Canaccord Genuity lowers target price on 888 Holdings

Canaccord Genuity noted that 888's recent Capital Market Day highlighted details of its updated strategic plan following the group's completion of the William Hill International acquisition, along with key financial targets for 2025.

While 888 also announced an acceleration and increase in anticipated cost synergies, with £150.0m of pre-tax synergies now targeted compared to £100.0m previously, Canaccord stated that expectations of "tougher near-term market conditions" as a result of macro and regulatory pressures had "more than offset" most of the increased synergy expectations in the short term.

"The group's primary near-term focus remains deleveraging given the high level of predominantly floating debt," highlighted Canaccord. "Execution of the strategy and delivery of the targeted synergies are now key if the market is to believe the group will be able to reduce leverage to the target of less than 3.5x by 2025."

"888 trades on 6.1x CY23E EV/EBITDA which we believe represents attractive value given the scale and positioning in large regulated European markets and strong proprietary tech platforms. That said, high leverage is holding back the valuation, in our view, and needs to reduce. Our SOTP-derived target price reduces to 295.0p (from 355.0p) reflecting updated forecast assumptions and slightly moderated component target multiples to reflect the challenging near-term demand outlook."

The Canadian bank reiterated its 'buy' rating on the stock.

Reporting by Iain Gilbert at Sharecast.com