In a research update to clients today, Ofir maintained his “Buy” rating and one year target price of $52.00 on Amaya.
On Monday, On Monday, GGB News posted an extensive interview with New Jersey Division of Gaming Enforcement Director David Rebuck, who talked about PokerStars application for a New Jersey license. Rebuck pointed out to GGB News publisher Roger Gros Amaya, not PokerStars, is the party applying. Rebuck said the Division of Gaming Enforcement was conducting a “thorough, comprehensive review” of the purchase of the Rational Group (the owner and operator of the PokerStars and Full Tilt Poker) by Amaya.
In June of last year, Amaya announced it would acquire Oldford Group Ltd., the parent of Rational Group for $4.9-billion.
Rebuck admitted the decision would be a controversial one.
“We’re going to do this in a very professional way which will be published to the world, because whatever decision we come down on will be scrutinized, and some will hate it and some will love it,” he said.
Ofir says that, considering the controversy about licensing PokerStars in the United States, it appears the New Jersey Division of Gaming Enforcement is defending the decision in advance. The analyst also notes that at a luncheon for the Quebec MBA association in Montreal last Thursday, Amaya CEO David Baazov said he expected PokerStars would be licensed by in New Jersey by the third quarter of this year. The Amaya boss struck a diplomatic tone about the current environment.
“The gambling industry has a bad reputation in some quarters, but that simply doesn’t reflect in public opinion,” said Baazov. “It’s not the way our nearly 100 million customers think about online gaming and it’s not the way many forward-looking governments around the world view our business.”
Ofir says there is a very particular reason why a positive outcome for Amaya might spark a run in its shares.
“We view a New Jersey license as a major catalyst for the stock for two prime reasons: a) Although NJ is not material financially, it will set a precedent and be the first US State allowing PokerStars to enter the market; and b) there are numerous hedge funds that are betting against Amaya’s ability to get licensed and have short positions. We believe this creates a solid risk/reward trading opportunity,” he said.
In 2013, New Jersey became the third state, after Nevada and Delaware, to legalize online gambling. The move is generally regarded as the most important since casino gambling was launched in 1978.
“This is a very exciting time for Atlantic City and for the gaming industry,” said Alisa Cooper, a commissioner with the New Jersey Casino Control Commission. “With the dawn of Internet gaming, we are on the cusp of perhaps the biggest change – and challenge – since the first casino opened here.”
Some speculate that several more states, including Rhode Island, Connecticut, Illinois, Ohio, New York and California may join Nevada, Delaware and New Jersey in legalizing online gambling.