BetMakers Technology Group Ltd - Further Validation of the Global Racing Network
BetMakers Technology Group Ltd
Further validation of the Global Racing Network
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 been awarded rights to offer Penn National Gaming Inc’s (NASDAQ:PENN) racing content outside the US and Canada, from 1 July 2022. These rights include data and race vision for fixed-odds, booked bets and exchange wagering for almost 950 race meetings. This will expand the Global Racing Network’s (GRN) content offering to more than 1,400 race meetings a year from the North American market. We are forecasting $18.5m in revenues from GRN in FY23, up from $5.2m in FY22, and predominantly driven by the NJ fixed-odds racing opportunity. This new agreement is not captured in our forecasts, which we will review as more information comes to market. The company noted that Penn would be paid a minimum guaranteed amount annually with the parties agreeing to a revenue-share arrangement. The agreement is currently until 31 December 2025. At the current share price, our FY23 forecasts imply EV/Sales of 2.0x, EV/EBITDA of 8.2x and PER of 24.3x. This compares with the 12-month forward mean of the All Tech Index of 2.7x EV/Sales and 17.5x EV/EBITDA. Our base-case DCF valuation for BET is $2.00/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, 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.
Significant boost to GRN’s North American racing content
The Penn National Gaming agreement significantly boosts BET’s North American racing content (from around 500 races a year currently to more than 1,400 races a year) for distribution into international markets. We expect that it will also give BET the opportunity to build on the relationship to potentially offer fixed-odds wagering and content in the North American market. Penn National Gaming operates 40 casinos and racetracks across the US and Canada, and owns Barstool Sportsbook, its online sports-betting platform. We anticipate that the distribution deal on the data and vision rights will be similar to other GRN deals where the general aim is to gross 2.0% on turnover with BET earning from 0.5% to 1.0% of turnover.
Base-case valuation is $2.00/share
Our base-case DCF valuation is $2.00/share on the current share count and $1.75/share fully diluted for all in-the-money options and performance rights on issue. Our valuation incorporates a 3.5% risk-free-rate to reflect rising Treasury bond rates. We see evidence of the progress of fixed-odds wagering in New Jersey as a key catalyst, along with 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, and the rollout of the NTD platform in Australia and New Zealand, which are not yet in our forecasts.
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