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17 August 2011

Gaming And Financial Market Report: Investors take a flutter on Bwin.party bid talk - 16th August 2011

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Takeover talk was on the cards for Bwin.party yesterday, as investors mulled over whether to take a gamble on the online gaming group after rumours emerged it could be in line for an approach from the US.

The company has existed in its current form only since March, when the merger between PartyGaming and Austria's Bwin was completed. Since then, however, a steady slide – exacerbated by the sharp falls seen across the markets in the past few weeks – has resulted in its share price plummeting by 45 per cent.

The move has prompted chatter that the world's biggest listed online gambling group may become a target, and yesterday vague speculation suggested the casinos group Wynn Resorts, whose chief executive is the Las Vegas billionaire Steve Wynn, could be a potential aggressor.

With the gossip claiming a possible bid could reach as high as 170p a share, Bwin.party managed to touch 107.8p during trading before closing at 105.7p, a rise over the session of 1.7p.

Not everyone agreed with the chatter, however, with one trader saying acquisitions in the sector were unlikely until there was further clarification over the potential regulation of online gambling in the US.

The recent rumours came after mutterings last week suggested potential aggressors for Bwin.party could come from closer to home, with William Hill – up 1.9p to 224p – one of the names linked.

Those in the City returning to their desks after the FTSE 100's volatile movements last week would not have been blamed for being somewhat fearful over what the days ahead would hold, yet the top-tier index ended up powering forwards 30.55 points to 5,350.58, its third consecutive session on the rise.

Nonetheless, traders were still cautious. "We are not out of the woods yet," said one, who added that he would feel more confident if the banks managed a sustained rally as well. That was certainly not the case yesterday as – with nerves raised ahead of today's key meeting between German Chancellor Angela Merkel and France's President Nicolas Sarkozy on the eurozone crisis – the sector was left in the red.

Following reports suggesting "ring fencing" proposals could be tougher than anticipated, Barclays dropped 3.85p to 183.35p, while Lloyds Banking Group was 0.59p behind at 33.23p. Meanwhile, HSBC fell 4.6p to 547.2p despite being picked by JP Morgan Cazenove as one of the more attractive stocks after the recent sell-off.

Saying that "equity markets are oversold and [we] see many signs of panic", the broker added that "indiscriminate selling is offering great opportunities if one can look through the current extreme volatility."

Also among its picks were Amec, which finished 43.5p stronger at 949p, and Xstrata. The latter was lifted 21.5p to 1,092.5p, and – with data from Japan showing its economy for the second quarter had shrunk less than feared – the rest of the miners were also rising.

SABMiller pushed up 15p to 2,105p after Nomura raised its glass to the Grolsch brewer and toasted its emerging markets exposure. Cutting its growth expectations for the amount of beer consumed in Western Europe and US, the broker pointed out that around 84 per cent of SABMiller's profits come from outside these regions and raised its recommendation to "buy" as a result.

However, Nomura's analysts were less keen on Diageo, dropping its advice to "neutral", thanks to its new estimates that spirit volumes Stateside will rise only 1 per cent next year, although the owner of Smirnoff vodka and Bell's whisky still ticked up 11p to 1,189p.

Down on the FTSE 250, there was a definite appetite for Domino's Pizza as the pizza delivery company – recently the subject of bid rumours – surged forwards 24p to 486.8p, helped by Peel Hunt upgrading its rating to "buy".

As well as claiming that investors now have "a rare second chance to buy into Domino's iconic marketing enterprise", the broker's analysts added that they would "also take seriously recent social developments which, even after calm has been restored, may result in a subtle shift between the considerations for going out as opposed to staying at home".

The wooden spoon on the mid-tier index was taken by Michael Page, with the recruiter dropping sharply as it released its interim results. The company ended up shedding 32.4p to finish at 368p after saying it was being knocked by hiring freezes among the European banks, several of which have recently announced large job losses.

It was a good session for the explorers operating off the coast of the Falkland Islands, with Rockhopper increasing its estimates for its Sea Lion discovery. As a result it spurted up 19.25p to 237p on the Alternative Investment Market, while Desire Petroleum – which operates in the same region – was 2.25p higher at 19.25p.


Sportingbet chatter a rare ray of light in a gloomy market; UK Report...

Takeover tittle-tattle engulfing the internet gambling industry provided a welcome distraction on an otherwise miserable morning in the markets today.

Sportingbet, at present being courted by Ladbrokes, rose 3.3p to 53.7p as investors bet that a deal is imminent. Sportingbet's rival GVC Holdings said it is in exclusive discussions with the company about buying its Turkish language website. According to Evolution Securities, a sale of the site would "pave the way for a Ladbrokes takeover [of Sportingbet]."

Recycled bid speculation also pushed Bwin.party Digital Entertainment into first place on the FTSE 250 winners' list. The ludicrously named gambling group is rumoured to be in the sights of either bookmaker William Hill or a predator from across the Atlantic, Wynn Resorts. Gossips named a price of up to 170p per share for an approach: that's already 10p more than they were dreaming about last Friday. Bwin.party, formed from the merger of PartyGaming and Austria's Bwin, surged 7.4p to 113.1p.

UBS also gave the stock a boost, noting that it is trading at levels last seen during the market panic which ensued after the collapse of Lehman Brothers. That is, according to the big-hitting bank, despite the prospect of €55 million (£48.3 million) of "merger synergies", the demise of a major rival (Full Tilt Poker) and better-than-ever prospects for re-entering the US poker market.

But analyst Simon Whittington added that first-half results at the end of the month are likely to be lacklustre and may provide an even better buying opportunity. He is a buyer of Bwin, and has a 185p price target.

Shares in London ended their three-day winning streak after disappointing German GDP data renewed investors' fears for global growth. The FTSE 100 fell 55.16 points to 5295.42, dragged down by mining stocks because of their exposure to economic growth. Xstrata dropped 35½p to 1057p, Kazakhmys lost 28p to 1022p and Chilean copper producer Antofagasta shed 34p to 1230p.

Car parts maker GKN was the worst performer on the top flight though, off 7.5p at 194.7p, as auto stocks were sold-off amid concerns that the economic slowdown will hit demand.

Only a smattering of blue-chips managed to post any gains. They were mostly "safe haven" stocks: drug-makers Shire and GlaxoSmithKline ticked up 14p to 1965p and 5p to 1282p respectively, and gold miner Randgold Resources climbed 60p to 6240p.

Recruitment firm Harvey Nash was 4p up at 72p as investors applauded a 40% jump in first-half profits. Polo Resources surged 0.4p to 5.3p after doubling its proposed special dividend to 2p per share. It comes after the mining investment vehicle sold its stake in Caledon Resources.


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