Things are looking up at 888, says Berenberg

Berenberg has reiterated its 'buy' rating for 888 Holdings despite the betting and gaming group disappointing the market with its recent first-half results, saying the company is "ready to de-lever" under its new chief executive officer.

Revenues and earnings came in below expectations for the six months to 30 June, with 10% growth in UK monthly active users but 1% growth in the international division due to compliance changes in certain unregulated markets and a slower recovery in the Middle East.

888 announced at the end of July that Per Widerström would be joining the group in October as its new CEO, replacing Jon Mendelsohn who has been the executive chair since Itai Pazner's departure in January. Mendelsohn will return to a non-executive chair position when Widerström joins.

Meanwhile, net debt reduced by £68m to £1,660m, with leverage reducing from 5.6x at the end of 2022 to 5.1x by the end of June. Meanwhile, the company delivered £66m of cost synergies in the first half, and said £150m of synergies expected in 2025 will now materialise one year earlier.

"These factors, aided by the appointment of a CEO with a proven track record, provide us with further confidence in 888’s ability to deliver a continued reduction in leverage," Berenberg said in a research report on Thursday.

The broker has given the stock a target price of 190p, suggesting significant upside from the current price of 129.3p, up 3.4% on the day.

In valuation terms, Berenberg said 888 trades at just 5x consensus 2024 EBITDA forecasts.