Analysts upgrade 888 estimates after William Hill purchase

UK investment banks have reacted positively to 888’s £2.2bn acquisition of William Hill International. Peel Hunt has increased its target price from 500p to 750p and reiterated its Buy rating, while Numis has upgraded its recommendation to Buy following the purchase. Despite the bullish forecasts, 888’s share price has fallen by 0.69% over the last five days of trading on the London Stock Exchange. The share price bottomed out at 383p on 10 September but has since recovered to 413p at the time of writing. “William Hill adds product leadership in sports betting to 888’s leadership in online casino and brings additional scale to both,” Peel Hunt analyst Ivor Jones told investors. “The enlarged 888 would match leading competitors in product and platform investment and benefit from stronger market shares in key markets. “In addition, 888 should have the resources to invest aggressively behind its US SI Sportsbook brand, with a real prospect of achieving relevance. “In this note we set out pro forma forecasts and, on the basis that the acquisition completes, conclude that the shares are materially undervalued,” he added. Elsewhere, Numis analyst Richard Stuber said he was pleased to see the two firms marry together after nearly six years of courting. “We consider £2.2bn a full but fair price to propel 888 into the top tier, tripling revenue and EBITDA,” he wrote in an investment note on Monday. “As well as scale, it significantly improves product mix (betting doubling to 28% of revenue), although we would prefer lower [regulatory] exposure to the UK,” he added. The UK now accounts for 52% of 888’s online revenue and 63% of total group revenue.