BetMakers Technology Group Ltd: Q3 Cash Receipts up 206% on Pcp, Focus Is on FY22

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478 Views27 Apr 2021 08:00

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SUMMARY

BetMakers Technology Group Ltd

Q3 cash receipts up 206% on pcp, focus is on FY22

BetMakers Technology Group (ASX:BET) is a B2B software services business focussed on servicing the wagering market and race operators globally. The company’s technology and systems are used by every racing authority in Australia and most of the major online bookmakers. BetMakers is not a gaming company, it is a technology company that is facilitating commercial opportunities for racing authorities, rights holders, and corporate bookmakers while providing an improved racing experience for punters. The company has reported cash receipts of $5.2m, up 31% on Q2 FY21 and 206% on Q3 FY20 and operating cash outflow of $0.4m with cost containment a key feature. Last month BET had noted that it was on track to deliver $5m in revenue in Q3. The company ended Q3 with $125.7m cash having received shareholder approval for and completed a $50m institutional placement, a $25m strategic investment from Tripp Investments, a company controlled by wagering industry leader Matthew Tripp, and a $10m share purchase plan. BET noted that Sportech acquisition is progressing with completion expected in Q4 FY21 and that the New Jersey legislation to allow fixed odds horse wagering is expected to progress to public hearings before the Senate State Government, Wagering, Tourism & Historic Preservation Committee in Q4 FY21. We have made minor adjustments to our FY21 forecasts to reflect Sportech becoming part of the group in the final month of the year. Our base case DCF valuation is $1.18/share, but we note that our forecasts do not reflect the US fixed odds opportunity beyond NJ.

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. Of its $9.2m in revenue in FY20, 67% was generated under the SaaS model. 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 will deliver 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.

Cash receipts point to core business exceeding ARR of $15.2m
BET has reported cash receipts of $5.2m for Q3, bringing total cash receipts year to date to $13.06m. This puts the company on track for its core business to exceed the $15.2m annual recurring revenue (ARR), reported at H1 FY21. Cash burn for Q3 was $0.4m and this includes absorbing around $1.0m across the quarter to develop its US strategy across content, advisors and operations as well as the cost of progressing the acquisition of Sportech’s tote assets and digital technology which is expected to complete in Q4. We have adjusted our forecasts to reflect a later than previously forecast completion of the Sportech assets, having now only included this for one month rather than the final quarter.

Base case DCF valuation of $1.18/share reflecting cash at Q3
Our base case DCF valuation of $1.18/share (previously $1.16/share) with the change reflecting the higher cash at March 31. Our valuation incorporates the Sportech acquisition and the rollout of a fixed odds business in New Jersey but not the broader fixed odds opportunity that may present across the US.

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