888 Holdings Still Receiving Deutsche Bank Scrutiny at ‘Buy’
Labeled 'King of the Hill' by analysts at Deutsche Bank, 888 Holdings have been the subject of continued coverage, nearly a year on from successfully winning a bidding war to buy the non-US assets of William Hill in what can only be described as an intriguing auction-esque scenario.
The German investment bank stated how 888 was now in a much better position than it was 12 months ago, revealing that the operator was "in the driving seat" but that there were "key differences" to the vehicle.
Analysts at the bank reported: "The terms have improved, but financial markets have not, resulting in a higher borrowing cost and a considerably lower share price, down by 60% since the deal was announced.
There were a number of concerns surrounding the deal that Deutsche pointed out, the first of which being with a year-end debt/underlying earnings ratio of 4.9x, in addition to a 4.0x at the end of 2023.
888 Going through the Gears
It has been somewhat of a rollercoaster for 888 over the last couple of years, having grown its brands significantly in each of its territories while, at the same time, attempting to juggle the acquisition of William Hill while fighting off substantial competition.
In addition, as noted by Deutsche Bank, it was pointed out that 40 percent of the group's total revenue is generated from the burgeoning UK market, a strong indicator that as far as markets are concerned, this is still regarded as an important one for the operator.
However, of concern to the group is that it is relying heavily on one market, this especially being a potential problem when considering the impending review of the UK Gambling Act, which could see a reduction in the annual revenue.
While the US is an obvious alternative, especially with the rate at which this has been growing over the last couple of years, there is still considerable competition, particularly when considering the number of native US brands. Each of these already has a big share of the market, while foreign operators have also started to make their mark.
Indeed, 888 is one of these. In what could well act as a unique selling point for the company, is the launch of its sportsbook in partnership with the fabled US media outlet, Sports Illustrated, which initially debuted in Colorado last year and which has since become available across the US.
This partnership gives us an incredibly powerful platform to build our US position without incurring all of the costs of building a brand in the US. This strategy allows us to invest much more selectively and effectively in the US, with a clear focus on using SI's brand footprint and positioning to acquire customers more effectively and to build a profitable business over time.
With Deutsche Bank expressing concerns about the group's balance sheet, this US asset could well turn out to be an important revenue-generator for 888 - certainly over the next 12 months.
How Could William Hill Make a Difference
The acquisition of the British-based bookmaker's non-US assets could help to substantially consolidate the group's position in the UK and Europe.
Having been around for decades, it still retains a considerable number of customers and is one of the biggest brands in the UK - especially its retail division, which still receives a significant amount of customers each year.
Arguably its biggest asset is its sportsbook, which leads the way in horse racing, covering every event on a daily basis and attracting copious amounts of customers, while its branding and promotional offers have always been impressive. This could be a major benefit for 888 moving forward.
Whatever the outcome of the complete acquisition, board members should be positive about what the future holds for the group as a whole.