The $10bn goldmine
Assessing the gaming opportunity in the UAE, hold rates could increase OSB TAM, FanDuel extends lead +More
Analysts big up gaming and lottery prospects in the UAE.
In +More: GiG completes share issue.
Rising hold rates will increase the US OSB TAM, says BofA.
FanDuel extends its lead over rival DraftKings in Q1, says Wells Fargo.
But you won't need no harem, honey.
Gaming oasis
The other Sahara: An operator-friendly casino market in the United Arab Emirates could be worth up to $10bn in gaming revenue and could tap into significant untapped demand, according to a report published this week by the equity and credit analysts at CBRE.
Gulf resorts: With robust tourism, high spending levels and no gaming competition to speak of in the region, the analysts said the UAE presents “one of the best IR investment opportunities we have seen in a long time.”
The team suggested that just the three IRs already planned in Abu Dhabi, Dubai and Ras Al Khaimah could be worth ~$6bn.
Meanwhile, CBRE estimated the lottery opportunity – which will likely be the first regulated gaming activity in the UAE – could be worth $1bn-$4bn.
Onto a Wynn-er: Wynn Resorts is furthest ahead with its plans for an IR situated on Marjan Island in Ras Al Khaimah. That project is slated to open in 2027 and the CBRE team said it has the potential to deliver strong returns and a greater non-gaming mix than Macau and even Singapore.
Given it will initially be the only gaming play in the region, the team added that gaming yields would be similar to Wynn’s US properties.
CBRE estimated Wynn’s 40% of project economics could generate over $350m of free cash flow annually by 2030.
“We conservatively model a three-year ramp to stabilization, however, it could be much quicker,” the team said.
On the beach: Abu Dhabi will be the “likely” second mover with Yas Island, which CBRE said would be a “logical location” for an integrated resort. Lastly, MGM Resorts’ project at Jumeirah Beach in Dubai would also be a “contender” for an IR. MGM currently has a non-gaming management contract in place.
Getting in on the ground: Other IRs are possible at a variety of locations across the UAE and CBRE suggested a line-up of global gaming operators would likely be interested, including Caesars Entertainment, Galaxy Entertainment, Genting, Hard Rock, Las Vegas Sands and others.
On the lottery side, CBRE noted Allwyn, IGT, Lottery Corp, Flutter (via Sisal) and SG Lottery would all feel they were in with a chance at winning the business.
You’ll know when you know and not before: The analysts said the public commentary from the likes of Wynn and MGM Resorts suggested to them that the legislative changes to allow for gaming should be in place “within a couple of months.”
“In fact, the decree may have already been signed but not yet published, and we wouldn’t necessarily expect a very public announcement when it is published,” they added.
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+More
GiG has completed an SEK100m ($9.6m) share issue with cash coming from existing investors, including Agerskov Kapital and the Juroszek family as well as the current joint CEOs Jonas Warrer and Richard Carter.
Among the uses for the new money will be as working capital for the loss-making platform and sportsbook spin-off, which will occur in Q3.
Gaming REIT Gaming & Leisure Properties has agreed to provide $111m to Queen Casino for the relocation of the operator’s Belle of Baton Rouge riverboat casino to land and for the property’s hotel renovation.
Flutter’s Betfair has launched a new brand platform called Play Different in the UK. The brand will focus on in-play betting, cash out components and Acca Edge, and will debut at the start of the UEFA Euro 2024 tournament.
Stats Perform has signed an exclusive agreement to collect and distribute data and live streams for International Cricket Council events.
Now you see me: Golden Matrix will be added to the Russell 3000 Index, which it said will increase its visibility to investors.
Jackpot.com has signed an agreement to become the official lottery courier and results provider for The Associated Press.
Bally’s has launched a free-to-play social casino platform called Bally Play in association with Ruby Seven Studios.
Earnings in brief
SkyCity Entertainment: The New Zealand-based operator has lowered its FY24 EBITDA guidance to NZ$283m ($175.4m) at midpoint, blaming in part the increased casino expenses in Adelaide where the company faces an impending High Court judgment alongside a worsening economic outlook.
Read across
Making plans for Nigel: In The Token Word, the Nigel Eccles-founded crypto-friendly betting exchange BetDEX has officially launched after being in beta for the past 12 months. Meanwhile, crypto-based prediction site Polymarket has recorded its best-ever month for bets transacted.
Not a big college town: Compliance+More reported yesterday on how the NCAA’s proposals to ban college prop bets is gaining traction with apparently little push back from the operators.
