In a client update on Monday, analyst Ralph Garcea of Echelon Wealth Partners says the deal is transformational for TGSI.
Operators of leading brand PokerStars and PokerStars Casino, TGSI’s new $4.7 billion deal is the third sportsbook-based acquisition in 2018 for the company after CrownBet and WMH Australia.
“Sky Betting & Gaming’s premier sports betting product is the ideal complement to our industry-leading poker platform,” Chief Executive Officer Rafi Ashkenazi said in a statement.
Garcea says that with sportbook gambling currently representing 50 per cent of the global online gambling market, the Stars Group is now well-positioned for growth.
“The acquisition clearly places TSGI at the top of the herd in terms of combined revenues and margin profile,” says Garcea. “This acquisition is meaningful because it now provides two low cost acquisition channels in poker and sportsbook, which can now be cross-sold into TSGI’s high yielding casino product.”
“SkyBet’s unaudited 2017 revenue was £624 million (~$874 million), with £202 million (~$283 million) in Adj. EBITDA (robust ~32 per cent margin),” says the analyst. “This marks TSGI’s third acquisition in sportsbook thus far in 2018 (CrownBet, WMH Australia, SkyBet) – we believe the focus now turns to integration and synergies across all platforms and business units.
TSGI estimates the transaction will be Adj. EPS neutral in the first full year with positive impacts thereafter. The deal represents a 2017 purchase multiple of 5.4x/16.6x EV/Revenue, EV/EBITDA, respectively, and 12.8x LTM EBITDA, including expected run-rate synergies.“
Garcea says that TGSI’s PokerStars is a stable revenue stream, while its Casino segment should grow to over $400 million in 2018. “We expect growth to include the leveraging of the Casino assets on the PokerStars platform, as well as the move to mobile. The Stars Group is now a story of customer acquisition and cross-selling of products,” he says.
The analyst has reiterated his “Buy” rating with a raised price target for TGSI of $55.00 (was $44.00), representing a projected return of 47 per cent at the time of publication.
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