BetMakers Technology Group Ltd: Eyeing the Prize in the US Wagering Market

Business model
BetMakers operates a SaaS style model for its Racing Data and Informatics platforms: Global Betting Services and DynamicOdds. Racing bodies and bookmakers pay a monthly recurring fee for access to the platforms with contract periods usually of 3 years’ duration. BetMakers also generates revenue from the content distribution deals it has in place with international racing authorities such as US Greyhounds and US Racing and UK Greyhounds which are more aligned to share of turnover. The acquisition of Sportech delivers additional SaaS-style revenues from its tote technology as well as a share of turnover from its tote operations. It will also establish BET as a pari-mutuel operator across 100 US racetracks, casinos and other venues in 36 states ahead of the opportunities to develop a fixed odds wagering business initially in New Jersey. An acquisition of Tabcorp’s wagering and media business would likely add gravitas to BET’s position in the US market, but in our view is not essential for its success.

New forecasts for US wagering support our upgrade
The US fixed odds wagering opportunity has progressed rapidly with the New Jersey Senate unanimously (40-0) passing the Bill to authorise fixed odds wagering on horse racing. The Bill will now be sent to the NJ Governor for signing into legislation. We see this as a significant development as it will set the scene for other US states to adopt similar legislation. Our analysis of the potential market for US fixed odds betting, outlined in our concurrently published industry report, Fixed Odds Presents an Opportunity to Scale, highlights our expectation that the total US horse racing market could grow to US$86b within 10 years of the introduction of fixed odds, with fixed odds comprising 75% of total wagering. Extrapolating this to BET, we estimate that the fixed odds opportunity could conservatively grow from A$2.6m in year one to A$308m in revenues within 10 years.

Base case DCF valuation upgraded to $2.42/share ($1.99b)
Our base case DCF valuation has increased $2.42/share (previously $1.16/share) as a result of capturing estimates for the broader US fixed odds wagering opportunity. This assumes that BET maintains the ~25% share of market currently commanded by the Sportech tote business except in NJ where it holds exclusivity for the next 10 years. Our valuation does not include anything for a potential Tabcorp wagering deal, which has still some way to play out.