Wednesday, 19 September 2012

Sportingbet (SBT) ... GENTs first?

I have a long position in Sportingbet (SBT, mkt cap £300m). I am long because I reckon it to be a good business, in a growing market, ripe for consolidation. On the third point I note some interesting activity announced this morning by Genting (GENT MK, mkt cap MYR33.5bn), the enormous Malaysian gambling group.
 
Genting appears to have announced it's looking to offload its stake in its Australian Casino business, Echo Entertainment (EGP AU, mkt cap AUD3.4bn) for $160m. This may be important for Sportingbet. Genting has been touted in the press as a potential suitor for Sportingbet, see link. An argument against this has been that in the Australian market, a company is apparently permitted to manage a land based casino or an online casino but not both. This ignores the fact that for the moment Sportingbet only does sports betting in Australia so land vs. online casino gaming obstacle is currently moot. But there is undoubtedly ambition on the part of Sportingbet. On today’s move, maybe Genting is freeing up a bit of pocket money and getting its ducks in a row to ease any problems switching from land to online gaming?
 
I would also add that the $160m really is pocket money to Genting; from what I can tell it's forecast to achieve c. £860m in free cash flow this year. Further, once one breaks ranks for Sportingbet, I reckon others follow.
SBT share price
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