The release by the UK government of its long-awaited gambling reform White Paper has provided some clarity for the gaming sector, although some additional changes could still be made. For the most part, the findings were on par with expectations. The White Paper suggested reducing maximum stakes to between £2 and £15 from £50 and set a period of time for additional consultation on the matter. Of note, the White Paper also suggested a £2 limit for players under the age of 25.
The government also plans strengthening pub licensing laws to prevent children from playing slot machines and to ban all lotteries from offering tickets to people under the age of 18.
The White Paper called for standardized and frictionless programs for affordability checks. Affordability checks will become more extensive for users that lose more than £1K a day and users that lose over £2K over a 90-day period.
On the financial front, the White Paper called for a mandatory 1% levy on gross gaming revenue for research, education, and treatment related to problem gambling.
The general view of analysts is that many of the incremental regulatory changes have already been planned for or instituted by the larger operators.
The clearing of the regulatory hurdle could also mean that M&A could become a focus again with some of the wildcards now played out. Entain (OTCPK:GMVHF), Flutter Entertainment (OTCPK:PDYPY), Flutter Entertainment (OTCPK:PDYPY), and 888 Holdings (OTCPK:EIHDF) have been mentioned as potential targets. Caesars Entertainment (CZR) is believed to be one of the companies that could look at a purchase of Flutter Entertainment’s FanDuel (DUEL) property or the entire company.
Roth MKM analyst Edward Engel thinks the announcement is a positive for Europe’s iGaming industry. “Not only were the new measures less restrictive than initially feared, but we believe clarity helps remove a major overhang for the group,” he noted. Inspired Entertainment (INSE) and Bragg Gaming Group (BRAG) as B2B suppliers they could benefit. Both stock are rated at Buy by the firm.
HSBC analyst Joseph Allen said the new rules no longer seem to be a major overhang on company share prices, based on our recent conversations with investors. The firm has Buy rating on both Flutter Entertainment (OTCPK:PDYPY) and Entain (OTCPK:GMVHF).
Flutter Entertainment (OTCPK:PDYPY) recently won shareholder support for a U.S. listing that has the potential to create some buzz in the sector with valuation in the U.S. tending to be higher for gaming stock and the FanDuel property of high interest as a potential IPO or spinofff.
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