IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Star Entertainment Group / Equity Capital Markets

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<li>
<a href="https://www.smartkarma.com/entities/star-entertainment-group-ltd" target="_blank" data-smartkarma-citation="entities:926:1" rel="noopener">Star Entertainment Group (SGR AU)</a> will raise A$800 million with a fully underwritten 3:5 pro rata accelerated non-renounceable entitlement offer and institutional placement at A$1.20, a 13.6% discount to TERP.</li>
<li>The equity raise of A$800 million will maintain leverage within the targeted 2.0x-2.5x net debt/EBITDA long-term range in our fines high-case scenario.</li>
<li>Adjusting for the raise, Star trades at a discount to peers. While the shares will be under short-term pressure due to the raise, there is long-term value for the brave. </li>
</ul>



Star Entertainment Group (SGR AU) will raise A$800 million with a fully underwritten 3:5 pro rata accelerated non-renounceable entitlement offer and institutional placement at A$1.20, a 13.6% discount to TERP.
The equity raise of A$800 million will maintain leverage within the targeted 2.0x-2.5x net debt/EBITDA long-term range in our fines high-case scenario.
Adjusting for the raise, Star trades at a discount to peers. While the shares will be under short-term pressure due to the raise, there is long-term value for the brave. 


Star Entertainment (SGR AU): A$800m Highly Dilutive Raise to Fix the Balance Sheet

Event-Driven

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<li>
<a href="https://www.smartkarma.com/entities/star-entertainment-group-ltd" target="_blank" data-smartkarma-citation="entities:926:1" rel="noopener">Star Entertainment Group (SGR AU)</a> scored an own goal by failing to provide an update on the balance sheet in the update on 13 February. The results are next week.   </li>
<li>There is a whirlwind of uncertainty surrounding potential fines and Star is in desperate need to recapitalise its balance sheet to avoid breaching covenants. </li>
<li>Our leverage scenarios suggest an equity raise of A$250-500 million is required. Despite the share price fall, we would steer clear until the details of its equity raise are disclosed.</li>
</ul>



Star Entertainment Group (SGR AU) scored an own goal by failing to provide an update on the balance sheet in the update on 13 February. The results are next week.   
There is a whirlwind of uncertainty surrounding potential fines and Star is in desperate need to recapitalise its balance sheet to avoid breaching covenants. 
Our leverage scenarios suggest an equity raise of A$250-500 million is required. Despite the share price fall, we would steer clear until the details of its equity raise are disclosed.


Star Entertainment (SGR AU): Entertaining Known Unknowns

European Event-Driven Analyst

Jesus Rodriguez Aguilar

On 24 March, <a href="https://www.smartkarma.com/entities/bally-s-corp" target="_blank" data-smartkarma-citation="entities:32231:1" rel="noopener">Bally's Corporation (BALY US)</a> reached an <a href="https://www.gamesysgroup.com/media/1786/rule-24-announcement-dated-24-march-2021.pdf" target="_blank" rel="noopener">agreement in principle</a> to acquire <a href="https://www.smartkarma.com/entities/gamesys-group-plc" target="_blank" data-smartkarma-citation="entities:23997:1" rel="noopener">Gamesys Group (GYS LN)</a> for c. £2 bn implemented by a scheme of arrangement.
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<li>Put up or shut up deadline is 21 April.</li>
</ul>
Consideration is 1850p per share, in cash, for an implied equity value of £2,022 mn and an implied EV of £2,342 mn.
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<li>
This represents 2.9x EV/ 21e revenue, 10.4x EV/21e EBITDA and 11.8x P/21e E.
</li>
</ul>
There is also a share alternative (new shares) in lieu of part or all of the cash consideration: 0.343 BALY US x 1 GYS LN. Gamesys' main shareholders intend to take it. So Bally's will only fork out c. £1,527 mn, financed first via bridge facility then equity raise (Bally's is firmly in junk territory, rated B stable by S&amp;P).
Bally’s is interested in Gamesys to grow in online gambling and sports betting. Bally's has recently been on an acquisition run. This friendly deal would be a transformational acquisition for Bally's and both companies are eyeing US online gambling and sports betting (look at Caesars' share price run since it announced the acquisition of William Hill). Putting together Bally's brand and bricks and mortar assets together with the online Gamesys platform seems a good combination. When news of the deal broke, Bally's shares gained 14% in midday trading.
Bally's prospective offer is less than the 16.3x EV/Fwd EBITDA in the case of Caesar's bid for William Hill and 14.0x EV/Fwd EBITDA in Entain's raised offer for Enlabs.
On this basis, the offer from Bally's does not look particularly generous, and Gamesys closed on 25 March 5.4% above the prospective offer. Recommendation is long Gamesys, TP 2060p (median implied valuation on an EV/Fwd EBITDA across comparable companies).

On 24 March, Bally's Corporation (BALY US) reached an agreement in principle to acquire Gamesys Group (GYS LN) for c. £2 bn implemented by a scheme of arrangement.

Put up or shut up deadline is 21 April.

Consideration is 1850p per share, in cash, for an implied equity value of £2,022 mn and an implied EV of £2,342 mn.


This represents 2.9x EV/ 21e revenue, 10.4x EV/21e EBITDA and 11.8x P/21e E.


There is also a share alternative (new shares) in lieu of part or all of the cash consideration: 0.343 BALY US x 1 GYS LN. Gamesys' main shareholders intend to take it. So Bally's will only fork out c. £1,527 mn, financed first via bridge facility then equity raise (Bally's is firmly in junk territory, rated B stable by S&amp;P).
Bally’s is interested in Gamesys to grow in online gambling and sports betting. Bally's has recently been on an acquisition run. This friendly deal would be a transformational acquisition for Bally's and both companies are eyeing US online gambling and sports betting (look at Caesars' share price run since it announced the acquisition of William Hill). Putting together Bally's brand and bricks and mortar assets together with the online Gamesys platform seems a good combination. When news of the deal broke, Bally's shares gained 14% in midday trading.
Bally's prospective offer is less than the 16.3x EV/Fwd EBITDA in the case of Caesar's bid for William Hill and 14.0x EV/Fwd EBITDA in Entain's raised offer for Enlabs.
On this basis, the offer from Bally's does not look particularly generous, and Gamesys closed on 25 March 5.4% above the prospective offer. Recommendation is long Gamesys, TP 2060p (median implied valuation on an EV/Fwd EBITDA across comparable companies).

Bally's - Gamesys: Betting on US Online Gambling

United States

Bally's Corporation operates as a holding company. The Company, through its subsidiaries, owns and manages hotels that offers amenities such as casinos, retail outlets, sports bars, pubs, dining, food court, and accommodation. Bally's serves customers in the United States.

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Bally's Corporation (BALY US)

Star Entertainment (SGR AU): A$800m Highly Dilutive Raise to Fix the Balance Sheet

Adjusting for the raise, Star trades at a discount to peers. While the shares will be under short-term pressure due to the raise, there is long...

Arun George

Star Entertainment (SGR AU): Entertaining Known Unknowns

Our leverage scenarios suggest an equity raise of A$250-500 million is required. Despite the share price fall, we would steer clear until the...

Arun George

Bally's - Gamesys: Betting on US Online Gambling

The combination makes sense but the price not so much. Gamesys closed on 25 March 5.4% above the prospective offer. Recommendation is long Gamesys,...

Jesus Rodriguez Aguilar

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