H1 results: Analysts encouraged by Evoke’s reduced UK reliance
Operator's H1 revenue only up 3% year-on-year but improvements in EBITDA have really buoyed the market.
Key points:
– Evoke’s international segment described as “standout” and “star performer”
– Both Deutsche Bank and Peel Hunt hold ‘buy’ recommendations, with share price target of over £1.00
– At the time of writing, Evoke stocks sit at £0.63, peaking at £0.66 immediately after the results
In perhaps the most satisfying coincidence you could imagine when reporting financial results, Evoke this morning announced H1 revenue of £888m ($1.2bn).
That is the figure when rounded (its report led with £887.8m), but still a rather nice touch given Evoke’s signature brand is 888. Beyond the coincidence, markets reacted positively, with Evoke’s share price rising as high as 6% in the immediate aftermath, to £0.66.
Analysts, too, reacted well, in particular emphasising Evoke’s international focus.
Deutsche Bank – target price: £1.08
Indeed, according to an investment note from global powerhouse Deutsche Bank, Evoke’s “standout was the improvement in online margin… but, in particular, international.
“Unlike UK online growth which was broadly flat (William Hill good momentum, particularly in gaming but 888 revenue declined), Evoke’s core international markets (Italy, Spain, Denmark and Romania), delivered an impressive 20.5% revenue growth and saw divisional EBITDA more than doubling owing to the ‘optimisation’ of non-core markets and its exit from the US B2C market.”
Deutsche Bank is consequently reiterating its ‘buy’ recommendation, keeping a price target of £1.08 for the operator.
Good to know: Evoke CEO Per Widerström joined Gambling Insider for an exclusive Huddle interview at ICE Barcelona in January
Perhaps the most crucial point delivered by this analysis highlighted that the international segment now represents 52% of group EBITDA, which is “especially important” if there is any “potential tax raid by the UK Government in the Autumn statement.”
Peel Hunt – target price: £1.10
Another positive note came from UK investment bank Peel Hunt, which noted “leverage descending, appeal ascending.”
Evoke’s “improving trajectory” may encourage investors previously put off by the operator’s debts, according to the bank.
Peel Hunt suggested 49% of H1 adjusted EBITDA came from markets outside the UK (this may vary from Deutsche Bank’s earlier figure of 52%, unless there is some overlap).
Its note continued: “We expect 888 to catch up under a new team… The International business (described as the ‘star performer’) shows that management’s changes can drive momentum.”
Indeed, Peel Hunt concluded by reiterating its ‘buy’ recommendation and a slightly higher target price of £1.10.
Overall, diversification seems to be the name of the game right now, a topic also emphasised by Entain CFO and Deputy CEO Rob Wood when speaking to Gambling Insider this week. Evoke’s historic decision to leave the US further supports a strategy of spreading across multiple markets, exiting a region that was too costly and would end up monopolising the organisation’s resources.
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