Feb 2: Playtech decision day

Playtech decision day, Gambling.com acquires BonusFinder, XLMedia trading update, Entain/Ennovate launch, Penn National analyst update +More

Feb 02, 2022

Good morning. Our lead story is the news from Playtech ahead of the shareholder vote later today which is likely to reject the Aristocrat offer. Also on the agenda:

Gambling.com buys the company behind BonusFinder.
XLMedia issues a trading update.
We have more details on Entain’s Ennovate initiative.
There is an analyst update on Penn National ahead of results Thursday.

Playtech decision day

The big news: Playtech said this morning in a statement that based on the proxy votes already received, the Aristocrat 680p-a-share proposal is likely to be rejected by shareholders.

What they say:

Playtech statement: “If this remains the case on the final vote count, the acquisition of Playtech by Aristocrat will not proceed, the Scheme will lapse and the offer period for the Company will end.”

Trevor Croker, Aristocrat: “Notwithstanding extensive due diligence on Aristocrat’s part, developments since the announcement of our offer have been highly unusual and largely beyond Aristocrat’s control.”

The story so far: Croker noted the “emergence” of a significant Asia-based investment bloc - reportedly including ex-CEO Tom Hall - that is thought to believe the Aristocrat offer undervalues Playtech. It is the unknown intentions of the Asian investors that scuppered the plans of rival bidder JKO which pulled its interest last week.

There is an alternative: Playtech said it is “undergoing a significant transition” and remains confident about the long-term prospects” for the business. This includes “evaluating attractive M&A proposals” for both the B2C and B2B elements.

Arriverderci: One of the proposals would involve the sale of the Snaitech business in Italy with Entain being the most prominent name in the frame. Sources suggest Flutter previously made an approach before it settled on the Sisal buyout before Christmas.

Caliente corner: Still yet to be resolved is the situation regarding Caliente/CaliPlay and its proposed merger with the Tekkorp SPAC headed by Matt Davey and the entry into the U.S. market. Playtech said today the transaction is progressing and that financing negotiations were “well-advanced”.

Current trading: Playtech said since its November trading update, the business has performed well with strong growth in the Americas driven by Caliente while Snaitech performed “very strongly” helped by the Italian retail recovery.

That’s a buy: Peel Hunt raised its target for Playtech to 700p this morning.

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Gambling.com acquires NDC Media

What’s the deal? The company behind BonusFinder.com has been acquired for €12.5m in cash ($10m) and shares ($2.5m) upfront rising to a potential €60m should 2024 earnout targets be hit. Working through the maths on 3.5x total consideration multiple in 2023, it suggests forecast revenues for next year of ~€11.7m.

A Canadian play: The company said BonusFinder’s biggest market is Canada and it said it had “traction” in the U.S., which Gambling.com hopes it can accelerate. The acquisition closed on Jan 31 meaning NDC will be “immediately accretive’ to 2022 earnings.

Who’s who? NDC Media was founded by Fintan Costello who will stay with the company.

Deal flow: This is Gambling.com’s second deal within a month after the $27.5m acquisition of RotoWire at the turn of the year. Analysts at Jefferies said the timing of the deal was favorable bearing in mind the news from Ontario. “While not surprised by the announcement, we expect a positive reaction to the news and the outperformance to continue.” The shares rose 5% on Tuesday on the news.

Penn National analyst update

Action: Ahead of Penn’s results on Thursday, Credit Suisse have lowered their price target from $128 to $99 though they maintain an Outperform rating.

Out of sync: Analysts at Credit Suisse say that sentiment on Penn National turned in Oct and Nov when regional results came in lower than expected but that despite a reverse in regional fortunes in Dec, Penn’s share price didn’t follow suit. They suggest that investors are worried Street consensus is too high on CY22.

Greenfields: Canada looms large in the update with the team accounting for the opportunity that presents itself via theScore acquisition last summer.

The Credit Suisse analyst team: “TheScore is one of the most well-known media brands in the country, and as such we think it has the ability to capture meaningful market share in both OSB and iGaming. Given poor sentiment around the stock, (Ontario) could be a meaningful catalyst.”

XLMedia trading update

FY revenue is expected to be in line with forecasts up 21.5% to ~$66.6m.
Adj.EBITDA is predicted to rise 41% to ~$17.2m.

