Analysts hail Stars’ ‘impressive’ Q2

13 August 2018

Analysts have hailed The Stars Group’s “impressive momentum”, driven by mergers and acquisitions, after the company behind the PokerStars and Full Tilt brands posted a 35% year-on-year increase in second-quarter revenue.

In a trading updated this (Monday) afternoon, Stars revealed that it generated sales of $412m (€361.2m/£322.8m) in the three months through to June 30, while EBITDA increased by 15% to $168m.

Stars CEO Rafi Ashkenazi (pictured) said that the results represented ongoing growth with the firm’s “international business and the contribution of its Australian acquisitions”.

Analysts also highlighted the performance of Stars’ ‘international’ segment, in which revenue increased by 15% to $350m, underpinning growth across all segments.

Regulus Partners said that, given the company’s M&A activity so far this year – snapping up CrownBet and William Hill Australia before finalising a deal to acquire Sky Betting & Gaming last month – the international segment represented the most significant like-for-like figures on the balance sheet.

“The extent to which Stars has been rapidly transformed by acquisition can be seen by the revised guidance,” Regulus Partners said, with an H2 annualised revenue run-rate of $2.5bn suggesting 77% growth on the previous guidance.

“Substantially all of this revenue is regulated, most of it is betting and only a very small proportion of it is poker,” the analysts added.

“As has been well flagged during the deal-making, Stars has therefore transformed itself from a geographic, regulatory risk and product standpoint – in capability as well as reach terms.”

Stars CEO Ashkenazi added: “The continued emergence of our sports betting and casino offerings and the addition of our 2018 acquisitions have transformed our business and greatly enhanced the foundation and diversity of our consolidated revenue base, which will now be nearly equally split among verticals and roughly 75% locally regulated or taxed.

"We are now focused on the next stage of our transformation—integration. While this will be a phased and measured process, we expect that it will prepare us to not only be a leader within the world's largest regulated markets but to also leverage the strength of our combined platform to take advantage of new opportunities and markets.”

Poker grew by 7% to $271m, while casino hiked 26% to $102m and betting, with the exception of Australia, improved by 5.4% to $20m.

Reflecting on the results as a whole, Regulus Partners said: “These figures demonstrate impressive momentum, but they are largely M&A-driven and also pre-Sky Betting & Gaming.”

On opportunities in the US market, the analysts added that Stars has “a potentially powerful position” due to launches of betting in New Jersey in addition to an existing casino and poker presence and releasing all products in Pennsylvania, not to mention the long-awaited expiration of the company’s bad actor suspension in Nevada and, a real trump card, offering “by far the strongest US poker brand”.