Analysts at Shore Capital believe the flagged revisions to the UK’s gambling legislation would be a “better outcome than feared for the industry and positive for stocks.”
Some of the proposed measures reported in the Times included a limit on stakes for online casinos, a ban on free bets, affordability checks and an increase in the number of machines allowed in physical casinos from 20 to 80.
The result of the reforms, according to the government's own estimates, would see revenues in the industry fall by £700mln.
ShoreCap suggests while this could impact the profitability of Flutter Entertainment PLC (LSE:FLTR), Entain PLC (LSE:ENT) and 888 Holdings PLC (LSE:888), it is still at the better end of previous expectations.
Analysts at the independent investment house believe most of the impact will be felt by casinos and online betting games, while Flutter, Entain and 888 gain most of their market share through betting.
“We would see current valuations discounting a more meaningful impact from the review and such a potential outcome would likely to be seen as a positive for stocks.”
ShoreCap names Rank as the big winner from the proposed rule changes, with the potential to double its estate of roughly 1,300 machines at 64 licenses, which can bring an additional £10mln to £20mln uplift in profitability.
Entain and Rank Group (LSE:RNK) are buys with ShoreCap, while Flutter is a hold.