Why I’m Bullish On William Hill plc & NCC Group PLC

William Hill plc (LON: WMH) reported results that warrant careful examination by value investors, and NCC Group plc (LON: NCC)’s results tomorrow are likely to show solid performance.

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William Hill (LSE: WMH)’s trading statement early this morning did little to its share price, as the company’s share traded largely in line with the broader, falling, market. This in my view masks the fact that there is enticing upward potential, even though there is a lot to watch out for in the process.

Operating profits on target

The bookie’s group revenues fell 1%, but full year adjusted operating profits came in on target, £290m. The revenues were £1.59bn.

The company’s online division delivered 14% net revenue growth (£116m), and I believe this will continue to expand, especially if last December’s launch of its ‘Macau’ online casino emulates the success of its Vegas casino game. The latter reported 2015 Q3 revenue growth of 19% vs non-Vegas casino revenue of -17%.

Australia performance fundamentally sound

William Hill, the only UK gambling operator still not having found a merger partner and hence somewhat prone to hefty tax bills, suffered foreign exchange losses, as its Australia numbers show. But the company has made its mark in this notoriously difficult market by introducing its voice recognition technology to allow punters to confirm wagers placed via smartphones, something that will enhance its brand in the long term. The market disruptive technology has already been copied by its competitors.

Low p/e

Analysts’ average target price of the share is £407.47. With a P/E of 18, William Hill company is offering bargain value at the moment. So much so that at this level, it is a takeover target — also a reason why this stock needs watching.

Another risk is the Australian dollar sliding further (it is down 3.6% this year already). Bad exchange rates were a burden on William Hills’ profits, so keep an eye out for this.

Otherwise, I believe that this is a great value share at an incredibly low price.

NCC Group

Tomorrow (Friday, January 14th), cybersecurity company NCC Group (LSE: NCC) is reporting first half results, and its most recent trading update covering the first four months indicates that the group is going to be right on target.

NCC Group was included into the FTSE 250 on December 29th, having just raised £126 million in a share issue to buy Dutch company Fox-IT, which is intended to improve NCC’s threat analysis and fraud detection services.  

Revenue growth of 48%

Iin the four months until September, NCC posted revenue growth of 48% at £84 mn. Organic growth reached 17%, due mostly to sales jumps of NCC’s escrow and assurance services. By comparison, in 2014 group revenue grew 13% between May and September, and organic growth reached 13%.

In its trading statement, the company indicates its cash generative escrow business usually experiences its weakest trading period in May until September, but that it has seen especially strong activity during the period this year. NCC’s assurance division booked double digit organic growth driven by an expanding market. The company’s domain services division is expected to be its weakest link.

Fox-IT takeover

Fox-IT, which it just acquired, is a Dutch company employing the odd ex-spy and brimming with online banking talent, which outgrew the Netherlands a few years ago. It happens to stand guard over a number of US banks and various governments around the globe.

At a P/E of 37 it might seem slightly expensive, but with a proven track record of successful and fast integrating acquisitions, and an ever increasing market (cyber attacks won’t stop unless we abolish the internet) this company, in my opinion, will deliver excellent long-term growth.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Angelique van Engelen has no position in any shares mentioned. The Motley Fool UK owns shares of NCC. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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