Jun 27: Gaming stocks stage a rally

The shares week, New York weekly data, Las Vegas analyst update, startup focus - ParlayBay +More

Earnings+More

Jun 27, 2022

Good morning. To start your week:

‘Here comes the cavalry’: gaming stocks stage a recovery.
ESPN suggests sports-betitng might be the next frontier.
Our startup focus is on sports-betting games provider ParlayBay.

Money trees. Sign up now:

The shares week

Relief rally: Friday was a good day for the gaming sector on the major indices as all the leading names enjoyed the benefits of the general optimism over equities and posted double-digit gains.

Renaissance: The leading US OSB and igaming operators also enjoyed something of a rebound led by DraftKings, which rose over 8% on Friday and was up nearly 28% for the week and Rush Street Interactive, which enjoyed a 9%+ gain on Friday and was up nearly 21% for the week.

Running up that hill: The performances helped provide a boost to the Roundhill sports-betting and igaming ETF which was up over 8.5% for the week. However, it is still down over 38% in the YTD.

**Sponsor's message: Spotlight Sports Group (owned by Exponent Private Equity) is a leading technology, content and media business specialising in sports betting. The business recently released a new white paper detailing the opportunity for operators in the UK and Irish markets to grow their horse racing revenue on a global scale.

Click here to download the full white paper.

For more information visit: spotlightsportsgroup.com

New York wk to Jun 19

GGR stood at $13.8m off handle $265.6m

Leaders: FanDuel all but generated the entire GGR for the week at $12.4m or a whopping 89%. DraftKings trailed in with $1.08m followed by PointsBet with $773k, BetMGM ($352k) and BetRivers with $329k.

Negative equity: The rest were all in negative territory including Caesars with minus $962k, Resorts World (-$45k) and Wynn Bet (-$22k).
In the fiscal year 22-23 YTD (or 12 weeks), FanDuel leads total GGR by 58.2%, followed by DraftKings on 20.1%, Caesars (10.4%), BetMGM (6.4%) and PointsBet (2.2%).

ESPN and sports-betting

Across the great divide: Speaking on a podcast from the Athletic last week, ESPN chairman Jimmy Pitaro suggested that the answer to the question of what's next for ESPN and betting was that the sports broadcaster thinks it could “potentially be doing more” and said, “is there a next frontier?”

A big help: For Disney, he said a move into sports-betting would be neutral for the brand but for ESPN in particular, it was (something we need to be doing).

Jimmy Pitaro: “It’s something that our fans are expecting from us. So it’s not a ‘nice-to-have,’ it’s pretty much at this point a must-have.”

He added that ESPN had opportunities to “be a bit more aggressive in the space”. “But we’re just not there yet. We are being very thoughtful here. We have to get this right.”

Bally share repurchase

Moving parts: Bally announced on Friday a $190m tender shares offer, lower than the previously suggested range of between $300m-$500m.

Suspension: Meanwhile, the Wells Fargo team has suspended its coverage of Bally Corporation with immediate effect. The analysts said the decision was the result of “various legal, regulatory and/or company policy circumstances”.
No reflection: But it was “not a reflection or comment by the analyst or Wells Fargo on the fundamentals of that company,” they added.

Low Fidelity: Wells Fargo’s decision follows the news last week that Bally’s lead investor Fidelity Investment had hired a law firm to investigate the group’s financial strategy in relation to the financing of its $1.7bn River West project in downtown Chicago.

Las Vegas analyst update

Dependencies: In Las Vegas, MGM’s, Caesars’ and Wynn’s 2023 figures will depend on the revenue mix from three segments: group/convention business, casino and US/international leisure, added the Wells Fargo team.

Base case: “In our base-case scenario, we assume a 12-15% YoY decline in (LV Strip) casino revenue, US leisure down 10-15%, offset by convention (+30-40%) and international up ~30% vs. 2022.”

High-end: Wynn will fare best because relative to peers, the Wells Fargo team believes “it skews higher-end and more international,” even if Macau remains Wynn’s primary stock driver.

Sentimental journey: Meanwhile, “investor sentiment remains negative as LV is perceived at/near peak and nowhere for estimates to go but down”.

Macau update

Harsh: The DICJ said on Sunday that gaming companies must “strictly implement” all Covid prevention measures including reducing the number of casino personnel. This was in response to the news on Sunday that the number of cases in Macau has risen to 299 from 170 on Friday.

Third time lucky: All Macau residents will also be required to undergo another round of mandatory testing from 9am Monday. It is the third round of citywide tests in the space of a week.

Further reading: The South China Morning Post ponders whether Macau’s gambling days are numbered.

IGT investor worries

Wake-up call: Investors are “exploring” the pending transition of the UK lottery from incumbent Camelot and its partner IGT to the Allwyn, the soon-to-list provider which is set to merge with the Cohn Robbins Holdings Corp SPAC.

Not good: According to CRHC disclosures, the UK lottery generates historical EBITDA of $175m and Jefferies pointed out that this represents 10.3% of forecast IGT EBITDA for 2022. The switch to Allwyn is “therefore not a positive”.

Startup focus - ParlayBay

Who, what, where and when: The ParlayBay idea was conceived in 2018 as a provider of sports-betting games which hopes to be commercializing its product suite as of this summer. The company has its hubs in Poland, Sweden, Malta and the UK.

Funding backgrounder: ParlayBay has a list of private investors from the igaming sector. A capital raise is planned for Aug22.

So what's new? In early June, ParlayBay formed an alliance with GRID Esports which will see the sports-betting games deployed in the esports vertical with data supplied by GRID. Under the arrangement, esports will be made available in the Fall across ParlayBay’s gaming catalog which includes Streak, Boss and Gekko.

The longer pitch: Patrick Nordwall, CEO, who joined ParlayBay in February this year, says the company is “on a mission” to design real-month sports-betting games, all with an eye on the micro-betting area. “At the core”, he says, sit odds engines enabling the creation of betting games across single matches, single-player and cross-matches betting markets, as linear parlays, or “Tinder-like swipe left/right-to-engage experience”.

Players can hedge their bets using multi-betting functionality and in many cases cash-out between rounds, both at price of course. Splash screens showcase the highlights of the betting games, how they work and how players can win.
The gameplay shows the action from other players joining and being eliminated, their own progression and event feeds to see what is happening in sports events that have impact on their bets

Keep it sweet: Nordwall says operators may “sweeten the deal” for the players even more by promoting this experience using free bets to “try new games and betting markets”, and use in-game promotional tools.

Newslines

Spotlight Sports Group will supply its Superfeed content engine to Catena Media’s horseracing-focused sites GG.co.uk and racingtips.com as part of a new multi-year deal between the two groups.

NeoGames has completed its $480m acquisition of Aspire Global whose shares will cease trading in Stockholm on July 4.

Knockback: The Star Sydney’s bid for a further 1,000 gaming tables has been rejected by the New South Wales regulator which ruled that an expansion was not appropriate right now due to the pending report into its suitability as a licensee.

Outta here: Ulrik Bengtsson is set to leave his position as CEO of William Hill as the group prepares to be integrated into 888’s corporate structure. Bengtsson joined William Hill in 2018 as chief digital officer and created the William Hill International division later that year and drove the acquisition of Swedish online casino MrGreen in 2019.