Analyst Predicts Consolidation in Online Poker IndustryDaniel Stewart & Co. Report Says Liquidity Key to Future Success in Online Poker Industry |
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James Hollins, an equity analyst at Daniel Stewart & Co. investment bank, has predicted consolidation within the online poker industry is the likely outcome of companies striving for enhanced liquidity in the sector.
The report, entitled Gambling Sector August 08, says “The issue of poker site liquidity has emerged rapidly over the past 12 months. Given the desire for greater liquidity among several key and well-established operators, we would expect several groups to be in discussions with regards combining liquidity.”
Consolidation has not been a prevalent feature of the 10-year-old industry to date, and the report identifies Lottomatica as the only significant driver of this trend with its recent purchase of Finsoft, Boss Media, and St.Minver.
However, it goes on to say, "…if we were betting folk, we would be focusing on the most attractive potential deals: Ladbrokes acquisition of Unibet; bwin Holdings acquisition of Sportingbet; merger of bwin Holdings and Unibet.”
It points to the recent announcement by LadbrokesPoker that it was opening some higher-stakes tables to the Microgaming network while retaining its lower-stakes tables within its own closed network.
The report also notes PartyPoker and iPoker both stand well beneath the top two players PokerStars and Full Tilt, and that overall, the top 20 networks are likely to have “sufficient” liquidity. The company breaks operators into four tiers according to liquidity. They are:
Tier one: Playtech (software provider), PartyGaming, Paddy Power, Rank Group (Blue Square)
Tier two: bwin Holdings
Tier three: Sportingbet, 888 Holdings (Pacific Poker), Unibet, Ladbrokes
Tier four: William Hill
Elsewhere, the report gives its key stock picks in the European gaming sector:
Offline pick — William Hill
With a resilient outlook on the high street and faster growth internationally and from an improved online product. With 53 percent upside, we have a Buy recommendation.
Online pick — Sportingbet
Sportingbet has suffered in 2008 from sentiment on its Turkish operations. The group is now less reliant on this area and still has significant growth potential. With 100 percent upside, we have a Buy recommendation.
Sell pick — Rank Group
Having upgraded from Sell to Hold in July, we revert back to Sell given the parlous state of bingo trading and a weak outlook on group returns. With 31 percent downside, we have a Sell recommendation.
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