BetMakers Technology Group Ltd: Record Q4 Cash Receipts, up 71% on Previous Quarter
BetMakers Technology Group Ltd
Record Q4 cash receipts, up 71% on previous quarter
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 is rapidly on a path to become a key player in the US horseracing industry which is poised to introduce fixed odds wagering. BET reported Q4 FY21 cash receipts of $8.9m, up 71% on Q3 and 272% on the previous corresponding quarter, with just two weeks inclusion of the Sportech digital and tote assets. The company generated $0.65m positive operating cashflow in the quarter and finished with net cash of $120.6m. Cash receipts for FY21 were $21.97m, well ahead of our forecasts for $17.4m and the company ended the year operating cash break even. We are focused on BET”s international expansion opportunities including its exclusive 10-year fixed odds wagering deal in New Jersey and expansive footprint in the US pari-mutuel market. These underpin our $2.29/share base case valuation.
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, which has been one of the leading states in the introduction of fixed odds sports-betting.
Sprint to the end of FY21
BetMakers has reported better than forecast Q4 cash receipts of $8.911m and, as a consequence, positive operating cashflow of $0.65m for the quarter. Cash receipts were more than twice our expectations, up 71% on Q3 FY21 and 272% ahead of Q4 FY20. The result was driven by a significant increase in activity in the Australian market and the inclusion of approximately two weeks of cashflows from the Sportech racing, tote and digital business. The company ended the quarter and year with $120.6m cash.
Base case DCF valuation is $2.29/share ($1.96b unchanged)
Our base case DCF valuation is $2.29/share, after adjusting for one-third of the Waterhouse performance rights and another 9m options conversion to shares. Fully diluted for all options and performance rights on issue, the valuation is $1.94/share. Our forecasts capture estimates for the broader US fixed odds wagering opportunity and 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. We see key catalysts as the imminent formal signing of the NJ Fixed Odds bill and demonstrated expansion in both the US and international wagering markets.
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