Online gambling surges as New Jersey Governor backs the industry

Online gambling stocks soared Friday after the Governor of the US state of New Jersey said he would legalise betting on the internet if it had a 10-year trial period and higher tax rate on casinos.

Online gambling stocks soared Friday after the Governor of the US state of New Jersey said he would legalise betting on the internet if it had a 10-year trial period and higher tax rate on casinos.

Chris Christie vetoed a bill to sanction online gaming on Thursday but said he would support the move with some minor changes including bumping up the tax rate on casinos from 10% to 15%.

"Now is the time for our state to move forward, again leading the way for the nation, by becoming one of the first states to permit Internet gaming," Christie wrote in a statement.

"While Atlantic City's reputation and stature as one of the premier resort destinations on the East Coast are well-chronicled, it is no secret that revenue from the region's most important industries, gaming and tourism, has been in decline."

Had Christie signed off on the bill, New Jersey would have become the third state to legalise gambling over the internet.

The market gained a day later from the leader's support of the industry.

Bwin.party was among the biggest beneficiaries as shares rose 18.25% to 138.00p at 13:43 Friday. Online poker company 888 jumped 14.04% to 132.00p while Playtech surged 7.11% to 52.50p.

Cannacord had predicted the outcome, saying Bwin.party was most likely to gain the most out of the governor's statement. It issued the company with a 'hold' rating and a target price of 122p.

"It was the market leader in the US online poker market prior to the [Unlawful Internet Gambling Enforcement Act] and has a [business to business (B2B)] partnership with Boyd Gaming, which operates an Atlantic City casino," the broker said.

"It is significantly the cheapest stock in the sub-sector given concerns over exposure to Germany and a structurally challenged European Online Poker market.

Other major recipient 888 - which has a B2B partnership with Caesars, another Atlantic City casino operator - was also given a 'hold' rating along with a target price of 125p.

The broker placed a 'buy' rating on Playtech with a target price of 604p, saying it was well placed to reap rewards as the only B2B company that is listed. "...we would expect it to secure B2B licenses, given a number of casino operators that have yet to commit," Cannacord concluded.

RD

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