TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Equity Bottom-Up

Last week, New York Governor pointed towards legalizing online gambling to try to plug the budget gaps that COVID has blown open. He wants to raise $500M in revenues annually. We don't think he will get there, but we do think NY is a $700M TAM.At $52, is it time to re-engage on Draft Kings even after an 11% rally?<div class="content-highlight">Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</div>

Last week, New York Governor pointed towards legalizing online gambling to try to plug the budget gaps that COVID has blown open. He wants to raise $500M in revenues annually. We don't think he will get there, but we do think NY is a $700M TAM.At $52, is it time to re-engage on Draft Kings even after an 11% rally?Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

NY State To Legalize Gambling, Double Down on DraftKings?

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<a href="https://www.smartkarma.com/entities/caesars-entertainment-corp" target="_blank" data-smartkarma-citation="entities:15532:1" rel="noopener">Caesars Entertainment (CZR US)</a> agreed last Wednesday a takeover offer of <a href="https://www.smartkarma.com/entities/william-hill-plc" target="_blank" data-smartkarma-citation="entities:22210:1" rel="noopener">William Hill (WMH LN)</a> for an amount of c. GBP2.9 bn, or GBp 272 per share of WHM in cash. This is to be effected by a Scheme of Arrangement.
The US group, which owns Caesars Palace, will focus on integrating the British group's American business into CZR. With William Hill's board backing the Caesars deal, the company's sale is virtually complete, and Apollo, whose two bids were turned down, is virtually out of the game.
Nevertheless, the deal has to be voted in December by William Hill's shareholders (75% required).
Wiliam Hill's shares closed at 278p on Friday, vs the offer of 272p.
<ul class="">
<li>a spread of 2.2% above indicated offer terms.</li>
<li>The market does not completely rule out the possibility of a higher bid, although CZR has a poison pill in case anybody else dares to bid for William Hill, and has signalled its willingness to dispense it.</li>
</ul>
If you really believe there is an outstanding opportunity in online gambling and sportsbetting in the USA, just as CZR and most analysts do, you should be switching from William Hill into CZR.
<ul>
<li>“William Hill’s sports betting expertise will complement Caesars’ current offering.”
<ul>
<li>CZR will dispose the most troublesome bits of William Hill, those exposed to the regulatory vagaries in both Australia and the UK. And there are buyers for them.</li>
<li>The potential William Hill acquisition is likely to create value for shareholders with little risk, up to $2.5 bn, or $12.25 per share of CZR (22% upside from last close). And there's the upside risk of consensus revisions.</li>
<li>CZR could integrate its own online business with that of William Hill, spin it off and list it. DraftKings is trading at an EV/Forward EBITDA (Cap IQ consensus) of 33.8x. </li>
</ul>
</li>
<li>The mean target price of CZR on Capital IQ is $67, an 18% upside vs. last close.</li>
</ul>

Caesars Entertainment (CZR US) agreed last Wednesday a takeover offer of William Hill (WMH LN) for an amount of c. GBP2.9 bn, or GBp 272 per share of WHM in cash. This is to be effected by a Scheme of Arrangement.
The US group, which owns Caesars Palace, will focus on integrating the British group's American business into CZR. With William Hill's board backing the Caesars deal, the company's sale is virtually complete, and Apollo, whose two bids were turned down, is virtually out of the game.
Nevertheless, the deal has to be voted in December by William Hill's shareholders (75% required).
Wiliam Hill's shares closed at 278p on Friday, vs the offer of 272p.

a spread of 2.2% above indicated offer terms.
The market does not completely rule out the possibility of a higher bid, although CZR has a poison pill in case anybody else dares to bid for William Hill, and has signalled its willingness to dispense it.

If you really believe there is an outstanding opportunity in online gambling and sportsbetting in the USA, just as CZR and most analysts do, you should be switching from William Hill into CZR.

“William Hill’s sports betting expertise will complement Caesars’ current offering.”

CZR will dispose the most troublesome bits of William Hill, those exposed to the regulatory vagaries in both Australia and the UK. And there are buyers for them.
The potential William Hill acquisition is likely to create value for shareholders with little risk, up to $2.5 bn, or $12.25 per share of CZR (22% upside from last close). And there's the upside risk of consensus revisions.
CZR could integrate its own online business with that of William Hill, spin it off and list it. DraftKings is trading at an EV/Forward EBITDA (Cap IQ consensus) of 33.8x. 


