Newly merged betting services giant Paddy Power-Betfair is expected to increase revenues by 16% this year, with growth of 10% and 8% anticipated in each of the following two years.
“We believe that the profit margin progress made at Betfair and Paddy Power over the last two years suggests that there is good potential for the merged group to deliver earnings upgrades into the future,” Davy Stockbrokers’ leisure sector analysts David Jennings and Robert Stokes said in a detailed report.
Davy has also upped its 12-month share price target for the company from €129 to nearly €137.
The report suggested the group — which recently announced the cutting of 300 Irish jobs as part of a cost-cutting plan — could boost online sales by 16% this year.
Australian sales (in local currency terms) could rise by over 22%, the US could rise by 6%, and the UK/Irish retail business is likely to show 2% sales growth.
Regarding the use of cash — shareholders got a combined €80m payout from the recent merger — Davy said the soon-to-be-debt-free group will have clear scope to make additional cash returns to investors, but only if it cannot find other businesses to buy.
This was the case when Paddy Power returned nearly €400m in surplus cash to shareholders last year.
However, Davy suggests the group will invest in expanding its global footprint as more markets remove regulatory boundaries and could also make “a certain level of grey market investment” in the meantime.
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