BetMakers Technology Group: Sportech Shareholders Approve Tote/Digital Assets Sale

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. Over time we expect the SaaS revenue share to average ~45-50% as the company expands its racing data and informatics platforms and new integrity platforms in both Australia and offshore.

Overwhelming majority vote
Sportech Plc announced to the market (London Stock Exchange) on Thursday December 24 that 99.81% of the votes cast at its general meeting were in favour of the sale of its Tote and Digital assets to BetMakers. In total, 60.18% of total votes on issue were registered to vote. BetMakers noted in an announcement today that it would now make the initial non-refundable payment of £6.2m. The outstanding conditions on the purchase relate to the satisfaction of certain customary conditions that only BetMakers can waive (at its discretion), including transfer of licences. The acquisition will be funded by way of a recently completed, fully underwritten $50m share placement at $0.60/share and a share purchase plan (SPP) to raise up to $10m. The transaction, done on an implied EV/revenue multiple of 1.2x and EV/EBITDA multiple of 8.1x, is transformative, in our view, accelerating BetMakers’ international growth plans and positioning it to play a pivotal role in the development of the US wagering industry.

Base case valuation is $1.00/share fully diluted
Our DCF valuation is $1.00/share fully diluted for all in the money options, and incorporates assumptions for the Sportech assets. On the post-transaction share count but excluding in the money options, our base case DCF valuation is $1.17/share. We have incorporated little in our forecasts for potential synergies or growth uplift derived from potential upsell opportunities. We also see potential upside from our current forecasts for BET’s role in the development of the fledgling US fixed odds wagering market.