential leap in guidance: Note all amounts in USDAt writing, Las Vegas Sands ( <a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807:1">Las Vegas Sands Corp (LVS US)</a> sits at $74…


LVS stock is undervalued compared with best peers even after a nice 4Q167 earnings beat.
The sale of its Bethlehem, PA property liberates US$1/3b toward its growing Japan cash stockpile.
Continued strong numbers out of Macau and ever-growing sentiment that it stands as leading candidate for Japan IR license should begin showing more dramatically in the trade.
Theory of this exponential leap in guidance: Note all amounts in USDAt writing, Las Vegas Sands ( Las Vegas Sands Corp (LVS US) sits at $74…

Las Vegas Sands: We're Raising Guidance from $80 to $95 Post Q3. Its a Bet on a Fortress Company

Thematic (Sector/Industry)

<ul>
<li>Genting Berhad has become the most geographically active developer of integrated resorts in more jurisdictions than any of its peers.</li>
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Genting Berhad has become the most geographically active developer of integrated resorts in more jurisdictions than any of its peers.
It's in the mix all over Asia and the US, expanding existing properties and financing new ones.
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Should Genting's Voracious Global Appetite for Expansion Trigger a Blinking Caution Light?

South China Assets Holdings / Equity Bottom-Up

<ul class="ember-tether-target ember-tether-enabled ember-tether-element-attached-top ember-tether-element-attached-left ember-tether-target-attached-top ember-tether-target-attached-right"><li><a href="https://www.smartkarma.com/entities/182" target="_blank" data-smartkarma-citation="entities:182:1">Sands China Ltd (1928 HK)</a>, the unit of parent <a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807:1">Las Vegas Sands Corp (LVS US)</a> holding all its Macau properties will be the biggest beneficiary of new Taipa-Pac On ferry Terminal due to open in May.</li><li>Its focus on mass, room capacity, total tables available and location of its must-see new Parisian on the Cotai positions it to ramp up its revenue share of a strongly recovering Macau gaming market.</li><li>Overall market gross gaming revenue rocketed 18.1% YoY in March way above consensus to MOP$2.12bn, marking the 8th straight month of recovery propelled both by mass and VIP business segments.</li></ul>

Sands China Ltd (1928 HK), the unit of parent Las Vegas Sands Corp (LVS US) holding all its Macau properties will be the biggest beneficiary of new Taipa-Pac On ferry Terminal due to open in May.Its focus on mass, room capacity, total tables available and location of its must-see new Parisian on the Cotai positions it to ramp up its revenue share of a strongly recovering Macau gaming market.Overall market gross gaming revenue rocketed 18.1% YoY in March way above consensus to MOP$2.12bn, marking the 8th straight month of recovery propelled both by mass and VIP business segments.

Sands China Will Ride the New Pac-On Ferry to a Strong Upside as Service Kicks off Next Month

Founder-CEO & Chief Analyst, Real Estate Foresight

Robert Ciemniak

Founder-CEO & Chief Analyst

Real Estate Foresight

Since 2012, REF has been helping investors with market research, project due diligence, and strategy development. This has ranged from detailed assessments and estimates on distressed developers' project portfolios to market due diligence on specific projects to macro-level questions linked to demand for commodities. The unique combination of the housing markets and developer data from data partner China Index Academy in Beijing, primary research, and technology-powered alternative data collection from public sources result in a valuable content set used in REF analytics and reports.

Predictive Analytics for China Property

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United States

MGM Growth Properties LLC operates as a real estate investment trust. The Company engages in the acquisition, ownership, and leasing of destination entertainment and leisure resorts, including casino gaming, hotel, convention, dining, retail, and entertainment properties. ... More

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Mgm Growth Properties (MGP US)

MGM's Prospective Offer for Entain

MGM's offer, an opening gambit, seems to undervalue ENT. Key is the valuation of BetMGM. My valuation for ENT ranges between 1,537p and 2162p. Mid...

Jesus Rodriguez Aguilar

Las Vegas Sands: We're Raising Guidance from $80 to $95 Post Q3. Its a Bet on a Fortress Company

LVS stock is undervalued compared with best peers even after a nice 4Q167 earnings beat. The sale of its Bethlehem, PA property liberates US$1/3b...

Howard J Klein

Should Genting's Voracious Global Appetite for Expansion Trigger a Blinking Caution Light?

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Howard J Klein

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Howard J Klein

Global Capital Trends In Real Estate In 2016

Three quick takeaways from the annual 2016 data on commercial property sales transactions - income producing assets in office, retail, industrial,...

Robert Ciemniak

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