TSGI has had an up-and-down year in 2018, with its share price hitting a high of C$51.75 on June 21 only to tumble over ensuing weeks and months to where it now sits at C$29.72 as of late-day trading on Thursday. (All figures in US dollars unless noted otherwise.)
But the downturn could be reversed now that the Sky Betting & Gaming deal, announced in April, has received clearance from Britain’s Competition & Markets Authority, says Tucci.
“With this clearance, TSGI can now start to integrate SkyBet into its operations and begin to realize its expected minimum $70 million in savings,” the analyst states in a client update. “Pro-forma revenue mix is very balanced with ~35 per cent sports betting, ~34 per cent poker, and ~28 per cent casino. We believe we will see a significant chunk of the $70 million in savings in 2019, with 2020 illustrating a full run-rate.”
Tucci notes that The Stars Group is a stable market leader in poker and that its Casino segment should grow to more than $550 million in 2018, while its BetStars sportsbook platform should continue to gain market share as TSGI cross-sells to its over 117-million-strong user base.
The analyst sees The Stars Group generating revenue and Adj. EBITDA in 2018 of $2.10 billion and $789 million, respectively, and revenue and Adj. EBITDA in 2019 of $2.80 billion and $1.08 billion, respectively.
“TSGI is currently trading at a C2018E EV/Sales, EV/EBITDA, and P/E of 2.7x, 7.2x, and 10.2x, respectively, versus its Global Gaming comparables average of 2.7x, 9.2x, and 17.3x, respectively,” he writes.
Tucci’s C$50.00 target represents a projected return of 73 per cent at the time of publication.
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