BetMakers Technology Group Ltd - Global Growth Strategy Emerges in H1 FY22 Result

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.

Step-change evident in growth in tote and betting services

Divisionally, BET recorded significant jumps in revenues from its Global Tote and Global Betting Services business. BET reported a 105% half-on-half increase in revenues to $18.0m from Global Betting Services, which includes its Managed Trading Services (MTS) business. The company noted that $8.26m in MTS revenues were generated with the support of the Waterhouse Group. The Global Tote posted $23.2m in revenues, up from $1.7m in H2 FY21, and generated predominantly in the northern hemisphere, following the integration of the Sportech technology stack into BetMakers’ offering. The Global Racing Network grew revenues to $2.3m from $1.8m in H1 FY21 and $1.4m in H2 FY21. This division is poised to grow significantly from H2 FY22 with the introduction of fixed-odds wagering in NJ, where BET has already signed 15+ tracks ready for the launch and further deals emerging with international racing bodies and companies seeking to distribute content globally.

Base-case DCF valuation is $2.28/share ($2.06b)

Our base-case DCF valuation is $2.28/share (previously $2.35/share) after taking into account the 45m shares issued to the Waterhouse Group as part of the conversion of its equity-based payments for the Managed Trading Services partnership. On a fully diluted basis for performance rights and in-the-money options, our valuation is $1.98/share. Our 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 in Q4 FY22, 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 further evidence of international expansion.