About 888 Holdings Plc (from its Press Release):
888 Holdings plc (and together with its subsidiaries, “888” or the “Group”) is one of the world’s leading betting and gaming companies. In 2022, the Group acquired the international (non-US) business of William Hill to create a global industry leader. Headquartered in Gibraltar, and listed in London, the Group operates from 15 offices around the world and employs over 12,000 people globally.
The Group’s mission is to lead the gambling world in creating the best betting and gaming experiences, bringing unrivalled moments of excitement to people’s day-to-day lives. It achieves this by developing state-of-the-art technology and content-rich products that provide fun, fair, and safe betting and gaming entertainment to customers around the world.
The Group owns and operates internationally renowned brands including 888casino, 888sport, 888poker, William Hill and Mr Green. In addition, the Group operates the SI Sportsbook brand in the US in partnership with Authentic Brands Group.
I have long steered of the ‘sinful’ companies such as tobacco and gambling, however more recently my stance has relaxed on this. Whilst I don’t smoke and have never been inside a Bookies in my life, I do like a glass of wine or two, and these industries are heavily taxed, bringing revenue in to the Government. I’m not running an ethical portfolio, so it’s a bit tricky to draw the line. Oil? Air travel? Confectionery? Publishers that might publish ‘Top Shelf’ magazines or racy books?
I’ve invested in breweries (bad move just before COVID) and, up until recently, had some tobacco shares, so why not gambling as well?
Business case
Gambling is not going to go away. Any Government is not going to kill off its Golden Goose (tax revenue). It’s just going to tread a line between Regulation, high taxes and all that income.
888 has been hit by COVID. It is also in the throes of purchasing William Hill. That will need integrating and they have had to raise the funds to do this. Current debt stands at a whopping £1.8B, which is approximately equivalent to their Annual Revenue and way above their Market value. The debt is manageable, however as Revenue margins are massive (20-30%) and I don’t worry too much about debt compared to Market value as Market value is just a number determined by the share price on any particular day and that will get affected by that day’s sentiment.
They have just (30th January) announced a suspension of VIP tickets due to a Compliance investigation. This managed to knock 30% off the share price, despite the affected area being only 3% of Revenue. Sentiment and herd instinct have overreacted, here IMO.
I think that as a punt (ha ha) over the next year or two it should easily double in price. I’m in for about 2.5% of my portfolio as an initial stake.
Positives
- Overreaction to VIP compliance issue
- PER of just 4.5
- PEG of 0.01 (probably currently meaningless)
- Operating margin 8%
Negatives
- High Debt (but serviceable)
- Sentiment over VIP Compliance unknowns