Figures for the value of gambling in the UK, released by gambling regulator the Gambling Commission have shown a continued rise, with the sector currently worth £13.8 billion in the year to September 2016.
For many it may appear an appealing – and profitable – industry, but are casino stocks are gamble worth taking? Investment in gambling stocks have cooled in recent years.
Some point to a changing demographic and different interests of the Millennial generation as a reason. Others take a more socially responsible approach, noting that ethically-minded investors have tended to avoid casino investment and reject so-called ‘sin stocks’.
However, according to Matt High, content editor at Casinopedia.org, the casino industry’s leading news publisher “The appetite for investment in gambling related companies seems stronger than ever. That’s particularly the case in the UK, were the market continues to grow unabated – both in terms of rising land-based casino revenue and the growth of online developers.
“Overseas too, the market is booming. Macau’s growth, which has surpassed the expectations of many, and the resurgence of Las Vegas thanks to a number of proposed building projects, has prompted a continued interest in global casino stock investment.”
UK casino market recovery
One of the major challenges faced by casinos is attracting young people to their tables. While millennials and Gen Y tend to respond well to sports betting, especially football betting, they are not attending casino venues in huge numbers.
The typical market for casino games is still those aged 40 and above. Yet changes in game styles – such as the introduction of video game gambling – and a wider focus on online casinos has started to bring more young players back.
Expansion into international markets has also helped the fortunes of a number of UK casino brands, and the global demand for gambling services has grown too. Drop data for the UK last year suggests that £1 billion was won by operators – an increase to 13.5% in total.
This suggests that investors might see strong returns on their stake. We took a look at some leading British casino brands and how their stocks are currently performing, helping UK investors make a more informed decision.
Rank Group: RNK (LSE)
UK-based Rank is one of the most recognisable names in UK gambling sector today. Responsible for the likes of Mecca Bingo and also of Grosvenor Casinos, along with its own online brand Rank Interactive, the company has diversified its gambling income through involvement in a number of markets. Stock prices for June are close to the 30-day high at 221.30, and the company has seen a steady rise since May. The RNK market value is currently capped at £864.58 million and the company earned £71.1 million during the 2016/17 financial year. There are no major changes predicted for Rank, and the business is exposed to a wide range of gambling activity and a number of growing market sectors.
Inter Game Tech: IGT (NYSE)
The market for online casino game developers has seen significant growth in recent years with a positive outlook for many leading software companies. International Gaming Technology (IGT) has had a particularly good year. The business, which is known for its innovative approach to the market, made headlines at the end of May thanks to a series of unusually high progressive jackpots that were won at Vegas Casino. While big payouts do, on occasion, make investors nervous, IGT has not been harmed. Stock prices have climbed to a three-month high and currently sit at 18.67 (a 1.25% daily increase). IGT presently boasts a market cap rate of $3.73 and appears to be in recovery after a market slump over 2015 and 2016. New game titles and moves into new and innovative markets are sure to bring further improvements.
William Hill: WMH (LSE)
British bookmaker William Hill has not seen the gains that some gambling companies are reporting, but maintains a steady rise and is still performing within expected averages for the year. It remains a consistent market leader in the field of sports betting, and a unit price of 283.20 on average represents a 0.56% increase in 200-day profits. A £2.43 billion market cap places William Hill in the top end of the gambling market, and further expansion into Europe and Australia ensure it has a major influence on betting consumers.
However, regulatory pressure is on the horizon, with the government pledging to consider the future of fixed odds betting terminals, and a potential cutting of the maximum bet from £100 to £2.
Paddy Power Betfair: PPB (LSE)
Irish-British bookmaker Paddy Power is seeing a different stock landscape to many of its rivals due to a somewhat turbulent year. However, it is to be noted that overall profits remain up and there is still much confidence in the business.
The company has a current trading high of 8,485,000 and an annual dividend yield of 1.85%.
May saw a drop in fortunes for the betting firm, but there has been a steady recovery since. Prices sit at 1.20% against daily trading highs and shares in the firm has seen a boost in response to growing revenues and exposure to both online and high street betting operations.
Net-Ent: NET-B (STO)
While not a UK developer, Swedish-based NetEnt is certainly worth considering right now. The game-maker has recently launched a huge range of new slot games, available at many online casinos, which offer fresh modern gameplay and which are achieving plenty of attention as a result.
As a result, finances for the developer look strong this year. Unit prices reached a 72.05 high point this week, representing a significant improvement over five years. With potential profits about to increase through new games licenses, Net-Ent is a good bet for UK investors.