LIVERPOOL stockbroker Panmure Gordon has improved its forecasts for Walton-based betting group Sportech and claims it will be ready to pay dividends to shareholders from 2013.
The broker bases its views on an evaluation of Sportech’s US operations which, it contends, are “significantly undervalued” on an “as is basis”.
Sportech acquired New York-based Scientific Games Racing, since renamed Sportech Racing, in October 2010 in a £51.4m deal.
It provides betting at horse racing tracks and other locations in the US as well as a Tote business, but an impending shake-up of betting regulations across America provides potential for further growth, says Panmure Gordon analysts Simon French and Lindsey Kerrigan.
They have increased their potential target share price for Sportech from 67p per share to 71p per share which, they say, implies about 28% upside potential. They recommend Sportech’s stock as a ‘buy’ to investors.
The report highlights several possible risks to Sportech’s business, including regulation covering different geographical locations, in particular its business in the Netherlands where its exclusive licence to operate horse racing betting expires in 2013; problems with taxation, such as a 15% gross profits tax due to be introduced on all online gaming activity in the UK in December 2014; competition in e-gaming which offers “few barriers to entry, but high barriers to success”; fraud by punters using false identities or counterfeit payment methods; and foreign exchange volatility.
But the authors say these are balanced by other mitigating factors.