FTSE 350 gambling: Game on in 2013

Punters and investors will again look to William Hill (WMH) to set the pace, but how the company will look by the year-end is the subject of huge debate. The gaming group has twice extended its bid for Sportingbet (SBT), whose valuable foothold in Australia should give the business an edge if it can squeeze value out of the £485m acquisition. The other strategic question that management needs to grasp is what to do about the Playtech (PTEC) share of William Hill Online. This is going through the process of being valued by a consortium of investment banks and Hills could end up spending anywhere between £350m and £450m buying the Israeli technology company out of what has been a productive, if turbulent, relationship. That level of expenditure could require a rights issue, which investors should be aware of before buying into shares that have reached close to a five-year high.

Towards the mid-year point, the market should also have a better idea of where Ladbrokes (LAD) is headed with its heavily promoted "self-help" programme after Hill's bitter rival backed out of potential takeovers of Sportingbet and 888 (888) in preference to building up the online business itself. The most immediate improvement has been in Ladbrokes' advertising and marketing, but mainly it has been the company's large retail estate of more than 2,150 shops in the UK that is keeping the business going, with fixed odds gaming machines, in particular, proving to be very lucrative. For the self-help programme to succeed, Ladbrokes needs to start showing real growth in the number of online users signed up and the number of affiliates (agencies that direct punters to its markets) that it can attract. Expect investment in IT and marketing to be the main focus in 2013, with perhaps a technology acquisition to strengthen its offering.