BetMakers Technology Group Ltd - Additional Revenues Added to NTD Deal

Equity Bottom-Up

683 Views17 Aug 2022 08:00

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SUMMARY

BetMakers Technology Group Ltd

Additional Revenues Added to NTD Deal

BetMakers Technology Group Ltd (ASX:BET) is a B2B software services business focussed on servicing the wagering market and race operators globally. The company has announced that it has varied the previously announced NTD contract to capture the wagering business, O’Shea Bookmaking, which trades as TexBet and which NTD has acquired. TexBet was a pre-existing client on BET’s SaaS platform but under its new ownership, its net gaming revenues (NGR) will form part of the annual fee payable to BetMakers by NTD. BET has agreed to contribute $2.5m over two tranches towards the purchase of TexBet by NTD and in turn, the annual fee payable by NTD to BET will increase by another $2m a year over the initial 10-year term. Effectively, this increases the maximum revenue payable to BET over the initial 10-year deal with NTD by $20m to $333m. We have not yet included this additional NTD revenue into our forecasts. At the current share price, our FY23 forecasts imply EV/Sales of 2.6x and an EV/EBITDA multiple of 20.3x. This compares with the 12-month forward mean of the All Tech Index of 4.1x EV/Sales and 26.2x EV/EBITDA. Our base-case DCF valuation for BET is $2.11/share, with $0.70/share incorporated for the US fixed-odds wagering opportunity.

Business model

BetMakers provides racing, wagering and integrity data, software and hardware products to bookmakers, racing authorities and rights holders globally. These include the supply of an international tote and other betting product engines, and services for bet types, including fixed odds, which monetise horse racing for stakeholders. BetMakers operates in more than 30 countries globally with greater than 200 customers and processes over $15 billion of wagering turnover annually. This, combined with BET’s 15-year exclusive deal to operate fixed-odds horse wagering in New Jersey, positions the company to be a significant player in the transforming US wagering market.

Converting a SaaS customer into share of turnover

The acquisition of TexBet by the NTD consortium has given BET the opportunity to convert an existing SaaS customer into share of NGR. As a SaaS customer, TexBet would have been paying BET an estimated $20,000 a month or $0.24m a year to use BET’s platform. The addition of TexBet to the NTD platform sees BET earning up to an additional $2m a year from the consortium to a maximum of $20m over the initial 10-year term. The upfront $2.5m contribution being made by BET enables the company to acquire IP rights to the customised betting platform currently owned by TexBet and has an estimated payback of 18 months based on the revised terms of the NTD deal. The NTD wagering venture, between News Corp, Matt Tripp’s TGW and Tekkcorp Capital, is slated to launch later this year.

Base-case valuation is $2.11/share

Our base-case DCF valuation is $2.11/share on the current share count and $1.85/share fully diluted for all in-the-money options and performance rights on issue. Our forecasts capture estimates for the broader US fixed-odds wagering opportunity, the NTD wagering opportunity, and assumptions for growth for the Global Racing Network division which will service the Penn National Gaming deal and other data and vision opportunities. We see key catalysts as evidence of take up of fixed-odds wagering in New Jersey and other US jurisdictions, the rollout of the NTD wagering platform in Australia and New Zealand, and growth in GRN revenues from Penn National Gaming and other ventures.

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