Broker snap: William Hill to re-rate strongly, says Panmure Gordon

1st Mar 2013 10:48

Panmure Gordon has reiterated its 'buy' rating and 436p target price for HIgh Street betting shop William Hill after digesting the company's full-year results, the buy-out of its online partner and a rights issue.Pre-tax profits in 2012 came in at £293m, up 22% year-on-year and in line with the upwardly-revised consensus estimate, Panmure said. Meanwhile, current trading is said to be strong. William Hill also announced the exercise of the call option for Playtech's shareholding in William Hill Online (WHO) for £424m, funded by a fully underwritten rights issue of £375m.The broker said: "We think William Hill is paying a sensible price for Playtech's shareholding in WHO (we had estimated £408m) and the strategic rationale is compelling. The rights issue amount is higher than we had anticipated but the group believes it has the 'appropriate capital structure having regard to current trading conditions, potential future developments and flexibility to pursue the stated strategy'.Panmure said that with the acquisition of some of Sportingbet's assets - expected to complete later this month - it still sees a 6.6% rise in earnings per share for 2014 than its current forecast at 31.1p.The shares are trading at 12 times 2014 earnings, compared with sector peer Paddy Power (price-to-earnings [P/E] multiple of 20.7) which has a similar earnings profile."We think the stock will re-rate strongly over the coming months and our 436p target price only implies a 2014E P/E multiple of c14x."Shares were up 7.51% at 435.1p by 11:46 on Friday.BC