Dime a dozen: The sports-betting affiliate sites revenue more than doubled YoY to $25.2m on the back of its US-focused brands Sports Betting Dime, CBWG and Saturday Football Inc. But the company said setbacks in its personal finance and casino divisions would offset the growth.

Transition period: Casino remains the problem child with revenues down 28.6% YoY to generated revenues of ~$23.2m. The company said it “will continue to face trading pressures as tail revenues decline further”.

Legacy issues: The group’s “tail revenues” from its casino sites continue to suffer under Google penalties. XL acquired SEO agency Blueclaw last September to address some of those issues but it is now talking about “managed decline” in European casino, including in Finland where it spoke about “negative regulatory change” significantly impacting revenues.

Entain/Ennovate launch

What is it? The initiative is essentially an incubator fund of £100m which will go towards an array of innovation projects, startups and collabs globally but with £40m earmarked to go to UK-based investments. The first innovation lab will be launched in London. Among the names working with Entain are Verizon, BT, and Theta Labs.

Show me the money: Entain said it will invest up to £5m via its accelerator program to “super-charge innovative concepts to revolutionize interactive entertainment” as well as technologies that further Entain’s ESG agenda.

Baby’s got a new buzzword: Entertain said it's the incubator and accelerator programs were ready to invite startups focused on “immersive customer experiences, interactive entertainment and metaverse”.

Pro tip: Use flywheel in the pitch deck and you are guaranteed a listen.

Did somebody say apes? Entertain says it is already working on an NFT project for Partypoker with Theta Labs which it says will “showcase some of the most iconic video moments and tournament hands in the history of partypoker and partypoker LIVE”.

What they say:

Jette Nygaard-Andersen, Chief Executive of Entain: “We want to lead the way with new, exciting products and experiences for customers and use our cutting-edge technology to pioneer innovations in sport, gaming and interactive entertainment for the metaverse.”

Regulatory update

South Dakota lawmakers have narrowly advanced a proposal that would allow voters to approve online sports-betting on the November ballot. Backed by DraftKings, FanDuel and BetMGM, the measure sees an expansion of online potential in the state. Currently online works under the restrictions of an in-person-only mandate in Deadwood casino properties and certain tribal lands.

Mississippi Gaming Committee chairman Casey Eure told the Sun Herald that there's little chance of a mobile sports-betting bill going to vote in the current session. Five of the state’s casino operators are reportedly against any mobile measure. Meanwhile, a Virginia legislative subcommittee tabled an in-state college betting authorization bill Tuesday, effectively ending legal betting hopes on Virginia college teams for at least another year.

Earnings in brief

BlueBet: The Australian-listed sports-betting minnow said revenue grew 68.3 percent to A$28.6 million and active customers grew 76.5 percent to 45,087 in the second quarter. The company said it remains on track to take its first bet in the U.S. in Iowa next month with an eye on honing its offering in order to attack the B2B market. BlueBet recently announced its second market-access agreement in Colorado with the Wild Card Saloon and Casino.

Datalines

Colorado Dec21: Land-based casino revenues rose 53.4% YoY to $82.8m, sports betting handle was up 62.1% to $461.4m, GGR was up 44.2% to $24.7m, mobile betting generated $24.5m of the total and was up +48.4% YoY, retail betting GGR of $156K was down 73.5%.

Newslines

North by Northwest: The Canadian gaming company NorthStar Gaming has advanced its online ambitions via this partnership for sportsbook provision with Kambi. NorthStar is poised to enter the Ontario market and has already signed up as a partner with Playtech for gaming.

On social - score settling: A tally of the deals Kambi has signed since Penn National signaled a move away from the platform when it bought theScore.

And then there were seven: WynnBet is set to launch in New York, a source told Wagers.com. It will be the seventh sportsbook to launch in the market. Only Bally and Resorts World (also a Bally skin) are yet to launch.

Panhandling: Las Vegas Sands-backed initiative that would have allowed voters to approve commercial casino gaming in North Florida seems to have fallen roughly 77,000 signatures short of qualifying for the 2022 ballot.

Instant odds: Oddsium, a mobile app that aggregates odds alongside instant bet placement with bookmakers, announced Tuesday it will launch in the first quarter of 2022 in New Jersey.