The City upgrades 888 estimates after record-breaking end to 2020

City investment banks Numis and Peel Hunt have scaled up their respective full-year 2020 revenue estimates for 888 after the operator reported strong performance in December. Numis upgraded its full-year 2020 revenue estimate for 888 to $827m (£605m), equating to a year-on-year rise of 48%, while increasing annual EBITDA to $148.1m (£108.4m), up 81% on 2019 figures. Today’s trading update also modestly increased Numis’ full-year 2021 EBITDA forecast for 888 by 2%, allowing for potential macro and regulatory headwinds in the UK. Elsewhere, Peel Hunt raised its full-year 2020 EBITDA forecast by 3% to $155m (£113.5m), although stopped short of upgrading 2021 forecasts to allow for “regulatory bumps in the road”. Peel Hunt analyst Ivor Jones suggested 888 would enjoy a strong start to 2021, combined with an “intriguing hint of M&A potential”. 888 could become the latest target for takeover by a US casino operator following Caesars’ purchase of William Hill and MGM Resorts’ bid to acquire its US JV partner Entain, with Las Vegas Sands mooted as a potential suitor. “We believe that Las Vegas Sands could be a good commercial or M&A partner for 888,” wrote Jones. “If, as we expect, Entain is acquired by MGM, there will be increased interest in finding the next gambling target.” 888 could also be interested in pursuing a deal for William Hill’s non-US assets, which Caesars have indicated will be up for sale this year. The London-listed operator’s year-end trading update confirmed all-time monthly records had been broken for both revenue and active customer numbers during December 2020. As a result, 888 said it expects to report revenue and adjusted EBITDA for the final period of 2020 “moderately ahead” of prior expectations. “While 888 has entered 2021 with good momentum, the board remains mindful of possible headwinds over the coming months including macro-economic and regulatory uncertainties in certain jurisdictions,” said the operator. “Notwithstanding, the board remains confident that, with 888’s outstanding product proposition, advanced technology and diversification across global regulated markets, the group remains well positioned to deliver further progress.”