Gaming - UK government reduces maximum FOBT stake to £2; signals tax increase on online gaming revenues

Davy Research
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While some in the industry will be disappointed by the UK government’s decision this morning to reduce the maximum stake on fixed odds betting terminals (FOBTs) to £2, the reality is that the market had pretty much priced in such an outcome in recent weeks. The decision at least draws a line under the uncertainty with the market now having a proper sense of what future earnings profiles look like. That certainty is a positive. What remains unclear, however, is what the timeline will be for implementation; it may well be delayed until 2020. In addition, the suggestion that online taxes on gaming revenues will be increased leads to question as to how much. If anything, it is this part of the announcement that will move these stocks today, not the FOBT outcome. The triennial process has emphasised once again the need of all operators to have both scale and diversification. Hopefully after today investors will be able to focus more on the growth opportunities for the sector than the downside from UK regulatory risk.