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888 And Bwin.Party To Benefit From U.S. Regulation

Analyst Believes European PLCs Will Do Well Out Of Online Gambling Regulation In New Jersey


Yesterday saw New Jersey pass a bill to regulate online gambling including poker in the state making it the third U.S. state after Delaware and Nevada to do so.

While struggling Atlantic City casinos will welcome the news so will some significant European gaming operators.

PokerStars is at a well advanced stage of buying a casino in the state and analyst Daniel Stewart & Co. also believes 888 and will benefit from the legalization of online sportsbook, casino and poker in the east coast gambling mecca.

In a note this morning the analyst said, “We estimated in our note titled: Jockeying For Position dated August 2012 that NJ could be a $450m market and larger if sportsbetting is allowed online and within state borders. Securing a decent slice of this market would be a significant addition to profits for operators and technology providers in our view. Furthermore the earnings derived from this market in our view should demand a high multiple for fully regulated and taxed earnings.

In relation to, which has a deal with MGB and Boyd Gaming, the note said, “As are result of the bill being signed into law we are reinstating our Buy recommendation on BPTY, TP [target price] 173p. However German exposure in our view is likely to cause further volatility to the share price. The stock trades on 6.6x DS FY13 EBITDA which appears a very reasonable entry multiple in our view in order to gain access to the NJ market.

With regards to 888, which has a B2B deal with Caesars Interactive Entertainment, Stewart & Co. said, “As are result of the bill being signed into law we are increasing our TP to 175p. The stock currently trades on 11x DS FY13 EBITDA, however a securing a large piece of the NJ market implies a far lower multiple on the current price in our view. We reiterate our Buy recommendation.”

At the time of writing was trading at 155p, up 18p while 888 was trading at 157p, up 7p.