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22 January 2006
Analysts Refuse To Gamble On
Stanley Leisure
Britons
enjoy a flutter and, after the relaxation of gambling rules
in November 2005, more and more are heading to UK casinos.
This plays into the hands of the likes of Stanley
Leisure, which is
expected to meet analyst expectations when it reports full
year results this week.
With 37 provincial casinos
and four in central London, Stanley is the UK's biggest
casino operator. It has been splashing out to take advantage
of relaxed gambling laws, but analysts have cooled toward
the £500m company after a storming performance by its
share in the past 12 months.
In November 2005 the
government relaxed gambling rules, allowing casinos to
advertise, abolishing the 24-hour rule which meant potential
gamblers had to wait a day after applying to join a casino
before playing, and allowing more electronic gaming
machines.
Stanley is almost doubling
the number of electronic roulette machines in its casinos to
1,000, up from 600 this time last year, adding valuable
revenues.
Last year Stanley sold off
its betting shop operations to William
Hill allowing it
to concentrate on its casinos while returning £325m to
investors.
A dip in trading at its
London venues in August after the terrorist bombings proved
to be only a temporary problem and since then the relaxing
of rules has benefited trading.
Stanley owns four London
casinos including the prestigious Crockfords where
Australian billionaire Kerry Packer lost £7m in three
weeks in 1999.
But after a rise in the
share price from 418p to 715p over the past 12 months, many
analysts feel the potential for more upside is limited. In
recent weeks, HSBC has issued a neutral rating and Shore
Capital, Panmure Gordon and Williams de Broë have all
rated Stanley as a hold.
HSBC has a fair value of
764p-835p and a notional price target of 800p. It said: "We
believe the UK's relaxation of gambling restrictions on
advertising, the 24-hour cooling-off period and membership
rules plus a doubling of the number of gaming machines will
drive growth."
Investec has a buy rating
and said: "Overall, group trading was in line with
expectations in the first half although lower footfall in
London impacted high-end casinos after the terrorist
incidents." It believes that the second half has been solid
"and the initial effects of deregulation are
encouraging."
Footfall across the
industry is believed to have been 8% higher since the laws
were relaxed. Stanley has also targeted more expansion with
applications for five new casinos approved and others under
review.
The company remains the
subject of takeover speculation due to the 11.8%
shareholding of Malaysian gambling company Genting which
also holds 29.8% of rival London Clubs International
although Genting describe its stakes as strategic
holdings.
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