Consensus community valuation
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As #Noddy74 has pointed out the share based payments made by BET in FY22 take you breath away.
Performance Rights of just shy of 155m granted in a company that has shares on issue of 904m is pretty extreme. But consider that BET recorded revenue of just $92m and these rights had a value of $71m at the time they were granted. One wonders how much of this company's future profits (if indeed the company achieves that lofty goal) will be vacuumed up by insiders. At least this type of transaction is highlighted in the profit and loss account as an expense - which it is. This expense contributed significantly to the pretax loss of $96m.
The transactions are shown in the presentation that was released at the same time as the results were announced but I would have thought that these should have featured prominently in the Annual Report.
Caveat emptor
I was going to write a straw about why I'd sold out of Environmental Group (EGL) on the basis that I felt the Board has structured the performance scheme such that all the company's growth is being given directly to the CEO and CFO, via excessive performance options set with too low a bar. Then I saw Betmakers result. Holy guacamole Batman...
If someone can make sense of note 34 such that it ties back to anything close to $71m you're doing better than me.
[Not held]
I find it almost impossible to put a meaningful valuation of this company due to the extreme growth in revenue, expenses and share count particularly over the previous 12 months.
I see that @TEPCapital attempted a valuation approximately 1 year ago based on Q on Q growth of 75% and estimated FY22 revenue of $162M. Valuation of $0.95.
Here are the challenges:
1. Revenue growth of 370% FY22 over FY21.
2. Expenses growth (estimated) ~100%.
3. Share count growth ~26%.
On review of the Q4 FY22 Investor Presentation there are some considerations to guide future predictions:
1. There were 10 active platform clients at 31/12/21. 18 Platform clients at 30/6/22. They estimate 25 active platform clients at 31/12/22. I expect this rate of growth can’t continue?
2. BET have invested heavily in growing the global TOTE business and adding platform clients. These investment spends are ahead of the growth curve and cash flow benefits will follow. This is evidenced via the extreme revenue growth numbers.
3. Current turnover of $2B is 85% Australian Market. There are numerous global betting services deals that are yet to contribute to revenue. Penn National Gaming went live 1/7/22, Monmouth Park live July 2022. Other deals include Caesars(US), South America, Ontario, Norway…
4. $87.6M in cash and no debt at 30/6/22.
5. Lots of opportunities to invest globally but have the option to buy back shares if this is the best investment opportunity.
My valuation is based on:
1. Annual revenue growth of 50% reducing to 10% over 10 years.
2. Expenses growing at 25% reducing to 10% over 10 years.
3. Share count growing at 5% over 10 years (reduced rate due to possible buy back).
4. PE of 20 at Year 10. Discount rate of 15% due to high risk
Today’s valuation $1.90
Positive numbers today in BETs Quarterly suggesting it is now at that inflection point where significant growth will drive profitability. All the key numbers can be found here…
BETMAKERS SIGNS DEAL WITH PENN NATIONAL GAMING FOR DATA AND VISION CONTENT
Highlights
BET awarded rights to offer Penn National Gaming’s racing content outside of the US and Canadian Markets, for fixed odds, booked bets and exchange wagering where applicable
BET will distribute Penn’s National Gaming’s racing content including data and race vision for over 900 race meetings a year to its customer base
Global Racing Network will now distribute more than ~1,400 race meetings each year from the North American market
Betmakers has announced that it will take advantage of the depressed share price and buy back up to 10% of shares on offer on market over the next 12 months. This is the only announcement today but the share price is up 25% which seems to be a very strong reaction to the news albeit off a very low price compared to 9 months ago when it closed at over $1.30.
https://cdn-api.markitdigital.com/apiman-gateway/CommSec/commsec-node-api/1.0/event/document/1410-02534843-0EHM992RTCU37R2OH9QO0T408B/pdf?access_token=000755FFXHrZHCABiZ6M6MLoofL3
I distinctly remember some "expert" on ausbiz a couple of months ago saying this was "a screaming buy" if it got to 60 cents. What is it now????
Super smart management.
Held a bit in RL (sold a lot at a loss) after going in full bore during hype. Pre TAB pitch. HC community was supercharged. I haven't checked since.
Still hold a bit because they are picks and shovels. And they're smart. Bumpy ride for me. Maybe not for you at these prices.
Question everything Strawpeople
Another interesting announcement from Betmakers this morning. A minimum 10 year agreement with Rikstoto to be the provider of parimutuel betting in Norway. Rikstoto have exclusive rights in the country. I don't imagine this will have a huge impact on future reveues and reading their announcement it also is light on details around the financials of the deal but still a positive that they are landing deals across the world.
https://cdn-api.markitdigital.com/apiman-gateway/CommSec/commsec-node-api/1.0/event/document/1410-02523709-3G9TQFUCTS8BJHU29TD597JU2J/pdf?access_token=0007zhCcLk4RZoV1NxM9CJ8smwBk
do you think BET is significantly undervalued? Reading through the threads and valuations, like the picks and shovels angle…
@occy good call. Market including me in RL obviously needed this. Been along the rough RL road with this before and after the TAB thing. One of the most engaged and argumentative HC threads. Talk and proof of massive short selling six months ago. I left it alone/after six months of engaging. Sold a lot. At a loss. Held some because of smarter people than I/me at the helm/Management. Online betting super competitive. Seems to me they're not playing there. Picks and shovels smart is where they're working. Figure Management knows their long race painful but rewarding?plan. That's why I'm still RL in. P.S. Flashback to pre Ukraine/irrelevant to betting maybe? Or more relevant. 26.26min in...
https://www.ausbiz.com.au/media/the-call-wednesday-2-february?videoId=18997
And today's announcement....
