Baazov bid overshadows vision for Amaya's future

Baazov bid overshadows vision for Amaya's future

Thursday, November 17, 2016 Posted by Andy McCarron
PokerStars operator aims high as former boss circles

While Amaya’s trading update this week was somewhat overshadowed by the news that former chief executive and company founder David Baazov has renewed his bid for the shares he doesn’t already own, it also took the limelight away from the vision that current CEO Rafi Askenazi has for the company - with a greater focus on mobile one of the key aspects.

The results were the first since the aborted merger bid from William Hill that was nixed by the latter’s shareholders who were wary of shackling their fortunes to those of the world’s biggest online poker operator.

The results statement, then, was a good opportunity for the Amaya management to re-state its case for the future of the company and its product mainstay. Among its priorities are to grow poker which still represents nearly three-quarters of total revenues of US$270.8m and which fell 1.3% year-on-year but was off by nearly 8% quarter-on-quarter (albeit in a seasonally quiet quarter).

Askenazi said the company hopes to return the product to growth next year, but an easier task comes in online casino where the company is seeing the benefits of the cross-sell into its huge 2.4 million active player base. The product saw 75% growth in the third quarter but again the quarter-on-quarter numbers were less impressive, with growth rising by 8.2%. Still, the company said it was pleased with the outcome given that it has yet to employ any external marketing for the casino offering and it has no VIP programme in place as yet.

The last leg of the Amaya plan is to make more of its sportsbook where the company has hired Zeno Osskó, formerly from myBet, to be the new managing director at BetStars.

“In 2017, we will refine our plans and strategy and then investing less on market expansion and more on our product and parity especially on mobile,” said Askenazi.

Addressing the possibility of cannibalisation of the poker players into casino and sportsbook, Askenazi said the company had expected some level of players using their poker-only deposits on casino and sports. But he said the evidence to date from lifetime values and net deposits was that there was an incremental spend in evidence. “We have been encouraged by the fact that newly-acquired players are generating more poker revenue than new-acquired players in prior years, while at the same time playing casino and sportsbook,” he said.

The company will make a payment of US$200m to the Scheinberg family, the previous owners of PokerStars, as part of the earnout due to the sellers in February next year. A further US$200m will be paid from cash resources closer to the February date.

Paul Leyland, founder at gambling consultancy Regulus Partners, said the earnout payment would add further pressure on Amaya’s debt situation which as of the end of the quarter still stood at US$2.56bn.

“This is a very high level of leverage for a low-growth environment, especially given the 80%-plus cash flow exposure to dotcom revenues (including circa 10% revenue from Russia),” he wrote in a note to clients. “Within this context, cost cutting is understandable but unlikely to be substantial enough to drive earning growth.”

Totally Gaming says: Askenazi ended his comments to analysts with the declaration that PokerStars aimed to be the “world’s favourite gaming destination”, going on to suggest it would achieve this aim by, among other things, being the most entertaining, exciting, reliable, trusted, safest, interesting and innovative operator in the space. It’s an extensive enough list of aspirations; whether the company achieves them – and whether it is attempted in the public or private arena - is now up for debate.

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