Berenberg reiterates 'buy' rating on GVC following 'strong' trading update
By Iain Gilbert
Date: Wednesday 14 Aug 2019
(Sharecast News) - Analysts at Berenberg reiterated their 'buy' rating and slightly lowered their target price on gaming giant GVC Holdings from 1,130p to 1,100p on Wednesday, but said following the group's "recent strong trading update" it was envisaging "numbers that meet expectations" when the company reported the next day.
Berenberg noted that despite the group's "continued strong operational performance", share price growth had been "disappointing" year-to-date and in its view, "remain hugely undervalued".
"We continue to believe the shares do not reflect GVC's current gains in market share, superior geographic diversification and brand strength across these geographies," said Berenberg.
The German bank acknowledged that regulatory concerns remained, but said that relative to peers the positive features were "excessively discounted".
Berenberg valued GVC using a discounted cash flow methodology, blending it with a trough price-to-earnings multiple in the event of a recession to arrive at its new target price.
"On multiples, GVC trades on 5.5x EV/EBITDA 2020E and 7.5x P/E. This marks a discount to peers and its historical average."
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