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Sunday share tips: Foresight Group, Flutter Entertainment

Sun 25 April 2021 12:13 | A A A

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(Sharecast News) - The Financial Mail on Sunday's Midas column called readers' attention to shares of Foresight Group, pointing out the company's long-track record in the renewable energy space, solid management and hence its long-term potential.

Founded in 1984, the company was aptly named by its founders, one of whom began the annual Earth Day summits in 1970 which brought together 1.0bn people at its last edition.

The group has been investing in renewable energies for nearly 15 years and now operates 33 funds, including Foresight Solar and Foresight Global Real Infrastructure.

Together, the funds own 300 projects providing renewable energy to almost 2.0m households.

A number of its funds also act as business angels, providing funds and advice to help small, often family-owned, businesses to grow.

Foresight's approach has momentum on its side, with its assets under management shooting higher by 60% over the year to 31 March to reach £7.2bn.

Havng floated on the stock exchange in February, the firm is expected to become a decent dividend payer, with a payout of 1.0p expected for the year just ended, rising to 10.0p for the year to March 2022 and 16.0p in 2023.

"Having built Foresight into a successful private business, [Bernard Faiman] is determined to do even better in the public arena.

"The signs are encouraging. Green energy is all the rage among big institutional investors so demand for Foresight funds should be strong. And the group's support for small businesses has widespread appeal as well. At £4.25, the shares are an attractive long-term buy."

The Sunday Times's Sabah Meddings recommended readers 'buy' shares of Flutter Entertainment, arguing that the firm was in a "good position" to profit from the liberalisation and expected growth in American sports-betting, notwithstanding its ongoing dispute with Fox.

Flutter owns 37.2% of the FanDuel brand in the US, as well as of Paddy Power and Betfair.

It is already the market leader in the US, sporting a 40% share and $1.1bn in gross gambling revenues.

What's more, its chief, Peter Jackson, believes the market will be worth more than $20bn by 2025.

Nevertheless, under the terms of Flutter's merger with the Stars Group in 2020, Fox, which was Stars' media partner, has an option to purchase an 18.6% stake in FanDuel.

But Flutter and Fox are in a tussle over whether that option must be exercised at its "fair value" or market price or at the same price as Flutter did.

According to analysts at Redburn, the difference between paying at either of those two prices is about £1.0bn.

FanDuel is hoping that the dispute does not derail its plans to float in the US, but even if it doesn't, some analysts believe it could hurt the valuation a bit.

Meddings also pointed out that if one applies the same valuation multiple to FanDuel as for US rival DraftKings, which recently floated and saw its stock triple in value, then Flutter shares could be worth as much as $25bn despite being on a forward price-to-earnings multiple of 44.2, a 40% premium to UK peer Entain.

"Despite its American dispute, Flutter is in a good position to win. Buy."

    The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.

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