Amaya sees the Stars with name-change

Amaya sees the Stars with name-change

Monday, May 22, 2017 Posted by James Walker
It’s a new name and a new beginning for Stars Group

Amaya’s decision to change its corporate name to Stars Group to better reflect the company’s heritage and the loyalty of the customers to the main PokerStars brand makes a lot of sense and will do much to help the company move beyond the shadow of the David Baazov years.

To further aid the corporate makeover being attempted by the now-disgraced chief executive’s successor Rafi Ashkenazi, the company has also officially confirmed it is bringing in the M&A nous of ex-William Hill strategy guru Robin Chhabra as corporate development officer.

His brief, according to Ashkenazi during the analyst conference call that accompanied the first-quarter results, will be to seek our “inorganic growth” opportunities, and one area where we can expect to see Stars Group seeking to bolster its revenue profile comes in the sphere of sports betting.

As can be seen from the results in the three months to March, the revenue profile in the sports betting vertical remains anaemic at best with revenues estimated to be at below $7 million for the quarter.

Although the company said it had seen an increase on a sequential basis in unique active players and wagering amounts, it divulged no further information. However, given the limited revenue total, it is a fair guess that the numbers are clearly not that impressive when compared with recent trading updates from the major sports betting-led competitors.

The company was clear in stating where it believes it is going wrong in sports: Ashkenazi said the in-play offering remained sub-standard, mentioned that the company was unhappy with the current onboarding process and finally added that it was also seeking to improve the localisation of its offering for various European territories.

As well as looking to rectify these operational issues, it is likely the incoming Chhabra (who joins in September) will be given the brief to gain scale in sportsbook and quickly.

“The way that we are looking at the sports is, it’s not about technology, it’s more about customer base and it’s more about revenues,” Ashkenazi told analysts last week.

“That’s the way that we are regarding the sports. I think it’s something that will allow us acquisition of sportsbook will simply allow us to accelerate our sportsbook rollout.”

The reasoning behind the greater push in sports is that Stars clearly hopes to see more customer acquisitions coming through that vertical and Paul Leyland, analyst at gambling consultancy Regulus Partners lays out exactly why.

While the cross-sell from poker to other products, and notably casino, remains relatively poor at around 40%, the percentage for sports betting is much higher at around 60%.

“Poker, for lots of reasons, is one of the poorest cross-sell products in gambling,” Leyland wrote last week. “If it wasn’t, PokerStars would not have liquidity dominance - Playtech’s iPoker network would.”

The analyst reaction in Toronto, where the Stars Group is listed, was supportive of the strategy of seeking growth through acquisition.

“Sports is a tougher business due to the competitive and technical challenges inherent to the segment,” said Canaccord Genuity’s Kevin Wright. “Management has started to discuss potential M&A to enhance Betstars but was unwilling to provide deeper insights.”

Any acquisitive moves in sports-betting have to be set against the background of other challenges for Stars. The merger near-miss last year with Chhabra’s old firm exposed the degree to which suspicions regarding the long-term prospects for the Stars poker proposition are prevalent in the sector.

While the first-quarter figures showed no signs of deterioration – poker was stable with revenues up 1% to $219 million – it is also true that the only growth being seen has come from casino.

Wright at Canaccord Genuity pointed out that the rise in the percentage of total revenues to over 27%, or around $80 million, was “progress” though it was clear from Ashkenazi’s comments that an element of this comes from marketing casino into greyer territories such as Russia (where all remote gambling activities are outlawed).

Still, the size of Stars Group and its poker dominance mean that market watchers are wary of being too negative over the company’s prospects.

Said Leyland: “Notwithstanding (the) issues, Amaya retains dominance of global poker markets, brings significant (if dot-com) scale, and is regaining its operational composure after a difficult acquisition period: the route to higher growth and lower risk is likely to be a combination of further operational improvements and strategic M&A.”

Over to you Robin…

Totally Gaming says: It’s a new name and a new beginning for Stars Group. As we head into summer, the company will have cash to spend after settling its $4.9 billion purchase of PokerStars and Full Tilt. And as it looks to move forward following the controversial departure of former leader David Baazov, sports betting is poised to become the next big revenue earner for the group.


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