10 May: Street hits like on DK’s social plans +More
DraftKings analyst reaction, Zeal Network, Genting Singapore Q1s, Aspire Global analyst reaction, Illinois, Ohio and Iowa April data
Welcome to another busy week of results from the global betting and gaming sector. Later today Bally Corporation, Scientific Games, Inspired Entertainment, Wynn Resorts and Full House will be publishing results and E+M will report on these tomorrow. We kick the week off though with a look at the analysts’ reaction to the DraftKings earnings call on Friday as well as the Q1 numbers from Germany’s Zeal Network and Genting Singapore.
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DraftKings
Analysts: Deutsche Bank, Macquarie, Credit Suisse, Truist Securities, Jefferies
Extending losses: Deutsche Bank (hold) suggested the marginally worse than expected EBITDA losses performance in Q1 has led expectations for losses for the year to “migrate lower” - they are now projecting losses of $551m versus prior estimates of $460m. The revenue beat was due to an unspecified benefit from a high hold percentage. This is unlikely to last. DB noted that intense competition, via tight pricing, “could put pressure on hold percentages, in addition to the normal volatility of the business, which tends to normalize over time.” Truist (hold) noted that rising sales and marketing costs would continue to grow with Q3 EBITDA losses likely to be the “deepest”.
I used to be a King: Recent commentary from BetMGM suggested it believes it’s vying for second place behind FanDuel and the team at Macquarie (outperform) indeed estimate DraftKings has lost market share. But Macquarie’s analysts went on to say that earnings call announcements on media, technology improvements and the new social functionality represent a successful effort to “fortify (DraftKings’) mousetrap.” Meanwhile, Credit Suisse (outperform) suggested the social innovations would provide good “differentiation.” Ahead of the earnings call, Jefferies (buy) said the company had provided “strategic substantiveness.”
“Our take from the quarter is that DKNG remains on track to grow as a first-mover from multiple perspectives: technological integration, product breadth and ultimately revenue.”
However, the market’s post-call reaction was less enthusiastic, sending the shares down over 6.5% on a generally bad day for gaming stocks.
Walk on the wild side: DB noted that management said little about its chances of finding a licensed berth in either New York or Florida after what the analysts term a “largely disappointing” quarter on the regulatory front. As the DB team says, while DraftKings will certainly attempt to qualify as a platform provider in NY - and then utilising one of the two available skins - from there “the process gets more confusing and ambiguous.” Credit Suisse believes DraftKings is the front runner in NY. “We think it makes sense for DKNG to partner with one of the other leaders in the space to make the bid/proposal more attractive and then allocate themselves the two licenses.”
Come on feel the Illinois: DB noted that Illinois was a tailwind in Q1 due to the unexpected benefit of having mobile registration available for the whole of the three months. As is detailed below (see Illinois March data), with in-person registration back in force as of early April, it potentially puts DraftKings at a disadvantage given the geography of its partner casino in East St Louis. However, DB said that given management's comments on having built up a sizeable player base while in-person was suspended, it shouldn’t have a dramatic near-term impact on market share.
Zeal Network
The top line
Revenues for Q1 rose 18.9% to €22.6m while adjusted EBITDA was up 61.3% to €4.6m. Billings rose 17% to €163.3m.
The number for new registered players in Germany declined over 24% to 156k. Germany accounted for the vast majority of total revenues.
Marketing push: The Hamburg-based operator behind lottery brokerage Tipp24 and LOTTO24 said its products performed well in the “low jackpot environment” encountered in the first three months of the year. The average jackpot for the German lottery was €5.7m compared to €7.3m in the prior year period. Counter-intuitively, Zeal invested in marketing during this period because the players that come through the door during low jackpot periods generally exhibit higher long-term activity. The German cost per lead rose 32% to €33.48 but average bookings per user also rose 14% to €56.36.
Instants karma: The company will be applying for a license to operate under the new Interstate Treaty. “We don’t foresee any issues there,” said CEO Helmut Becker.
“Then the plan is to launch instant win games once we have a license. We know from the past that these games resonate well with our user base. And we know from other markets that instant win games are a successful product category.”
Peel Hunt analysts suggested the results highlighted the structural growth evident in the German online lottery market.
The Google Play Store: The company said that as of March 1 the LOTTO24 app is now available on the Google Play Store in Germany. The company expects this to accelerate its share of mobile usage.
Genting Singapore
The top line
Gaming revenues ticked up slightly QoQ, 2% higher to S$216.8m (US$163.5m) but including non-gaming (down 29% QoQ), total revenues fell 12% QoQ and 32% YoY to S$277.9m. Adjusted EBITDA fell 39% QoQ and 15% YoY to S$128.1m.
Hobbled: Genting Singapore said it continue to be tied down by travel restrictions imposed by the Singaporean government. The company said international leisure travelers were unlikely to return in the near term. To increase the “vibrancy and attractiveness” of Resorts World Sentosa as a safe destination, the company has instituted health and safety protocols to build on the country’s reputation as a “safe and trusted hub.” This includes revisions to the company’s S$4.5bn RWS 2.0 expansion plans.