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02512310-2A1369659?access_token=83ff96335c2d45a094df02a206a39ff4
BET is currently in a trading halt. One would assume it would relate to the recent media speculation over the past couple of months regarding News Ltd and Matthew Tripp (creator of BetEasy and Sportsbet) launching a new betting agency. As the article linked below suggests, Betmakers will likely supply the OS for the new operation given Tripp is an advisor to the company too
https://www.smh.com.au/business/companies/news-corp-settles-on-bookmaking-launch-with-tripp-partnership-20220419-p5aeja.html
BET too, is heading in the right direction.
Q1 FY22 Quarterly Activities Report for the period ending 30 September 2021
$21.0 MILLION IN CASH RECEIPTS - UP 135% ON PREVIOUS QUARTER
Quarterly highlights
BetMakers Chief Executive Officer, Todd Buckingham said:
“The past quarter is a very pleasing result for the Company. We have seen an impressive uplift on our strong base of domestic operations while also capturing growth in global markets that were identified by the Company as opportunities for us to expand our B2B wagering technology products and services globally.
“BetMakers has a very clear strategy for growth in Australia and the United States, and is investing in the US opportunity, which we believe has the potential to be significant. Our rollout for Fixed Odds in the US, starting in New Jersey, progressed during Q4 FY21 after being passed unanimously by the Senate and General Assembly, and signed into law by the Governor of New Jersey. Everything is on track and we are excited about the journey ahead.
“The Company is now seeing the benefit of its acquisition of Sportech’s racing, tote and digital assets. This material acquisition is a cornerstone of our future plans, and we are delighted to have welcomed staff within these businesses into the BetMakers’ team.
“With a clear strategy, focused management, highly-skilled global staff and the opening up of sizeable opportunities across the world’s wagering markets, we believe BetMakers is well placed to build upon the foundations it has now established.”
DISC~I hold in RL & SM
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02441831-2A1333787?access_token=83ff96335c2d45a094df02a206a39ff4
EDIT~added link details
JEFFERIES - Rated New Hold PT $1.20
I belive that Betmakers is making the same progress upwards as Pointsbet (end user) although different business models, but from a long term background play. Pointsbet is the end user but its actually Betmakers the business in the background that will deliver long term results. The companies with affiliation to Betmakers will be the ones that drive the market of betting but its the innovation in the backend which will be the winner (Dont need marketing hype and big name sportspeople unlike frontend players like Pointsbet) while Betmakers will continue to innovate in the back end with a diverse range of clients this will help them stay infront of what different markets needs which will intern help overall business development, so while all End Users all compete for market dominance Betmakers will be piggy backing them all so to speak. I beleive currently things are looking up in terms of US strategy and other countries, let alone our own. I look forward to see what next year or two brings, I'd imagine with the odd expansion headaches. But very positive outlook I would have thought.
Disc: I hold BET shares and enjoying the ride....
Financial Overview
BetMakers is well positioned to continue to deliver strong growth in its domestic market as well as key international markets including the US
- H1 FY21 revenue growth of 67% half-on-half driven by Managed Trading Services and Content Distribution, with a strong pipeline of new platform clients.
- Q3 FY21 update - The Company is expected to generate revenues of approximately $5 million, which will deliver a 25% increase quarter-on-quarter.
- Sportech continues to perform in line with expectations and offers immediate growth opportunities through global strategic partnerships and cross-selling of BetMakers’ product offering.
- Sportech acquisition expected to complete Q4 FY2021.
- Projected cash balance in excess of $100m post-completion of the Sportech acquisition and strategic investment by Matthew Tripp. BetMakers is well positioned to continue to deliver strong growth in its domestic market as well as key international markets including the US
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02358147-2A1289592?access_token=83ff96335c2d45a094df02a206a39ff4
DISC~I hold
MATT TRIPP LEADS $75M STRATEGIC PLACEMENT INTO BETMAKERS
HIGHLIGHTS:
• Matt Tripp signs exclusive partnership with BetMakers
• Acceleration of BetMakers’ global B2B wagering strategy
• Top institutional funds continue their support for BetMakers
• $25 million investment by Matt Tripp
• CEO Todd Buckingham signs new 3-year commitment to drive next phase of growth
DISC: I hold
Q2 FY21 Quarterly Activities Report For the period ending 31 December 2020 QUARTERLY HIGHLIGHTS
• Strategic acquisition of the Sportech Racing and Digital Assets
• Clear pathway for Fixed Odds legislation on Horse Racing in New Jersey
• Expected net cash of more than $35.0M post completion of the Acquisition • Cash receipts for the 1H FY21 up 90% on previous half
• Annualised cash receipts at $16.0M
DISC:I Hold
BET-sign-Fixed-Odds-and-Global-Distribution-Deals-in-Jamaica
Highlights
· Exclusive agreements with Supreme Ventures Racing and Entertainment Ltd
· 5-year deal to manage Fixed Odds on all racing at SVREL venues and online in Jamaica
· 5-year deal to distribute Jamaican racing from Caymanas Park internationally
DISC: I hold shares