Jun 27: Evolution to swallow Nolimit

Evolution acquires No Limit City, Jefferies conference takeaways, Macau’s woes +More

Wagers.com Earnings+More

Jun 22

Good morning. On today’s agenda:

Evolution has bought slot developer Nolimit City for up to €340m.
Jefferies have feedback from their consumer conference.
SJM in cash crunch as Macau suffers Covid outbreak.

Left to my own devices. Click here:

Evolution acquires Nolimit City

Evolution will pay €200m upfront in cash and a further €140m in earnouts.
Nolimit will generate EBITDA of €23m in 2022 from revenues of €30m.
Completion expected in Q3 and will be accretive to FY22 earnings.

Mental as anything: Evolution has snapped up the Stockholm-based provider of games such as Mental, San Quentin and East Coast/West Coast at a multiple of around ~14.7 x 2022 EBITDA. Nolimit now joins the same stable as Bet Ent, Red Tiger and Big Time Gaming.

Founders: Martin Carlesund, CEO, noted Nolimit was a founder-led company and that the management would remain in place post-acquisition. On revenue synergies, he said there was a “good strategy” built inyo the earnout mechanism. “We want them to grow fast by adding them to our network,” he added.

No limit: Carlesund said Evolution’s double-digit growth target for RNG remains in place. “We have high expectations for Nolimit growth,” he added.

Scarcity value: Asked on the call whether Nolimit was a rare find, Carlesund said there were ”a few companies” Evolution has looked at. “The games are filling a gap we didn’t have before, clearly so,” he added.

Content-led: “We want to hand over the best content in the world to the end-user,” he said.
Live tech: Carlesund said it was unlikely Evolution would make any bids for live casino competitors. “But maybe there is part of the technology,” he said. “That could happen.”

Diary date: Evolution will report its Q2 earnings on July 21.

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Jefferies conference takeaways

Churchillian: Jefferies said the most notable commentary from day one of its Consumer Conference came from Churchill Downs which said it will be looking to expand the TwinSpires horseracing business by offering it out to sports-betting providers.

Recall: Churchill Downs exited the sports-betting space in Feb22.
Minimal cannibal: Jefferies said Churchill Downs expects de minimis cannibalization of its own B2C horse racing offering.
By increments: They added that CD could expect incremental sports-betting sponsorship opportunities for its flagship Kentucky Derby.

Caesars: Caesars corroborated previous recent commentary suggesting Las Vegas occupancy remains high. They added that the addition of the Caesars Forum will provide an “incremental tailwind”.

Caesars also confirmed that in Regionals, rated play was “performing well”.
The company also “reiterated confidence” in the success of the upcoming sale of a Strip property despite “shifting capital markets”.

Macau woes

Outbreak: Macau’s Covid outbreak is threatening to see the gambling enclave shut down once more despite official statements that a lockdown is not on the cards. Early this week the number of cases stood at 49. Visitation to Macau fell 30.6 percent year-over-year to 600,748 in May.

Ho lotta trouble: A report in the FT suggested that SJM is burning through its cash reserves as a result of being unable to fully open its casinos as the territory looks to tighten restrictions once more on Covid concerns.

Crunch: The paper points to analysis from JP Morgan which suggests that SJM’s liquidity will only be sufficient to take the company through to March next year.
“SJM remains our least preferred name in Macau,” the FT quoted JP Morgan which suggested operators such as Wynn, MGM and Melco had enough liquidity to take them through to mid-year 2023.
Ratings: last week, rating agency Fitch downgraded SJM debt citing “red cued confidence in the recovery” in Macau.

Gaming analyst updates

In line: Regional gaming is slowing but Apr-May22 has trended in line with expectations, according to the team at Truist.

Showing weakness: Truist added that “some but not all operators are talking about macro-related weakness”.
“The question is whether already expanded margins and/or absolute EBITDA can hold if the environment worsens.”
June numbers are yet to come in, but gambling stocks are likely to “reflect more risks/lower estimate revisions”.

Margin call: The story “has been more about margins than top-line/GGR” Truist noted, with a post-COVID focus on margin expansion.

“Recent commentary has suggested less margin reversal than initially expected.”
Challenged: “Still, we think it may be challenging for further margin expansion to offset any macro-related revenue deceleration.”

Vegas summer: Meanwhile, Macquarie suggest Vegas demand is “looking strong” throughout the summer, suggesting there has been an uptick in the search data for Las Vegas rooms.

Consistent: “We believe the current demand still bodes well for 2H22 and is consistent with commentary from operators,” the team added.
Moderation: They added they will be “closely watching” the spend/visitor metric which moderated as expected in April.
Nationally, Macquarie noted that US GGR remained healthy in April (-4% seq, +2% YoY) but they also pointed out that GGR “slightly slipped in May”.

Caesars analyst update

Go for growth: JPMorgan has resumed coverage of Caesars Entertainment with an Overweight rating suggesting Caesars will be able to grow EBITDA in the near-term. The team added that they saw Caesars as “more than just a same-store grower”.

Digital dividend: The analysts also noted recent efforts to pare back digital expenses saying they expect to see a “sizable reduction” in EBITDA losses.

NorthStar listing

NorthStar Gaming, the owner of the NorthStar Bets brand in Ontario, says it has entered into a letter of intent with Baden Resources regarding a reverse takeover that would enable a public listing on the Toronto Stock Exchange.

Mining for gold: Baden Resources is a shell company that was previously involved in mineral exploration in Canada.
Northstar Bets launched with the market opening in Ontario in April.

What we’re writing

The crown slips: Scott Longley assesses the future for DraftKings where the path to profitability remains unclear. For EGR Intel.

Newslines

OddsOn Compliance has announced a new partnership with iGaming Academy, the provider of compliance and job skills training for online casinos, sportsbooks, and lottery operators in the U.S. and Canada.

ComeOn in: Saxony Anhalt has confirmed that it has granted a license to ComeOn Gaming. The Cherry-owned company has registered the brands of Sunmaker, Comeonwetten and Mobilebet.

The Zeal deal: Germany-based lottery provider Zeal has announced a cooperation agreement with the Better Collective-owned Mindway AI.

Caesars has announced today that Caesars Sportsbook at Chase Field, the home of partner the Arizona Diamondbacks, is officially open.

Wheels within wheels: After reaching an agreement with Sony Pictures Television and International Game Technology, BetMGM will launch Wheel of Fortune Casino, the first full brand-led online casino in North America.

Low6 has launched its free-to-play ‘gamification’ products as a full turnkey B2B solution for sportsbook operators. Its first clients are Dutch-focused operators TOTO and Jacks, it will announce North America and Asia deals later this year.

Sports and betting content provider Planet Sport has launched a French content service for the Canadian market.