Earnings+More - Aug 8: UK gaming feels the heat
Aug 8: UK gaming feels the heatThe week ahead, DraftKings, Penn Entertainment and Century analyst reactions, startup focus - BettorEdge +MoreGood morning. On today’s agenda:
The week aheadChalk/cheese: Last week, the largest US casino groups demonstrated they were seeing no visible recessionary effect on their businesses with Las Vegas, in particular, apparently seeing revenues accelerating. This week, however, the focus turns to the biggest of the UK-listed operators Entain (Thursday) and Flutter and 888 (both Friday) and here the situation appears very different.
EntainWhere does it hurt? At the start of July Entain said it was already seeing the impact of macro impacts in the UK with a reduced rate of spend among consumers helping to drag online Q2 NGR down 7%.
Unfinished sympathy: A note from Jefferies suggested that MGM CEO Bill Hornbuckle’s comment last week about Entain that “you can’t buy what’s not for sale” was a “pointed overture” to Entain’s shareholders, ~50% of which are US-based.
Datapoint: MGM’s Jan21 bid of an implied £13.8bn would now be worth £17.4bn due to FX movements and the falling value of sterling. FlutterSeal the deal: The latest news from Flutter came on Friday when it said it has completed its £1.62bn Sisal acquisition but the company’s last trading statement was at the start of May which in the current condition feels like an age away.
888Rubber hits the road: The clearest impact of the economic uncertainty to date has come from the debt markets and what we know about the difficulties of raising cash against the current backdrop. So it was that at the start of July, reports emerged that 888 was struggling to find buyers for the debt raised to fund the William Hill buyout.
Also reporting this week: Red Rock Resorts, Wynn Resorts, Light & Wonder, LeoVegas, Genius Sports, Sportradar, Super Group, Catena Media What we’ll be writingDeal Talk: Tomorrow we launch Deal Talk, another new monthly newsletter edition this time focusing on what’s being spoken about away from the earnings announcements and analyst calls of the betting and gaming sector.
**Sponsor’s message**: Venture capital firm Yolo Investments manages €550m in capital across 80 of the most exciting companies in fintech, gaming & blockchain. Their Gaming Fund, regulated by Guernsey Financial Services Commission, a dedicated 29-company, €183m AUM portfolio has invested in fast-growth assets including Dabble, Kalamba, SimWin & ThriveFantasy. DraftKings analyst reaction
Plus ça change: On Friday DraftKings beat guidance and the share price rose 12% at one point before settling at just below 10% (and is up 57% since July 1) but for Deutsche Bank, “not much has changed” DraftKings share price performance, Aug 5 Not seeing it: The DB team are “not convinced” that the industry is going through a large-scale promotion rationalization as “we frankly do not see that in any of the data”.
Hide your light: The team at Wells Fargo suggested the Q2 performance was better than it seemed at first glance.
The tech difference: JMP suggest H2 will be the “last large-scale push” before DraftKings enters into a “more mature operating environment” in 2023 and beyond.
The shares weekThe genius switch: As noted above, also reporting this week is Genius Sports and likely to be top of the agenda for the analyst will be the performance of the share price in the past week, up over 42%. 👀Genius Sports share price, week of Aug1-Aug5
Eat my shorts: The team at Jefferies suggested the performance of both DraftKings (as noted above up 32% on the week) and Rush Street Interactive over the week (up 8% on the week) was better than most land-based gaming stocks.
Analysts in briefPenn Entertainment: Roth analysts suggest it is hard to find catalysts that move the needle, suggesting the mature portfolio of casino properties will be hard pressed to grow better than inflation even with initiatives such as cashless gaming.
Century: Macquarie said the underlying fundamentals remain strong and were helped by a stable promotional environment with marketing spend remaining below pre-COVID levels. “Century expects this dynamic to continue as they have not seen any negative impact on gaming volumes from these lower levels of advertising.”
Golden Entertainment: Analysts at JMP note that while Golden Entertainment maintains 100% of its real estate, the value of the company’s assets and the proximity to the Strip has been noted by investors. While management believes it creates more value for shareholders at current levels to keep the real estate, JMP suggest it is worth noting that but if we see the cap rate compression story continue to play out for REITs, it could warrant selling off the real estate of these assets. We believe a sale of the STRAT’s land to a REIT could result in $600M- $700M of proceeds for Golden. Playtika: With Playtika missing Q2 revenue forecasts by 3% and social casino performance much weaker than expected, the team at Macquarie acknowledged the group’s product and personnel changes. But they note that stemming the tide is “unlikely to be an immediate event”.
Startup focus - BettorEdgeWho, what, where and when: BettorEdge is a Minneapolis-based no-fee social betting marketplace connecting sports fans to trade bets founded by Greg Kajewski and James Seils that launched in early 2021. In the first 18 months of operation, BettorEdge has grown to a community of users who have bet $40m in orders collectively. Funding backgrounder: BettorEdge has raised over $1M to date backed by a network of friends and family. So what's new? In March this year, BettorEdge saw more than $3m in orders on NCAA Conference Tournament Basketball games and NCAA Tournament games. Upcoming new features include a ‘discover’ page with personalized suggestions for games, bets, competitions and more. The longer pitch: Kajewski says BettorEdge’s opportunity lies in creating a platform that “aligns to how bettors actually engage”.
Well received: Kajewski says the community reaction to the concept has “proved there’s a strong demand” for BettorEdge offers. “We’ve seen a ton of interest in all markets in the US,” he adds. “We started our marketing in our home state of Minnesota and saw great adoption there, as well as neighboring states like Wisconsin and South Dakota. The takeaway: There’s a strong desire for social betting with no hidden fees across the community,” says Kajewski. DatalinesNew York: Flutter’s FanDuel led New York’s online sports-betting market in July with 54.5% of GGR followed by DraftKings (21.5%), Caesars (11.9%), BetMGM (8.6%), PointsBet (2.3%), Rush Street (1.6%) and Wynn (0.5%). Resorts World was less than 0.5% and BallyBet has only just launched. Maryland: Casino GGR in July was up 0.8% YoY at $181.5m. MGM National Harbor led the market with 42% share and GGR up 6.8% YoY at $77.2m. NewslinesParty like it's 1999: US elections website BallotPedia reports that the two sports-betting bills in California have raised the most money since reporting of ballot measure sponsoring came into being in 1999. Those for and against both ballots have raised a total of $256.4m, BallotPedia reported. Rebrand: Blackstone’s Great Canadian Gaming rebranded as Great Canadian Entertainment and has launched a new loyalty rewards program for its 12 Ontario destinations. Bounty hunter: Peer-to-peer DFS provider Bounty Sports and Inside the Pocket have entered into a strategic content partnership that will see Bounty Sports’ fantasy product portfolio join ITP’s distribution platform to grow its reach to a new network of operators, affiliates and media partners. What we’re reading:Twitchfinder general: “These days, ‘slots’ is the seventh most popular content category on Twitch, ahead of the video game Fortnite.” Not in Kansas now: Legal Sports Report reports the state Racing and Gaming Commission Director of Wagering as saying sport-betitng won’t launch until the NFL season is underway. Wall of money: Esports comes to the Commonwealth Games. On socialMarjorie Taylor Greene may not be the dumbest person on the planet, but she better hope Lauren Boebert doesn’t die. Calendar
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Friday, August 5, 2022
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