Allwyn AG "A Fair Draw: Initiate at Neutral" (Neutral) Shelley

Research evidence excerpt

Allwyn AG "A Fair Draw: Initiate at Neutral" (Neutral) Shelley

Allwyn AG UBS Research

Executive Summary

Our thesis in a nutshell

We initiate coverage of Allwyn with a Neutral rating and €14 PT. While the group benefits from attractive lottery exposure,

diversified earnings streams and a dividend yield of c.7%, we are more cautious than both company guidance and consensus on

the medium term revenue outlook.

Within the mature asset base, we see scope for steady earnings growth, supported by UK margin expansion and resilient

Continental European revenues, although structural pressures on UK growth and persistent European margin headwinds temper

our confidence. In North America, PrizePicks appears a compelling growth asset, but the emergence of prediction markets

introduces a new source of competitive uncertainty at a time when user growth metrics have begun to soften. As a result, we see

a credible pathway to continued earnings growth, but one that is below expectations.

With our EBITDA and EPS forecasts broadly aligned with market expectations, the shares appearing expensive relative to their

growth profile, and much of the business quality already reflected in valuation, we find it difficult to argue for meaningful upside.

That said, resilient lottery cash flows and an attractive dividend yield provide meaningful downside support, leaving us with a

balanced risk reward profile and a Neutral rating.

The Investment Hurdle: Can Allwyn Deliver Mid to High

Single Digit EBITDA Growth?

In our view, the key question for investors is whether Allwyn can deliver mid to high

single digit EBITDA growth on a sustainable basis. We believe this level of growth

represents an important investment hurdle, as it would imply performance ahead of

current consensus expectations of c.5%.