Until the pips squeak
Until the pips squeak
Flutter ships $3.5bn in New York on UK gambling tax hike threat
UK gambling could be hit by doubling of online tax rates, says report.
In +More: ESPN Bet’s first data in NY.
Rush Street Interactive gets a hedge fund boost in the shares week.
By the numbers: Wynn’s sector-leading per room EBITDA metrics.
The tax man's taken all my dough.
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When life gives you lemons
Squeeze: The UK-facing gambling sector could be facing a doubling of OSB and iCasino taxes as the Labour government looks to fill a hole in its finances, according to newspaper reports. It is thought the Treasury is weighing up plans that could raise up to an extra £3bn.
A source “familiar with” Treasury thinking told The Guardian the tax hike was “definitely on the map,” before adding “there’s no obvious pushback to it.”
The report suggested remote gaming duty would more than double to 50% while “lower harm” products such as lottery and bingo would remain where they are.
Bad timing: The news broke after market close in the UK but was early enough to rattle investors in New York who sent the Flutter share price plummeting by nearly 9%, causing a $3.5bn drop in value.
Entain, Evoke and Rank are sure to see their share prices come under pressure in London on Monday.
💥 Flutter suffers a Wall Street crash
Wipeout: Analysts at Jefferies said the proposals apparently being considered would “all but wipe out bookmaker profitability in the UK.” But they added that the “extent of these proposals seems unrealistic.”
They predicted bookmakers would mitigate the tax rises via reduced marketing, ending sports sponsorships and potentially offering worse odds to consumers.
The team added that any such moves would “likely pose an existential threat to many smaller operators.”
Oh what a tangled Webb we weave: The Treasury proposals were informed by a report issued by the left-leaning think tank, the Institute for Public Policy Research, in the summer.
That report suggested higher-harm products should pay more tax under the auspices of the “polluter pays principle.”
The Guardian also suggested a separate report forthcoming from the Social Market Foundation, which is funded by Labour donor and anti-gambling campaigner Derek Webb, will also suggest a doubling of online taxes.
IL conceived: The SMF report is thought to have been influenced by the debate over gambling taxes in the US. Notably, Illinois more than doubled its OSB tax rate to 35% earlier this year while New York has an effective tax rate of 51% and the tax on online slots in Pennsylvania is 54%.
The Betting and Gaming Council trade group said any move to increase taxes ran the risk only of increasing black market activity.
Jefferies predicted the industry would cite the potential for job losses in retail bookmaking and certain damage to the sports ecosystem, particularly horse racing.
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ESPN Bet managed $3m of handle in its first three days of operations in New York and a GGR of $166k, according to data from the New York State Gambling Commission. The hold rate of 5.4% was the lowest of the nine operators.
With total handle up 31% YoY to $517m, an 8% WoW increase, it meant ESPN Bet had a share of just over half a percent.
Marketwide GGR was up 21% to $52.7m. FanDuel retained top spot with 46% share while DraftKings held 33%.
The analysts at Jefferies said their expectation “remains that the initial data points should be positive for the shares, while longer-term fundamental growth remains less clear.”
Fanatics Betting & Gaming and the Major League Baseball Player’s Association have reached a non-exclusive licensing agreement, making the operator the first officially licensed sportsbook of MLBPA.
The deal comes after the association filed a lawsuit against FanDuel, DraftKings, bet365 and Underdog Fantasy, alleging they used player images without having a licensing agreement.
The non-exclusive nature of the deal suggests the MLBPA is open to signing up others to licensing deals.
Derek Stevens, CEO and founder of Circa, told the Las Vegas Review-Journal last week that his business will be moving to its own tech platform before it launches in new states. Circa is currently live in Nevada, Colorado, Illinois, Iowa and Kentucky.
His comments confirmed the rumor from EKG in July last year that the company was looking to build on a copy of the Entain-owned Stadium Technology sportsbook platform.
The week ahead
Entain and Evoke might take the opportunity to discuss the tax hike newspaper report when each unveil their respective Q3 trading updates on Thursday and Friday. Any potential rise would be particularly poorly timed with each company’s UK businesses still in the recovery position.
In late September Entain updated the market claiming it was making “strong progress" in H2 with NGR growth ahead of its own expectations.
In particular, it said UK & Ireland was ahead of expectations with sports betting benefitting from both stronger volumes and margins.
Fellow UK-listed operator Evoke said at the time of its H1 earnings that Q3 revenue growth was within the target range of 5%-9%. The company will hope to be able to confirm the “significant improvement “ in profits vs. H1 when EBITDA fell 67% to £43.8m.
Shares watch
We've got stars directing our fate: Rush Street Interactive put on 7% this week, helped by news at the end of the week that New York-based hedge fund Millennium Management had quadrupled its stake in the company during the second quarter.
The biggest integrated gaming suppliers will be pleased with their respective performances during G2E week, with Light & Wonder up 3% and Aristocrat gaining 4%.
Slap in the face: Less happy will be Penn Entertainment, which went to the trouble of hosting an investor event at the start of G2E in Las Vegas and was rewarded with a 2% decline for the week.
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By the numbers – Wynn Resorts’ room EBITDA
Sweating the assets: Looking at the EBITDA expectations for Wynn Resorts’ Al Marjan Island project in the UAE, the team at Deutsche Bank believed there was “credibility” in the $500m-$800m at maturity estimate put forward by the company in its investor presentation last week.
Notably, the team pointed to the company’s “history of meaningfully outperforming peers on an EBITDA per hotel room basis, as evidenced in Las Vegas.”
As can be seen, in the last 12 months to the end of Q2, Wynn Resorts earned $204 per room in EBITDA compared to $86 and $83 for two rival Las Vegas Strip operators.
The DB team said that, based on the assumptions in the presentation, Wynn expected the Al Marjan Island property to generate $324k-$519k per hotel room on an annual basis.
In comparison, the Wynn Macau assets over the LTM period have generated ~$407k per room, “despite considerably more competition and a meaningfully higher gaming tax rate.”
🛌 Wynn gets the most from being the host
+More numbers
Indiana: B&M GGR came in down 30bps YoY at $194m in September, leaving Q3 GGR up 2.3% YoY. On a same-store basis, September GGR was down 5.8% YoY and off 3.4% YoY in Q3. For OSB, GGR rose 29% YoY to $53m on handle that was up 20% to $484m. For Q3, GGR was up 30% YoY.
ESPN Bet watch: Handle share came in at 2.7% for the month, which is sequentially flat.
Iowa: GGR for B&M gaming came in at $131m for September, down 8.9% YoY, with visitation down 6% YoY. For Q3, GGR was down 3.9% YoY. Sports-betting GGR of $27.5m represented a 14% YoY increase from handle that rose 10% to $271m.
Maryland: OSB GGR came in at $65.4m, up 43% YoY, from handle that rose 20% to $533m. FanDuel controlled 50% of total GGR, followed by DraftKings on 31% and BetMGM trailing on less than 7%.
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Earnings calendar
Oct 17: Entain
Oct 18: Evoke
Oct 23; Churchill Downs (e)
Oct 24: Betsson, Evolution, Boyd, Churchill Downs (call), GLP
Oct 25: Kindred
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