Independent, The (London): THE INVESTMENT COLUMN: Stanley Leisure is not worth gambling on

Shareholders in Stanley Leisure, the gaming group, have scooped a 250p- per-share jackpot thanks to the sale of the company's betting shops to William Hill.

The disposal was completed yesterday, and details of how the cash will be handed back will be made public next month. Now, Stanley will concentrate on its casinos " an understandable decision given that the biggest changes in the casino industry in 40 years are about to happen.

Under the new Gambling Act, operators will be able to advertise for the first time. They will be able to double the number of lucrative slot machines they can install to 20. Customers will no longer have to be members of the casino for 24 hours before they play. All this should drive extra revenues to Stanley, the biggest casino operator in the UK with 37 provincial venues and four in London.

Its enormous Star City venue in Birmingham was a bold venture, based on hopes the Gambling Act would allow casino groups like Stanley to build supercasinos all over the country, with hundreds of slot machines in each one. But it now looks a bad gamble. The Government reined in the number of new casinos it would allow to 17, only one of which will be a supercasino. Stanley will have to slug it out with all the other casino groups to win any of these precious new licences. Meanwhile, Star City is struggling without the revenues it had hoped for from hundreds of extra slots.

Even shorn of its betting shops, which were 40 per cent of the business and which have had a bad run of sports results recently, Stanley's earnings will still be volatile. Lucky punters are often able to turn the tables on the house. We took a pessimistic view of Stanley before the Government changed its plans, believing the company's small venues would suffer in the face of competition. Since then Genting, the Malaysian leisure group, has been building a stake in Stanley. Shares rose on bid hopes.

But Genting is turning out to be more of a long-term investor, running a joint venture with Stanley to bid for a supercasino licence. A merger of Stanley with rival operator London Clubs International (LCI) also seems unlikely when LCI's shares are an expensive 25 times earnings.

Stanley will benefit from the freedoms of the new Gambling Act, but at around 20 times 2006 earnings, the shares already seem fully valued given that there is no certainty it will win any new licences.