In an intriguing development earlier this week, the globally-renowned MGM Resorts International publicly announced its bracing moves into the digital gaming frontier. The gigantic company is diving headfirst into the realm of online betting with its LeoVegas unit striking a deal to absorb the US iGaming and sportsbook operations of Tipico Group for a monetary value that remains cloaked in corporate secrecy. This bold maneuver is already earning applause and commendations from Wall Street aficionados, showcasing a long-awaited leap into the burgeoning era of digital gaming.
There’s more to this saga than just APA-style number crunching and acquisition bureaucracy. If you delve deeper, you’ll find that MGM’s strategy could be less concerned with Tipico’s market share and more captivated by its cutting-edge technological prowess. This sentiment mirrors the take of Gimme Credit analyst, Kim Noland. She lauds this power move as a significant cog in MGM’s digital advancement machine. She further notes that the resort operator’s evolution into the digital sphere is already paying lucrative dividends.
“MGM’s foray into sports betting and digital gaming isn’t merely an extra kink in the chain. It’s set to transform into a profitable graft on the MGM flora, supplementing its international luxury casino resorts and potentiate its growth trajectory,” Noland writes in a newly published report.
And what becomes of Tipico? Post-acquisition, Tipico will shutter its US operations. However, parts of its US-based management, technology, and trading teams are set to emerge into a new dawn at LeoVegas once the ink of the transaction agreement dries, potentially by the third quarter.
In the year of 2022, when MGM penned a hefty $600 million check to acquire LeoVegas, it laid down a concrete marker of its intention to expand its digital footprint beyond the American boundaries. The forthcoming incorporation of Tipico’s high-end technology could resonate well with these international ambitions.
This digital gaming expansion is a subject of high interest to investors because, unlike its tethered relationship with Entain in the US, MGM’s international operations aren’t constricted by competitive hurdles. Consequently, MGM can efficiently deploy Tipico’s technology to scale itself internationally in regions, where the jointly steered ship of BetMGM by MGM and Entain doesn’t have preferential rights.
Adding to the panoply of digital expansion, in a recent move, MGM put pen to paper for a partnership deal with Playtech. This offers live casino content streamed directly from Bellagio and MGM Grand’s gaming floors in Las Vegas to regulated international markets, laying the groundwork for potentially storming the U.S. markets in the future.
While Noland hints at the possibility of regulatory hindrances for the Playtech live gaming venture, she remained confident about the overall growth of MGM’s iGaming unit.
As the corporate announcements spread their wings, MGM’s shares soared nearly 15% this month. And while the stock’s dividends are nothing to write home about, the high yield-to-worst of the company’s 2027 maturing bonds of around 6% is proving to be quite enticing for income investors. Supported by a potent free cash flow and solid fundamentals, Noland projects an outperform rating for the issue.
Apart from the sturdy fundamentals, MGM’s hearty stock repurchases and a sizeable remaining authorization of $1.7 billion paint a bullish picture, making the company’s offering a tantalizing prospect for investors with a keen eye for potential returns.
