BetMakers Technology Group Ltd: Strong Operational Performance While Growing the Stack

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.

H1 FY21 result commentary
BET has announced an 88% increase in interim revenue to $7.6m, and underlying EBITDA (ex non-cash employee share payments, one time acquisition costs and costs associated with the US expansion) of $0.4m, compared with underlying EBITDA of $0.57m in H1 FY20. Reported EBITDA was a loss of $1.68m. Revenue from content & integrity more than doubled in the half to $1.82m and was ahead of our forecast for $1.57m while wholesale wagering increased 82.5% on the previous corresponding period to $5.77m, although was a little lower than our forecast for $6.63m. Underlying costs were in line with expectations. We have incorporated some forecast changes to take into account a later inclusion of the Sportech acquisition in FY21 (previously included from March but we have pushed out to May) and in FY22 we have incorporated additional capital and people investment in the US over and above our previous estimates. We have not offset this with revenue upside at this point given that the fixed odds opportunity in the US is still to be defined although we noted that the Sportech relationships and contracts in the US should open doors for BetMakers as it educates the US market on the benefits of fixed odds wagering in a broader, more robust wagering market.

Base case DCF valuation of $1.16/share unchanged
Our base case DCF valuation of $1.16/share remains unchanged. Our valuation incorporates the Sportech acquisition and the rollout of a fixed odds business in New Jersey. We note that there is a broader opportunity in the US which is minimally captured in our current forecasts.