Aspire Global analyst reaction
Analysts: Edison, Redeye
Receiving an upgrade: The analysts at Edison liked what they saw from Aspire Global, suggesting the broad-base organic growth had been complemented by EBITDA accretive M&A (BtoBet in September 2020 and Pariplay in late 2019). Redeye noted the earnings beat and suggested it had been driven by Pariplay which was “gaining good traction” in the market. The Q1 growth has led Edison to upgrade their revenue and EBITDA forecasts for 2021 and 2022 for the company by 4% to €195.6m and €220.4m for revenues and €34.7m and €40.6m for EBITDA respectively. The upgrade reflected more optimistic growth assumptions for the games and the B2C segments as well as a modest upgrade on the core sports-betting platform business.
Discount to peers: The Edison team note that with an EV/EBIT ratio of 11.4x, Aspire trades at a 59% discount to its peers, who trade at an average of 27.7x on that metric. Also, relative to its peer group Aspire has a smaller market cap though this might change as it pursues potential M&A and organic growth opportunities. Recall, on the conference call with analysts last week CEO Tsachi Maimon said the US was one focus area. “If AG continues to execute well, we expect the valuation gap relative to its larger peers to narrow,” the Edison team predict.
Ohio, Illinois and Iowa (sports-betting) April data
Ohio: GGR at Ohio’s casinos and racinos came in at $217.1m in April, up 35.5% on the same period two years prior. Sequentially, the increase was 0.6%. Slot handle increased 35.2% and slot revenue was up 38.1%. Table drop increased 9.8% and table revenue rose 19.6% on a 200+ bps rise. Caesars’ Scioto Downs led the way percentage-wise up 53.6% on Apr19, while Jack Cleveland rose 41.4% on April 2019 with Penn National Gaming’s four properties up combined 35.2% to $77.6m. MGM’s Northfield Park was up 21.3% to $24.5m. Boyd’s Beltarra Park rose 24.6% to $9.2m.
Illinois: Casino data for April in Illinois is in and it paints an interesting backdrop to the reintroduction of in-person registration for sports-betting. The leading property in the state is the Rivers Casino with $40.8m of GGR from a statewide total of $107.8m, or 37% of the total. The three Caesars properties in the state brought in a combined $31.9m in GGR followed by Penn’s three properties with $19.1m. Of the rest, DraftKings at Casino Queen (in East St Louis) achieved GGR of $5.5m while Boyd’s Par-A-Dice (Peoria) brought in $4.8m. The revenue performance of the latter two versus market leader Rivers gives a hint at the issues FanDuel and DraftKings might face should in-person registration remain a permanent fixture in Illinois. Their relative distances from the main market of Chicago might throw up longer-term registration issues.
Iowa (sports-betting): GGR fell back to $7.7m in April from $13.5m in March. The financial year-to-date number now stands at $75.4m. Leading the way in terms of single property GGR was FanDuel at the Diamond Jo, Dubuque with $1.3m off a combined handle of $18.4m (mix: $17.9m online, $0.5m retail). However, William Hill’s access via six casinos means it leads the way in terms of operators with a combined GGR of $1.84m. DraftKings and BetRivers share between them $1.92m (unspecified split) at the Wild Rose Jefferson and Wild Rose Clinton properties while DraftKings also brought in $0.7m at the Wild Rose Emmetsburg. At the Diamond Jo in Worth, BetMGM managed $0.9m of GGR. The largest casino by retail handle was the Ameristar in Council Bluffs which brought in $3.7m. The online skin for the Ameristar is theScore, which recorded $1.4m in handle in April.
Newslines
A match made in heaven: Star Entertainment has unveiled plans for a A$12bn merger with fellow Australian gambling giant Crown. In an announcement to the ASX, the company said it aimed to create a “tourist and entertainment giant” and would unlock over A$2bn of cost synergies over 10 years. Recall, in March Crown was subject to an A$8bn takeover offer from Blackstone.
Premier acquisition: PointsBet has snapped up Premier Turf Club, an Oregon-licensed ADW operator for $2.9m. Premier runs the BetPTC.com website and PointsBet says the buyout will enable its entry into the US horseracing market.
Poles apart: Century Casinos is to extend the closures of its Polish casinos until at least early June. This is contrary to what the company stated as recently as last Friday when it said the properties would open this past weekend.
An impressive deck: Esports Entertainment Group announced late last week it has bought the esports content and media business Holodeck Media for an unspecified amount. Grant Johnson, CEO of Esports Entertainment Group, said that with this deal, EEG was gaining “a world-class creative team with specific expertise in esports.”
Is that all you can eat? The Bachannal buffet at Caesars is reopening on May 20 (not pictured above) featuring upgraded and improved seafood, carving, American and Latin kitchens and more than 30 new dishes have been added to Bacchanal's “re-engineered” menu. “We look forward to welcoming our guests back and seeing their faces light up when they experience and, most importantly, taste all the new enhancements." said Sean McBurney, Caesars Entertainment regional president, presumably between mouthfuls.
What we’re reading
Of sharks and demons: Howard Stutz at CDC Gaming Reports looks into the whether Red Rock Resorts will be leaving the San Manuel tribe with Damien Hirst dead shark.
Earnings calendar
10 May: Bally Corporation, Scientific Games, Inspired Entertainment, Full House Resorts, Wynn Resorts
11 May: Accel Entertainment, FuboTV
12 May: Better Collective, Raketech
13 May: Neogames, Rush Street Interactive
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com