DAVY VIEW

Another week, another transaction in the global gaming sector. 888’s (not covered) acquisition of William Hill’s international business has several implications for the broader sector. Firstly, the assets are set to remain in strategic hands and will add significant scale and diversity to the 888 business. Secondly, it will alter the shape of the competitive landscape, especially in the UK (888 pro forma online gambling market share is likely to increase to c.12%, possibly making it the number-three player in the market). Finally, the price paid for the assets serves as a reminder of the value of non-US online operations, particularly for industry leaders such as Flutter Entertainment and Entain. We estimate 888 has likely paid a >10.5x FY20 EV/EBITDA multiple for 888’s online operations, reinforcing our view that both Flutter and Entain’s superior online operations should command a healthy double-digit rating. With the share prices currently implying a FY22 EV/EBITDA multiple of just 4.5x and 7x respectively on each operator’s ex-US businesses, we continue to believe the sector represents a highly attractive investment opportunity. We reiterate our ‘Outperform’ recommendation on Flutter.