Weekend Edition #79
Bet365’s year, Caesars vote of confidence, Fanatics’ Candy talk, Genius/BetConstruct settlement, sector watch – Italian cash access +More
On today’s agenda:
Bet365’s revenues rise 2% as ‘lockdown actives’ soar.
Caesars investors ring out the old, ring in the new.
Fanatics bails on Candy, dumps on Kambi.
Genius Sports wins settlement, gains a client
Sector watch looks at the pettycash issue in Italy.
Bet365 results
The global betting and gaming giant saw revenue rise 2% to £2.85bn in the year to March 2022.
Build a brand: In its annual report published by Companies House, the Stoke-based operator said operating profits slumped to £15.4m from £285.5m, driven by a “significant” increase in brand-building costs. Still, actives rose 48% for the year compared to a 13% rise in the year previous as the company continued to benefit from pandemic lockdowns.
Sports revenue fell 2%, while gaming was up 25% (~18% mix, according to Regulus).
Pre-tax profit for the year was £76.1m down from £525.2m in the year to Mar21 or £45.6m after Stoke City’s financial losses are taken into account (bet365 has a majority stake in the English football club).
Cash in hand and investment totalled £3.32bn.
Regulus Partners said the underlying performance was “far stronger” than the 2% overall growth would suggest, with the company battling against high OSB margins in the prior year.
Nevertheless, the team added that the growth rate does indicate a “material” loss of market share.
“Whereas a decade ago, bet365’s main competition were a mix of badly run UK-led, dotcom operators, monopolies and local businesses with little digital scale, most markets now contain ‘local heroes’ which are not bet365,” they said.
Meanwhile, Regulus added that bet365 was also not present in high-growth but in “fiddly” markets such as Belgium, Czechia and Colombia.
They suggested this is a “dangerously expanding list” for the betting company.
“Whether or not an impressive accumulated balance sheet of £3.3bn should be deployed to fix a growing global market share issue is a very personal and cultural question,” they added.
Regulus Partners: “More often than not, being very good at one thing generates considerably more sustainable value than trying to take on the world.”
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Caesars’ thumbs up
Deutsche Bank has reaffirmed its buy rating, suggesting the operator can put a poor 2022 share price performance behind it.
Pillars of success: Reassessing Caesars after a poor 2022 – shares down 56% for the year – the team at Deutsche Bank suggested better-than-peers EBITDA growth, a digital inflection, improved leverage and the fruits of recent development work will see the company rebound this year.
Against regional peers, DB said Caesars will see outsized EBITDA growth (+16% for 2023) due to its Las Vegas footprint, which the team predicted will outperform regionals.
Hold me back: For digital, DB indicated an improving hold picture will help drive the inflection to profitability. The weak hold compared to the rest of the sector – 4-5% range vs. 7.9% in Q322, for instance – is due partly to a higher concentration of sharps (from the strong Vegas footprint), a UK-based trading team, limited parlay exposure and its promotional strategy.
With the trading team now US-based and improvements on parlays, it should drive hold higher in 2023.
“Should handle remain firm, on a same-store basis, we believe these changes could result in gross revenue growth of over 50%,” the DB team wrote.
In iCasino, DB suggested Caesars “has not capitalized” on its advantages but the hire of Matt Sunderland from BetMGM could help turn things around.
Specsavers: On the leverage issue, DB believed Caesars will be able to reduce net debt by ~$1bn in 2023, reducing leverage to around 5.7x. This “optical de-leverage is likely to screen attractively,” the team added.
Another vote of confidence: Wells Fargo also tipped up Caesars as one of their favored stocks for this year, saying it “embodies the powerful recovery theme”.
💡 The Caesars share price reacted well to the DB note on Wednesday
Fanatics’ NFT dump
Fanatics has offloaded its controlling stake in NFT provider Candy Digital. Meanwhile, the company has confirmed Amelco as its sports-betting platform provider.
Candy snore: Fanatics will be selling its 60% interest in Candy as a further sign of the extent to which NFTs have lost their luster among the wider ‘crypto winter’ freeze. According to an internal memo seen by CNBC, the stake will be sold to crypto merchant bank Galaxy Digital led by Mike Novogratz.
Candy Digital was founded in 2021 and has an agreement with MLB to produce NFTs.
Amelco that ends well: Meanwhile, Fanatics’ betting chief Matt King revealed the worst-kept secret in gaming as he told a Massachusetts licensing hearing that the company’s betting operation is powered by Amelco code.
The news about Amelco originally emerged back in April through a LegalSportsReport.com story.
Snooze/lose: The delayed confirmation caught the attention of slow-on-the-uptake Scandi investors who dumped rival supplier Kambi after an analyst suggested it had “lost out on a tender”.
😱 Kambi falls 10% as investor bail
Legal ’construct
Genius Sports has won its legal dispute with BetConstruct over data usage.
BetConstruct’s subsidiary SoftConstruct has reached a legal settlement with Genius Sports with regard to the use of data and has agreed a multi-year deal for future usage. Pointedly, the deal “acknowledges Genius's ownership of database rights”.
“Genius invests significant time, resources and expertise in creating and developing market-leading technology and databases to collect and supply sports-data products across the industry,” said Jack Davison, Genius Sports’ CCO.
“We are delighted that the SoftContruct team has recognized this value.”
Out of the frying pan: Separately, BetConstruct has also received approval from the Malta Gaming Authority to accept player deposits in cryptocurrency.
Ohio highs
The newest OSB state sets debut weekend records, according to GeoComply.
Smashing it: Ohio recorded more geolocation transactions than even New York in its first two days of operation this week, according to the supplier GeoComply. At 11.3m, it topped the previous two-day record set by New York, which totalled 9.3m, and more than Pennsylvania at 8.2m.