The mean target price of CZR on Capital IQ is $67, an 18% upside vs. last close.


William Hill - Caesars (Almost) Done Deal, Trading Above Terms

British bookmaker <a href="https://www.smartkarma.com/entities/william-hill-plc" target="_blank" data-smartkarma-citation="entities:22210:1" rel="noopener">William Hill (WMH LN)</a><a href="https://www.williamhillplc.com/investors-centre/regulatory-news/item?rnsid=3819908" target="_blank" rel="noopener">confirmed on 25 September </a>that it has received separate cash proposals from <a href="https://www.smartkarma.com/entities/apollo-global-management-inc" target="_blank" data-smartkarma-citation="entities:28770:1" rel="noopener">Apollo Global Management Inc (APO US)</a> ("Apollo") and <a href="https://www.smartkarma.com/entities/caesars-entertainment-corp" target="_blank" data-smartkarma-citation="entities:15532:1" rel="noopener">Caesars Entertainment (CZR US)</a> ("Caesars").
Apollo submitted its first takeover offer on Aug. 27, then upgraded it, while Caesars joined the bidding for a company that has been hit hard by the coronavirus.
Today, press reports that Caesars in is advanced talks on a £2.9 bn takeover bid, at £272p per share, which would value the equity of William Hill at 2,855 mn. The shares of William Hill have adjusted downwards and at 15.30 (GMT) were trading at 275, above the indicated level for Caesar's prospective offer.
Caesars is undertaking an equity capital raising (30 mn shares, at $57.07 the closing price of Friday, could raise $1.7bn) with the aim of using its proceeds, together with existing cash and $2 billion (£1.6 billion) of new non-recourse debt facilities to fund the offer. The transaction would be subject to approval of William Hill shareholders and customary antitrust and regulatory gaming approvals. Caesars expects that the transaction would close in the second half of 2021.
I estimate that a private equity buyer could pay 300p per share (10% premium to Caesar's offer) and achieve an IRR of 20.3% between years 7 and 8. Apollo would seek to launch a friendly offer.
I believe that the first move by Caesars makes it more difficult for Apollo to present an offer and enter into a bidding war for William Hill, but this should not be ruled out.
Recommendation is LONG William Hill. There may be further upside from an Apollo offer.

British bookmaker William Hill (WMH LN)confirmed on 25 September that it has received separate cash proposals from Apollo Global Management Inc (APO US) ("Apollo") and Caesars Entertainment (CZR US) ("Caesars").
Apollo submitted its first takeover offer on Aug. 27, then upgraded it, while Caesars joined the bidding for a company that has been hit hard by the coronavirus.
Today, press reports that Caesars in is advanced talks on a £2.9 bn takeover bid, at £272p per share, which would value the equity of William Hill at 2,855 mn. The shares of William Hill have adjusted downwards and at 15.30 (GMT) were trading at 275, above the indicated level for Caesar's prospective offer.
Caesars is undertaking an equity capital raising (30 mn shares, at $57.07 the closing price of Friday, could raise $1.7bn) with the aim of using its proceeds, together with existing cash and $2 billion (£1.6 billion) of new non-recourse debt facilities to fund the offer. The transaction would be subject to approval of William Hill shareholders and customary antitrust and regulatory gaming approvals. Caesars expects that the transaction would close in the second half of 2021.
I estimate that a private equity buyer could pay 300p per share (10% premium to Caesar's offer) and achieve an IRR of 20.3% between years 7 and 8. Apollo would seek to launch a friendly offer.
I believe that the first move by Caesars makes it more difficult for Apollo to present an offer and enter into a bidding war for William Hill, but this should not be ruled out.
Recommendation is LONG William Hill. There may be further upside from an Apollo offer.