What we’re reading
Destroy everything you touch: Sports agent Leigh Steinberg writes for The New York Times that “any suggestion” major league sport may be fixed or tainted will “destroy the industry.”
Head of CRM – Cyprus
Global Head of IT – Singapore
Head of Marketing Data – San José, Costa Rica
Allwyn’s UK boost
Just the ticket: The global lottery operator enjoyed a 28% revenue boost from the first full quarter contribution from the UK National Lottery in Q1, as it formally took over under the new 10-year license. CEO Robert Chvátal said the launch was a “milestone” for the business.
Revenues rose to €2.11bn while adj. EBITDA was up 3% to €358m. Ex- the UK contribution, revenues rose 3%.
All Greek to me: The period also saw the launch of Eurojackpot in Greece, bringing the multi-national game to the country for the first time.
Squeezebox: Over the period, Allwyn completed a new financing with the addition of a €500m accordion facility. While post-close it has managed to syndicate a debut $450m term loan, which Chvátal said offered further diversification in terms of access to capital.
Hold analysis
Something to hold on to: Rising average hold rates will be an increasingly important factor in the growth story for US OSB, according to the analysts at Bank of America, noting that every 1% improvement increases TAM by ~10% or nearly $1.5bn.
The team pointed out that hold rates in Europe “consistently achieve” levels of 11%-14% despite less favorable sports and demographic factors.
Meanwhile, they suggested the DFS+ operators Underdog Fantasy and PrizePicks are achieving hold rates of 15%+.
This theory has legs: Much of the improvement in hold is related to the success of parlays and in particular the same-game variant, which the BofA team said has “transformed” OSB with hold rates at ~19% vs. just 5% for single bets.
The analysts pointed out that parlay mix has risen to between 41% and 60% of handle in the last four years from 18%-28%.
The rest is noise: The analysts cautioned that improvement doesn’t happen in a straight line, pointing at the well-documented hold issues in both Q4 and Q1. But they said that “by their math,” hold swings of 1.4%-1.8% per month and per quarter are “natural” and are enough to swing industry GGR by 15%-20% in either direction.
Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.
Heavyweight contest
Pulling ahead: The gap between the two market leaders in US online is widening once more with FanDuel sitting on 36% share versus DraftKings’ 30% in Q1, said the team at Wells Fargo. The analysts pointed out that this compares with Q423 when DraftKings edged very slightly ahead with 31%.
However, in adj. EBITDA terms, the team noted DraftKings has closed the gap with margin inflecting to 2% positive for the LTM versus FanDuel’s 7% margins over the same period.
They also noted that DraftKings has pulled back more on promo spend, at 32% of GGR in Q1 vs. FanDuel’s 36%.
Team FanKings: Looking at the data in the YTD for OSB, the analysts at Truist said it is FanDuel and DraftKings world “until proven otherwise.” noting that FanDuel controlled 38% share of handle in YTD to April and DraftKings 36%.
Not stopping: “It’s certain that lower-tiered operators will continue to push to make a dent in DraftKings’ and FanDuel’s lead but these two won't stand still,” the team said.
A missing floor: The analysts added that “there is no tier 2,” with the leader having “clear white space” to the tier 3 operators of BetMGM, Caesars and ESPN Bet.
“We’ll watch ESPN Bet and their new tech closely this fall to see if they qualify for a jump up in class.”
More takes
Gaming sector: A slew of notes from Stifel this week included the reiteration of Buys on Caesars Entertainment, MGM Resorts, IGT and DraftKings, while it continued with Holds on Light & Wonder and Penn.
On the latter, the team said possible catalysts included “potential strategic alternatives.”
Sportradar: Analysts at Morgan Stanley have increased their FY24 and FY25 EBITDA estimates to €203m and €230m respectively, saying they are seeing improved industry and operating cost trends.
The shares week
DoubleDown Interactive: Shares in the social casino to real-money iCasino operator have enjoyed a good month, up 25%, helped along in the past week by a Buy recommendation and a resumption of coverage from the analysts at B Riley.
In social casino, the team noted that DDI’s post-pandemic growth plan was to favor player monetization over daily active user growth.
While revenues declined, EBITDA grew in 2023 and has continued into 2024 with strong free cash flow generation.
B Riley added that DDI is still catching up with its rivals in the area of direct-to-consumer activity. A further shift there will bring further EBITDA gains.
They noted that the company has previously said the “first” use of cash would be M&A.
🍒 DoubleDown on the up
Calendar
Jun 7: Allwyn Q1
Jun 18-20: Canadian Gaming Summit
Jul 17-20: National Council of Legislators from Gaming States, Pittsburgh
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