by Kevin Bertoli – Portfolio Manager
Many Australian sports fans would be familiar with advertisements for Sportsbet. Some might have used Sportsbet’s App to bet on horse racing or other sports.
Less understood is that Sportsbet is owned by Flutter Entertainment plc, a Dublin-based company that has its primary listing on the London Stock Exchange (LSE: FTLR).
PM Capital’s interest in Flutter emerged during our 2017 review of UK bookmaking sector, which included such companies as William Hill and Entain (at the time named GVC). PM Capital’s investment in global casino companies and our understanding of the local bookmaking industry added to our understanding of sports betting.
In 2017, investors largely ignored potential growth in US sports betting given its status as an unregulated ‘grey market’ outside of Nevada. PM Capital believed this market would become a significant, emerging opportunity. So, we watched and waited for value to emerge in sports-betting stocks with US exposure.
In April 2022, PM Capital initiated a position in Flutter for the PM Capital Global Companies Fund. The Fund’s initial entry point was around £82 a share.
We believed Flutter had traits of other PM Capital investments. Flutter has a strong position in a structurally growing market. The company’s leverage to the evolving legalised US sports-betting and online-gaming market could potentially provide years of growth. Importantly, at the time of PM Capital’s investment, Flutter traded at a material discount to our sum-of-the-parts valuation for it.
PM Capital’s investment style is to identify high-quality companies trading at bottom-quartile valuations. Often, this means buying deeply out-of-favour stocks and holding them through a full investment cycle (7-10 years) as we wait for value to be realised. Our goal is to sell when the company achieves a top-quartile valuation.
We believe Flutter can achieve this goal for five reasons: 1. Dominant position in a long-term growth market In 2016, Flutter was created through the merger of Paddy Power and Betfair. In 2020, Flutter became the world’s largest online betting company with its US$6-billlion acquisition of The Stars Group, a Canadian gaming company.Capitalised at £19.2 billion 2 , Flutter is a top-100 company on the London […]
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