BetMakers Technology Group Ltd: Record Cash Receipts of $4m, up 127% on Pcp
BetMakers Technology Group Ltd
Record cash receipts of $4m, up 127% on pcp
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 record cash receipts of $4m for Q2 FY21 in a quarter in which the company’s management team and resources were heavily focused on global opportunities, including the $56.2m acquisition of Sportech Plc’s tote assets and technology. Cash receipts were up 127% on Q1 FY20. BetMakers posted an operating cashflow loss of $0.17m, a 40% improvement on Q2 FY20, despite absorbing legal costs associated with the Sportech acquisition. First half cash receipts were $7.9m an increase of 130% on the corresponding period in FY20. The company ended Q2 with $68.6m cash in hand and noted that it expected net cash of more than $35.0m post completion of the Sportech acquisition. Our earnings estimates and valuation remain unchanged. Our base case DCF valuation is $1.00/share, fully diluted for in the money options. On the current share count, the valuation is $1.20/share.
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.
Record Q2 cash receipts
BET reported its best quarterly performance to date, delivering cash receipts of $4m and a reduced cash operating loss of $0.17m, which included the absorption of costs including legal costs associated with the acquisition of Sportech’s tote assets and technology, expenditure on the US development plan, and additional employees to transition the company to its next stage of development. Net cash at the end of the period was $68.6m but after it completes the Sportech acquisition this quarter and having just completed an oversubscribed $10m share placement plan to shareholders, cash is expected to be $35.3m. It is our expectation that future quarters will look very different with the Sportech assets delivering a substantial uplift in revenues and EBITDA. Had BetMakers owned the assets in FY20, combined revenues would have been $56.1M and EBITDA $7.7m versus BET’s reported revenues of $9.2m and EBITDA of $0.9m. We are forecasting for the Sportech assets to contribute $12.7m in revenues in H2 FY21. In FY22, we are forecasting Sportech to contribute $49.9m revenue and $8m in EBITDA to BetMakers.
Base case DCF valuation upgraded to $1.00/share fully diluted
Our case DCF valuation is $1.00/share and incorporates assumptions for the Sportech assets and assumes all in the money options and performance shares convert. On the current share count our base case DCF valuation is $1.20/share. In our view, the scaleup of earnings over the next six months will reshape BetMakers’ investment profile.
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