BetMakers Technology Group Ltd - BET’s Tech to Power News Corp’s Wagering Play
BetMakers Technology Group Ltd
BET’s Tech to Power News Corp’s Wagering Play
BetMakers Technology Group (ASX:BET) is a B2B software services business providing racing, wagering and integrity data, software and hardware products to bookmakers, racing authorities and rights holders globally. BetMakers has announced it has been selected as the exclusive technology and services provider in Australia and New Zealand for a new wagering venture backed by News Corp (NASDAQ:NWS). The consortium, comprising News Corp Australia, Matt Davey’s Tekkorp Capital LLC, and TGW, a trust whose investors include Matt Tripp, has engaged BET on a 10-year contract with both fixed- and revenue-share arrangements worth a minimum $80m and up to an estimated $313m in revenues (after the initial establishment and launch fee payments). We expect the transaction to add material top- line growth to our forecasts for FY23 to FY25. It also underscores BET’s credentials as a tech platform for large-scale operators wanting to establish a market presence quickly and efficiently. BET will retain the intellectual property from the platform and is likely to replicate similar arrangements in international markets. We have yet to incorporate the deal into our base-case valuation of $2.28/share but see it as accretive to both earnings and valuation.
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 more than $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.
A blueprint for other potential deals
BET has entered into an exclusive 10-year agreement with NTD Pty Ltd, a new wagering venture formed by News Corp Australia, Tekkorp Capital LLC and TGW, a trust which counts Matt Tripp as an investor. NTD retains a right to extend the agreement for up to five years beyond the initial 10-year arrangement. NTD has agreed to pay BET $2m in a platform establishment fee and $500,000 per month in launch development fees up to the go-live date. BET anticipates the go-live date to occur within six months. After go-live, NTD will pay an annual minimum $7.5m development and service fee, which will increase by CPI. The parties will revenue share with a maximum annual fee payable of $20m to BET in the first year with total fees payable, after the go-live fee, of $313m over the 10-year life of the deal. If successful, BET hopes to take the model to international partnership arrangements. NTD will apply for a sports bookmaker licence to operate in Australia and New Zealand with plans for product launch to punters to bet on racing and sports in the second half of CY2022.
Base-case DCF valuation is $2.28/share ($2.06b)
Our base-case DCF valuation, excluding the new wagering venture, is $2.28/share and derived from a discount rate of 11.4%. On a fully diluted basis for performance rights and in- the-money options, our valuation is $1.98/share. Our current forecasts capture estimates for the broader US fixed-odds wagering opportunity, particularly in New Jersey where BET holds exclusivity for the next 15 years. We see key catalysts for the stock as the commencement of fixed-odds wagering in New Jersey on May 7, progression of its Heads of Agreement with Caesars Retail Sportsbooks to be the exclusive provider of pari-mutuel racing services at bricks-and-mortar locations in Nevada, rollout of the NTD partnership and further evidence of international expansion.
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