William Hill - Caesars: Entertainment Prospective Bid

<div>Our investment philosophy attracts us to investing behind THE major secular trend in the world today…offline to online transition of massive TAMs. Even the largest TAMs in the world – groceries, entertainment, autos, commerce, finance, real estate, etc. are still incredibly early in the long term re-platforming of how the global economy functions, but COVID has turbocharged these trends. Gambling has been online in Europe and Australia and parts of Asia for a few years now, but the US is jusssst scratching the surface. We think DraftKings is a great long term holding and had a good tactical entry point yesterday when we wrote this...it was up 9% today on news that Illinois (~4% of the US population) had reinstated remote registration for online gambling, just ahead of the start of NFL season. We think there's still 15%+ upside in our base case, and 56% in our bull case. </div><div></div><div class="content-highlight">Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</div>

Our investment philosophy attracts us to investing behind THE major secular trend in the world today…offline to online transition of massive TAMs. Even the largest TAMs in the world – groceries, entertainment, autos, commerce, finance, real estate, etc. are still incredibly early in the long term re-platforming of how the global economy functions, but COVID has turbocharged these trends. Gambling has been online in Europe and Australia and parts of Asia for a few years now, but the US is jusssst scratching the surface. We think DraftKings is a great long term holding and had a good tactical entry point yesterday when we wrote this...it was up 9% today on news that Illinois (~4% of the US population) had reinstated remote registration for online gambling, just ahead of the start of NFL season. We think there's still 15%+ upside in our base case, and 56% in our bull case. Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

La Francaise des Jeux / Equity Capital Markets

La Française des Jeux (FDJ) is the French national lottery established in 1933 and it is the largest company in the French gaming sector and has a monopoly in draw and instant lotteries (both point of sales and online) as well as point of sale sports betting in France. Based on gross gaming revenues, FDJ is second only to Italy’s Lottomatica in Europe, and also the 4th largest player in the world.Our previous insight on <a href="https://www.smartkarma.com/insights/fdj-french-national-lottery-ipo-odds-of-winning-are-better-than-their-lotteries" target="_blank" rel="noopener">FDJ (French National Lottery) IPO: Odds of Winning Are Better than Their Lotteries</a> focused on FDJ’s strong business model, stable earnings growth and its monopolistic position in the market. This time we shift our attention to the valuation of FDJ and in this insight, we’ll be looking at return on equity, dividend yield and other relative valuation multiples for both FDJ and its peers.

La Française des Jeux (FDJ) is the French national lottery established in 1933 and it is the largest company in the French gaming sector and has a monopoly in draw and instant lotteries (both point of sales and online) as well as point of sale sports betting in France. Based on gross gaming revenues, FDJ is second only to Italy’s Lottomatica in Europe, and also the 4th largest player in the world.Our previous insight on FDJ (French National Lottery) IPO: Odds of Winning Are Better than Their Lotteries focused on FDJ’s strong business model, stable earnings growth and its monopolistic position in the market. This time we shift our attention to the valuation of FDJ and in this insight, we’ll be looking at return on equity, dividend yield and other relative valuation multiples for both FDJ and its peers.

FDJ (French National Lottery) IPO Valuation: 32% ROE & 5% Dividend Yield Merits a Higher Valuation

United Kingdom

William Hill is a British gambling company offering sports betting, online casino, online poker, and online bingo. It provides betting opportunities on sporting and non-sporting events, as well as number-based products like lotteries, through licensed betting offices, on-course betting, and online platforms. The company was founded in the UK in 1934 and is headquartered in London.

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William Hill (WMH LN)

NY State To Legalize Gambling, Double Down on DraftKings?

After New York's Governor signaled he would legalize gambling, we revisit our previous bullish thesis on DraftKings to see if now is the time to re...

Aaron Gabin

William Hill - Caesars (Almost) Done Deal, Trading Above Terms

Caesars Entertainment (CZR US) agreed last Wednesday

Jesus Rodriguez Aguilar

William Hill - Caesars: Entertainment Prospective Bid

Apollo and Caesars Entertainment present separate bids for the British bookmaker William Hill.

Jesus Rodriguez Aguilar

DraftKings: First Round Pick

Our investment philosophy attracts us to investing behind THE major secular trend in the world today…offline to online transition of massive TAMs....

Aaron Gabin

FDJ (French National Lottery) IPO Valuation: 32% ROE & 5% Dividend Yield Merits a Higher Valuation

La Française des Jeux (FDJ) is the French national lottery established in 1933 and it is the largest company in the French gaming sector and has a...

Oshadhi Kumarasiri

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