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888 Holdings: Investec hails Caesar deal

888 Holdings: Investec hails Caesar deal

Just as the poker market is showing signs of returning to life, the bingo market is getting increasingly competitive, judging by the trading statement from 888 (LON:888).

So far as revenue goes, broker Investec reckons the key trends were: excellent casino yield growth; strong growth in the number of active poker players; a weak bingo market; and good cash generation.

The online gaming operator has also announced an agreement with Caesar’s Interactive Entertainment that will allow 888 to launch a business to consumer (B2C) casino and poker product in New Jersey, which Investec described as “a significant positive”.

“Following the Q2/H1 KPIs [key performance indicators] we have left forecasts virtually unchanged at the group revenue line, although there is a minor shift in mix with casino and poker projected yields increasing, but equally offset by the impact of an increasingly competitive bingo market,” Investec’s James Hollins reveals.

Investec has retained its ‘buy’ rating and 185p price target, and says the rating is “supported by strong and consistent revenue growth, as well as exceptionally attractive US profit opportunities that have been materially improved following today’s announcement with Caesars”.

“We adjust our forecasts to reflect where the business is trading. Reduced bingo, Dragonfish [the B2B division] and emerging offering, though our forecasts for B2C poker and casino remain broadly as before. As a result our revenue forecast for FY13 reduces by 2% from US$411mln to US$402mln as a result EBITDA [underlying earnings] reduces marginally from US$74mln to US$73mln where we expect the business to produce an 18% margin. EPS reduces marginally from 14.7c to 14.2c and we introduce new forecasts for FY14 where we look for group revenue of US$424mln, EBITDA of US$75mln and EPS of 15c,” Daniel Stewart’s Michael Campbell said.

“We believe the business is well placed for the US market though we are only likely to see the benefits from this market reflected in FY14 and beyond,” Campbell declared.

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