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Entain PLC (LSE:ENT) could return more than half its current market value to shareholders through dividends and buybacks by the end of the decade, according to a note from Shore Capital that highlights a sharp rise in cash generation.
Shore Capital analyst Greg Johnson said the owner of Ladbrokes, Coral, Foxy Bingo and a 50% stake in BetMGM is forecast to deliver a “step-change in cash generation”. The broker targets £500 million annually from 2028, driven by profit growth, contributions from BetMGM and the unwind of its deferred prosecution agreement (DPA).
Johnson argued the opportunity is “yet to be reflected in either forecasts or valuation”, adding that the potential free cash flow yield could be around 14% at current levels.
Operational developments in recent trading were cited as supporting evidence. In the first quarter, online volumes rose 10% even as sports margins were weaker. Revenue growth was reported to be tracking within full-year guidance of 5-7%.
Shore Capital expects cash flow to increase from about £150 million last year to more than £450 million by 2028. The improvement is attributed to the end of DPA payments and growing dividends from BetMGM.
On Shore Capital’s estimates, falling leverage could enable around £2 billion to be returned to shareholders via dividends and buybacks over the medium term, equivalent to roughly 300p per share.
If the £500 million annual cash-generation target is achieved, the broker said there would be scope for a rerating. It noted that even with a lower yield, the share price could move closer to £10.
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