Last close As at 05/08/2026
EUR3.07
— 0.00 (0.00%)
Market capitalisation
EUR22m
Research: Consumer
Online gaming legislation varies widely across Europe and bet-at-home (BAH) focuses predominantly on grey (or ambiguous) markets. At H119, the company’s core markets were Germany (35% of gross win), Austria (c 30%) and Eastern Europe, and this report provides further detail on recent regulatory changes (particularly in Germany). BAH is a strong brand with 5m customers, a capital light model and high cash generation. The stock trades at 9.9x EV/EBITDA and 13.0x P/E for FY20e with an attractive 9.6% prospective dividend yield.
bet-at-home |
A closer look at German regulation |
H119 results |
Travel & leisure |
10 September 2019 |
Share price performance
Business description
Next events
Analysts
bet-at-home is a research client of Edison Investment Research Limited |
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Online gaming legislation varies widely across Europe and bet-at-home (BAH) focuses predominantly on grey (or ambiguous) markets. At H119, the company’s core markets were Germany (35% of gross win), Austria (c 30%) and Eastern Europe, and this report provides further detail on recent regulatory changes (particularly in Germany). BAH is a strong brand with 5m customers, a capital light model and high cash generation. The stock trades at 9.9x EV/EBITDA and 13.0x P/E for FY20e with an attractive 9.6% prospective dividend yield.
Year end |
Revenue (GGR**) (€m) |
EBITDA |
EPS* |
DPS |
P/E |
Yield |
12/17 |
145.4 |
36.4 |
4.81 |
7.50 |
10.8 |
14.4 |
12/18 |
143.4 |
36.2 |
4.65 |
6.50 |
11.2 |
12.5 |
12/19e |
136.9 |
32.1 |
3.97 |
5.00 |
13.1 |
9.6 |
12/20e |
140.3 |
32.4 |
4.00 |
5.00 |
13.0 |
9.6 |
Note: *EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **GGR are gross gaming revenues
German legislation continues to evolve
Gaming legislation is a key feature for determining both market size and risk potential for online gaming companies and BAH focuses mainly on grey markets, with ambiguous regulation. By gaming volume, these comprise Germany (35% of gross win), Austria (c 30%) and Eastern Europe (17%). While the company pays taxes in both Germany and Austria, the advantage of many grey markets is that they are untaxed and hence generate higher cash flow. The flipside, however, is that operators can be subject to sudden IP blocking (eg Poland in 2017 and Switzerland in 2019). This report summarises the current regulatory situation in BAH’s key markets, with a particular focus on Germany, where licensing for online sports is on track for mid-2021 (but e-gaming regulation remains uncertain).
Continued strong cash flow
Within its Q219 trading update in July, management reiterated FY19 guidance of €130–143m GGR and an EBITDA of €29-33m. This compares to €71.1m GGR and €21.3m EBITDA already achieved in H119 and therefore assumes a significant negative impact from Swiss IP blocking (effective from July 2019). We are leaving our forecasts unchanged as, although we acknowledge that our estimates could be conservative, BAH continues to face regulatory uncertainty across its key markets. Nonetheless, the business model is very capital light, with high cash flow generation. We forecast net cash of €49.8m at FY19.
Valuation: 9.6% dividend yield
BAH trades at 9.9x EV/EBITDA and 13.0x P/E for FY20e, which is towards the top end of the peer group, but its healthy net cash position and 9.6% prospective dividend yield are very attractive. In our view, a major catalyst would be concrete evidence of positive regulation in core markets, especially for German e-gaming (casino).
A grey market operator
Overview
Gaming legislation varies widely across Europe and BAH is focused mainly on grey markets, which are characterised by ambiguous regulation. By gaming volume, these markets comprise Germany (35% of gross win), Austria (c 30% of gross win) and Eastern Europe (17% of gross win).
Given the lack of formal legislation across most of its markets, BAH typically operates through its sports betting and gaming licences issued in Malta. Under EU law, these licences are effective in all EU member countries due to the freedom of movement within the EU, as long as online gaming and sports betting is legal in the respective member country.
In some markets (such as Poland), BAH has been subject to IP blocking for e-gaming, which is generally considered a violation of EU law.
|
Exhibit 1: BAH’s betting and gaming volume (€m) by region |
|
|
Source: bet-at-home. Note: Eastern Europe comprises Bosnia and Herzegovina, Croatia, Montenegro, Poland, Serbia, Slovakia, Slovenia. Western Europe comprises Cyprus, Finland, Ireland, Liechtenstein, Malta, Netherlands, Sweden, Switzerland, the UK. |
Germany (35% gross win)
At the moment, Germany is a grey market, where online gaming companies operate through either a Schleswig-Holstein licence or another European licence (typically Maltese) and pay VAT on casino revenues and a turnover tax on betting. To date, legislation has been very confusing and there has been a high level of disagreement among Germany’s member states.
