The turmoil among online gaming companies is good news for Ladbrokes.
In with the old, out with the new! That's what the gaming market is like at the moment.
It would have been frustrating for solid and established companies to see themselves over taken by young upstarts sporting the latest, most trendy, newfangled technology.
This was the case a few months ago for old fashioned bookies with their high-street betting shops. One such is Ladbrokes
(LSE: LAD)
, which released a trading update today.
Ladbrokes was looking staid compared to the online glamour boys of Partygaming
(LSE: PRTY)
, 888
(LSE: 888)
or BETonSPORTS
(LSE: BSS)
.
But how quickly things change. This year officers of British gaming companies were arrested in the US. Then the US Senate voted for a law that would make it illegal to transfer money to gaming sites.
As a consequence, the shares of online gaming sites went into freefall and the boring old bookmakers started to look like the safer bets.
Since its demerger from Hilton Hotels, Ladbrokes is clearly one of the dominant bookies in the UK. Today's update show that is continues to be so, with revenues up across the board but especially in eGaming and Telephone Betting.
The turmoil among online companies is good for Ladbrokes. It means that it is in a position to make acquisitions and grab market share. On 6th November it confirmed that it was looking at 888, although it had not decided whether any approach would be made.
Ladbrokes is anyway intending to expand. It wants to apply for casino licences under Britain's new gaming legislation to add to the casino and sports bar it is currently operating at the Paddington Hilton.
Free of the problems that is dogging businesses taking bets from US based customers, Ladbrokes has been expanding overseas, especially in Italy and Russia. It also has designs on the Spanish market.
All this sounds good. However, Ladbrokes isn't without risk. The competition online may well become far more fierce. In the poker market, we've already seen that customer acquisition and retention has become more expensive. This means margins may be squeezed. Margins may also be squeezed by innovative services such as bet matching services like BetFair where punters bet against each other rather than against a bookie. Such services can often offer better odds.
Ladbrokes' share price doesn't look that cheap at the moment. The prospective price-to-earnings ratio is 15.9 and the historic price-to-cashflow ratio is 13.
While I have no doubt that Ladbrokes will continue to do what it does very well, the price means I won't be buying just yet.
