LONDON (ShareCast) - (Sharecast News) - Royal Bank of Canada upgraded William Hill to 'outperform' as it recommended buying gambling shares to take advantage of share price falls caused by the Covid-10 crisis.
After gambling shares plunged following the shutdown of big sporting events, the sector is ready for a rapid recovery once sport resumes, RBC said. William Hill, Flutter, GVC and Stars all have plenty of liquidity to get them through the Covid-19 shutdown, the bank's analysts said.

RBC's Julian Easthope and Christine Zhou upgraded William Hill to 'outperform' from 'sector perform' and restated its 'outperform' ratings for GVC, which owns Ladrokes, Stars Group and Paddy Power parent Flutter, its preferred stock. Flutter's purchase of Canada's Stars is awaiting minor regulatory approvals.

"We believe the weakness in share prices due to COVID-19 offers one of the best buying opportunities in recent times for all of our covered gambling operators," the analysts wrote in a note to clients.

They said the companies would be hit by a sharp impact in 2020 followed by a return to normal growth in 2021. William Hill will take the biggest hit because it is the most exposed to retail gambling and has a high sports exposure.

Only William Hill is likely to breach bank covenants during the crisis and it is the biggest risk in the sector but banks are likely to be flexible for otherwise sound companies, giving William Hill shares 50% potential upside, the analysts said.

"As soon as sporting content resumes, we expect a fairly immediate recovery given the low ticket item nature of sportsbetting and the fact it can be done as a solitary activity - unlike the wider leisure sector, which will likely see a lag before recovery," the analysts said. "It is supply not demand that is the bottleneck."

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