BetMakers Technology Group Ltd - Cash Profit in Q4, Annualised Revenues Now $100m
BetMakers Technology Group Ltd
Cash profit in Q4, annualised revenues now $100m
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. The company is rapidly on a path to become a key player in the transforming US horse racing industry, which is poised to introduce fixed-odds wagering, initially in New Jersey where BET has a 15-year exclusive licence with New Jersey Thoroughbred Horsemen Association and Darby Development LLC to deliver and manage fixed-odds thoroughbred horse racing wagering. BET has reported FY22 revenues of $91.6m, in line with our forecasts, and FY22 cash receipts of $93.4m, up three-fold on FY21. Q4 cash receipts jumped 194% on the pcp to $26.2m and operating cashflow for the quarter was $0.42m. BET ended the quarter with $87.55m cash in hand, down $20m on Q3 FY22 after making payments associated with the NTD wagering platform and capital investments in its US betting terminals. Moving into FY23, BET expects capital expenditure of $6m with this halving to $3m in FY24 and beyond. We have incorporated estimates for the NTD wagering platform and included higher employee and operating costs for the group to support its global expansion. We have also pushed our expectations for meaningful revenues from New Jersey’s fixed-odds wagering opportunity into Q2 FY23 with the launch of Monmouth Park’s online app imminent. Our base-case valuation is now $2.11/share (previously $2.00/share), with the NTD wagering platform contributing around $0.15/share to our 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, that 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.
Revenues and cash receipts in line with forecasts
BET delivered FY22 revenues and cash receipts in line with our forecasts and confirmed that annualised revenues were now $100m. On a costs basis, the company invested in human capital at a faster rate than we had forecast and we have now incorporated this into our forecasts. We have also now included the NTD wagering opportunity into our forecasts, which over a 10-year period is forecast to deliver up to $313m in revenues to BET. While there has been no confirmation of a start date for the venture, our forecasts assume operational revenue contributions from H2 FY23. We anticipate that the company’s investment in additional people and resourcing will flow through to sustained revenue and profit growth longer-term. Our forecasts incorporate a 10-year CAGR in revenues of 30% and a 45% CAGR in operating profits to FY31.
Base-case DCF valuation is $2.11/share (up from $2.00/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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