Is this to be 888’s Golden Age?

modqs-is-this-to-be-888s-golden-ageThe regulation of online gambling in the US is going to mean a lot to a lot of companies.

For some land-based casino operators that had perhaps been struggling, it will give them a new lease of a life as well as new playing field on which they can compete. For the ancillary and related iGaming vendors that were on the New Jersey DGE’s list, many have the chance to take their operations to new levels. Then there are the online operators who intend to use their know-how to cash in on regulated US iGaming.

Of these companies, and there are many, few are better placed than 888. Last month’s trading statement showed that group revenues had risen by 2% in the third quarter to $94 million. While this is nothing to be sniffed at, it’s likely to be a drop in the ocean compared to what we can expect to take place in the next year.

With New Jersey being the hot topic at the moment it seems sensible to start there and it’s 888’s early activity here that makes it stand out from other operators. The company has made deals with Caesars, Wynn and Harrah’s that will enable them to operate under various guises in the state.

CEO Brian Mattingley revealed a few months ago that the company would make every attempt to seek a license in any state that decides to make itself a regulated territory. On current evidence they appear to be doing a pretty good job at that. Bearing all of this in mind, it appears that the next few years could be extremely promising for the company, but just how much of the US land can 888 grab?

Returning to pre-UIGEA glory

While the company has never exactly been on the ropes, it’s worth noting that they have had some slumps. UIGEA effectively wiped out much of the company’s business overnight and in 888’s case it almost was literally overnight as the company had closed down within 48 hours and were refunding their US players.

At one stage Ladbrokes almost took control after the bookmaker revealed in December 2010 that they were looking to pay as much as £240 million. Given that the trading statement now values 888 at more than double that, it’s safe to say that the last few years have been good ones.

Since 888 Holdings began trading on the stock market its highest share price was reached in April 2006 when they climbed to 240p. The company’s 2006 annual report lists net gaming revenue at $157 million while profit was also healthy at $90.5 million before tax. Compare these figures to those for the first half of this year and you see that while revenue has already surpassed past figures ($200 million for six months to June 2013), profit does not look likely to follow suit with $38.6 million EBITDA for the first half of the year.

Share price is another indicator of just how far 888 still have to go. The company’s shares were listed at 164p at the time of the trading statement last month and have since dropped slightly to around 155p.

Forward Thinking

While 888’s current share price and profits are far behind where they once were, there’s plenty of obvious reasons to be optimistic about the company. The company is placed better than almost everyone with regards to re-entry as they have the best of both worlds. This consists of having operated in the US before while still being considered a legally clean company by regulators.

So while 888 already knows the US market, and more importantly the US market knows them, they are also likely to be looked on favourably by those in the position to hand out licenses. This has already been evident in Nevada, Delaware and New Jersey and although potential complications with Caesars Interactive may limit some areas of growth in the Garden State, 888 has spread their net wide enough to ensure that they’ll still be able to profit.

The Las Vegas Review Journal even took time to praise the company on how they had begun their time in the regulated US iGaming environment. In this piece 888’s Itai Freiberger revealed that the company are hoping to have as many as 10 US-facing brands under their control in the three states where iGaming is a reality.

Many of these brands have come under 888’s control through savvy deals such as those done with Treasure Island, WMS and Wynn through the AAPN. It’s these types of deals that leave 888 in a good spot to head into any state that opens up.

Speaking in September Brian Mattingley revealed that he believes the company to be one of the closest operators to the regulators where they’re already approved. Of course California is the big prize and its 888’s relationship with Caesars that could be key they. The WPT is headquartered there and that may be one of the reasons why it’s worth sticking with the company even if it endangers some of their New Jersey activity.

Should this partnership bear the fruits that it’s likely to then 888 will gain a significant foothold in the Californian market. On all current evidence, this looks set to be a trend that will be repeated across the country meaning that 888’s shares are due to soar.