EIHDF - 888 Holdings faces challenges with William Hill absorption

Deutsche Bank resumes coverage on 888 Holdings ( OTCPK:EIHDF ) with a Buy rating even as it voiced some concerns over the William Hill deal.

Analyst Simon Davies noted that 888 has finally secured William Hill, just over a year after it starting to prepare for an auction of the leading UK Online Gaming business.

888 is said to be in the drivers seat now, but with key differences. The deal terms are noted to have improved, but the downturn in the financial markets has resulted in a higher borrowing cost and a considerably lower share price since the deal was announced. A major concern is that the William Hill has left 888 highly levered, with year-end debt/EBITDA of 4.9X and 4.0X at the end of 2023, which is the highest in the UK sector. The company also now generates 40% of revenues from UK Online, which is leaves it highly exposed due to the forthcoming Gambling Act review which could raise leverage further.

Looking ahead, there is execution risk noted by Deutsche Bank , particularly around the migration of customers over to a combined technology platform, as well the risk an economic slowdown will weaken consumer spending.

Read the details of the William Hill deal.

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