DAVY VIEW

On first glance, DraftKings’ (DKNG) acquisition of Golden Nugget Online Gaming (GNOG) looks strategically interesting. The combination is designed to improve its positioning in the narrower (for now) but highly profitable online casino channel. It will result in a dual-brand online casino strategy for the operator, both enhancing and expanding its targetable customer base and product offering. While a full price in nominal terms (implied EV of $1.5bn on a FY21 revenue base of $135m, increasing to >$200m next year (FY22 EV/Sales 7.6x)), the all-stock transaction allows DKNG to leverage its premium rating in this regard. In this report, we also update our DKNG estimates following recent results. The stock is trading on 12.6x FY22 EV/Sales, falling to 11.2x pro forma for the announced deal (pre-synergies).