The transactions were shared between 16 operators and 784k unique accounts. In the first hour on New Year’s Day 234k geolocation transactions took place.
Meanwhile, according to data collected by analysts at JMP, app downloads were up 201%, helped by the Ohio launch.
JMP noted that betr entered the download charts with a 1.5% share or 2.5k of downloads on the first day of Ohio’s opening.
The shares week
Is the worst over in Macau?
Relief rally: The Hong Kong-listed shares of the big Macau interests were distinctly perky this week as further news emerged of the lessening of isolation restrictions on foreign travelers into the region.
Wells Fargo said the prospects for Wynn, Sands China and MGM China were looking more positive thanks to China’s “policy pivot” on Covid.
The team was keen on Wynn, suggesting it has a “viable path” to recapturing most or all of its 2019 VIP EBITDA, despite the absence of junkets. “This is not reflected in the stock,” they added.
Overall, WF said that Q1 is still likely to be “messy” as the number of infections have surged following the policy change, but a Macau GGR recovery was now “more palpable”.
⛅ Macau-related Hong Kong listings get a boost
Analyst takes
OSB and recession: To attempt to understand what happens to sports betting in a recession, JMP took a look at Nevada’s experience in previous downturns and found the activity to be fairly resilient. “Cheap forms of content-driven entertainment, close to home, have demonstrated the ability to take wallet share,” they said.
Regional visitation: Wells Fargo suggested the poor weather in December across most of the US would have acted as a drag on regional gaming GGR. Looking at visitation data, the team indicated December GGR was implied -0.4% y/y, down from November's +1.1% y/y.
Sector watch – payments
For the love of money: The Italian government has dropped plans to let businesses refuse card payments for amounts up to €60, following widespread criticism of its resistance to a cashless society. A second pro-cash budget proposal by Giorgia Meloni’s right-wing government was approved, however, which raises the ceiling for transactions with banknotes from €1,000 to €5,000.
Dirty cash: Brussels said both measures were “not in line” with past advice to Italy to tackle money laundering and fraud, while the Bank of Italy also had reservations.
In testimony to the parliament, Fabrizio Balassone, research lead at the bank, said higher cash thresholds "favor the black economy" while "limitations to cash use pose a hurdle to several forms of crime and evasion".
Italy has one of the lowest rates of digital payments in the EU, ranked 25 out of 27 economies, despite a double-digit growth in the wake of the pandemic.
Take the money and run: Gambling operators, particularly those who have arrangements with shops over the purchase of deposit vouchers, have been warned to take note of the risks. New rules were announced last year tightening sales of the vouchers that can be accepted by licensed gambling firms.
Addressing the near comical lack of identity checks carried out in shops that don’t require gambling licenses to sell the vouchers was cited as a matter of urgency.
The vouchers have also been linked to illegal gaming taking place at the stores.
Slot machines and illegal betting operations have emerged as a source of funds only second to drugs for the mafia over the last 20 years.
Prosecutor Vincenzo Luberto, one of the main magistrates taking on the ’Ndrangheta, said “some criminal bosses involved in drug trafficking have shifted their investments to gambling because it is more profitable and less risky”.
Reach out and touch: A scheme to encourage digital payments was enacted in late 2020 by then-PM Giuseppe Conte as part of his government’s ‘cashless Italy’ Covid recovery plan.
This week on E+M
Startup month #6: The latest edition included a selection of insights into what can be expected in the year ahead from sector experts, plus our 10 companies to follow for 2023.
We also analyzed 2022’s funding rounds, which we estimate saw over a quarter-of-a-billion dollars raised.
Coming up
This month’s edition of Deal Talk will be released next Tuesday, featuring a look at the bid from the Australian Betr for PointsBet’s Oz-facing operations and asking what this might mean for the company's US future.
Datalines
Spain: Q3 GGR revenue rose 31.3% to €240.8m, with online up 9.2% to €128m. Overall, betting GGR was up 46.2% to €89m.
Colorado’s November GGR rose 2.1% to $37.6m on handle that was up 16% to $552.6m. In Rhode Island, land-based slots GGR rose 15.3% to $41.4m, while table games was up 4.2% to $9.6 and sports betting was down 28% to $4.9m. In Maryland, casino GGR was down 4.5% YoY to $165.2m in December.
Newslines
Search party: Flutter is seeking a successor to chairman Gary McGann, according to Sky News. Chair since 2015, McGann will depart later this year.
US-facing affiliate Betsperts has acquired Bleacher Nation for an undisclosed sum in a cash plus equity deal.
Super Group has also completed its acquisition of US-facing OSB and iGaming supplier Digital Gaming Corporation for an undisclosed amount.
Bally’s, in partnership with GLP, has completed the sale and leaseback of its Tiverton Casino & Hotel in Rhode Island and Hard Rock Hotel & Casino in Biloxi, Missouri, for $635m.
On to a loser: Betsson has permanently shuttered its Dutch-facing Casino Winner brand as part of an effort to finally smooth passage towards gaining a license in the Netherlands.
New York casinos: A request for applications for three downstate New York casinos has been issued by the state gaming facility board.
What we’re reading
Slow burn: Among their predictions for the year, EKG suggests 2023 could be the year for bet365 in the US. In addition to its expansion plans, the team adds that they believe it could “surprise via M&A”.
This ain’t over: IGT is continuing with its legal pursuit of Allwyn over the award of the National Lottery, saying it cost the company “marketable goodwill”.
Calendar
Jan 10: Deal Talk #6
Jan 17: Due Diligence #3
Contact
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com