Shares in 888 rise as Peel Hunt backs gambling group's long-term outlook

By Scott Kanowsky 

Investing.com -- Shares in 888 Holdings (LON:888) jumped on Monday, reversing some losses at the end of the previous trading week, after analysts at Peel Hunt backed their positive view of the online gambling firm's outlook.

The analysts said they are still confident that the integration of William Hill's business outside of the U.S., which 888 acquired in a £1.95 billion (£1 = $1.2220) deal completed in July, will be "executed well" and create the potential for a "bounce back" for the stock.

Shares in Gibraltar-based 888 have dropped by around 65% over the past 12 months, as investors fret over how recent central bank interest rate hikes will impact the massive debt pile 888 accrued in order to finance the William Hill purchase.

The Peel Hunt analysts noted that the acquisition has saddled 888 with "too much debt at too high a price," adding that potential shareholders are likely to stay "on the sidelines" until the move shows signs of success.

In November, 888 outlined plans to lower the £1.6B in debt it took on during the deal, mainly through disciplined capital allocation. But 888 admitted that it remains exposed to elevated borrowing costs, with 64% of its total net debt at the end of September pegged to floating rates.

Shares were also hit last week when 888 announced that chief financial officer Yariv Dafna, who was credited for playing a "crucial role" in the William Hill combination, would step down at the end of March. The company called Dafna's departure a "mutual" decision.

Meanwhile, a spike in revenues due to the FIFA World Cup football tournament at the end of 2022 was not enough to keep sales from sliding by 3% in the year to the end of December.

But revenue still met consensus estimates in the fourth quarter, while 888 also maintained its full-year guidance.