In March 2019, German state ministers approved a process towards a licensing regime for online sports betting, although the framework for online casino remains unclear. At present, it appears that entirely new regulations for online sports are to come into effect in mid-2021 and some of the federal states (led by North Rhine Westphalia) have plans to open up the online casino market. It is uncertain whether or not all the federal states will follow suit. BAH believes that the most likely scenario is a licensing model for online sports as well as online casino (at least in some states), from mid-2021 and BAH is optimistic that it will be able to maintain its entire product suite.
We summarise the current online sports and casino situation below:
■
Sports betting: Licensing regime in sight
In March 2019, German state ministers approved amendments to the Interstate Treaty, establishing an interim sports betting licensing regime from January 2020. The amendments also lifted the cap on licences in preparation for a future agreement on a more permanent regime from June 2021. While the regulatory progress is a positive in general, it is important to note that live play betting will be restricted under the current plans and there will also be a setting of monthly wagering limits for players.
■
E-gaming: Federal ban still in place
The biggest area of confusion surrounds the issue of online gaming (over 50% of BAH’s online GGR), with online casino and poker technically illegal under the current reading of the Interstate Treaty. In March 2019, the draft amendments maintained a federal ban on online casino set in 2012, with the exception of Schleswig-Holstein (see below).
Reinforcing the negative stance, in June 2019, a large international payments provider was prevented from participating in payment transactions in connection with “illegal gambling” in Germany. However, as noted above, there are a number of states that appear to be committed to the provision of online gaming within the next couple of years and BAH remains optimistic that it will be able to maintain its entire product suite.
■
Schleswig-Holstein
The Federal State of Schleswig-Holstein went down a different route and issued licences for sports betting and casino as early as 2012, including to BAH. These licences expired at the end of 2018 and could not be extended due to Schleswig-Holstein becoming a party to the Revised Interstate Gambling Treaty. Essentially, operators with both online sports betting licences and online casino licences (issued by Schleswig-Holstein) are particularly exposed, with regulators requiring sports betting licensees to stop offering casino games alongside sports betting. BAH therefore resolved to discontinue the casino products.
In March 2019, the Ministers authorised Schleswig-Holstein to extend its existing casino licences until a new national regulation comes into effect (this is for operators with casino-only licences). BAH is currently implementing the licensing conditions and plans to commence the casino offers in this federal state again no later than in the first quarter of 2020. We assume this means that BAH will split its licences, thereby receiving a casino-only licence.
■
Injunctions: possible fine from Hesse in 2019
BAH is subject to a couple of e-gaming related injunctions (Berlin, Federal State of Hesse), although it has continued to offer casino products in those regions as it believes the injunctions are a violation of EU law. There has been no conclusive result to any of these injunctions, but management has stated that it may face a penalty in Hesse later this year.
Austria: Business as usual (30% gross win)
There is limited formal gaming regulation in Austria and online gaming is dominated by Casino Austria, which is partially state-owned. On 27 February 2018, the Austrian Ministry of Finance published a draft bill on the amendment of gambling laws. This draft envisaged that online gaming providers without an Austrian licence would be blocked by ISPs from October 2018. However, the draft was subsequently repealed days later and no amendment has since been published.
The government intends to include online sports bets in the gambling law, with the tax income directed towards sport. A new regulation for online casinos in Austria is also being discussed but there is no clarity on when a new draft law will be published.
Poland: Operating sports betting without a licence
Until 2017, BAH operated in Poland via its EU licence for both sports betting and e-gaming. However, in April 2017, an amendment to the gambling laws of Poland became effective and the state monopoly (Totalizator Sportowy) was granted exclusive rights to operate remote casinos and poker. Although the enforcement measures (such as IP and payment blocking) are generally considered a violation of EU law, the appeals by international operators to the European Court of Justice have been unsuccessful. We therefore assume there will be no liberalisation of the Polish e-gaming market. BAH continues to offer online betting in Poland without a licence and is taking action against the discriminatory regulations.
Switzerland: Completely blocked from July 2019
In June 2018, a Swiss referendum resulted in local Swiss casinos receiving exclusivity to apply for e-gaming licences for six years, essentially barring all international operators. The new Money Gaming Act came into effect in January 2019 and international operators are now required to agree a deal with a local land-based operator in order to continue serving players. BAH does not have any such deal.
In addition, the act requires Swiss ISPs to block international sites, with the ISPs being compensated for doing so. Unlicensed operators have been blacklisted from July 2019. Since Switzerland is not part of the EU, it is therefore not bound by the EU free-trade laws and international operators are not likely to dispute the legality of this recent ruling.
Financials
We are leaving our forecasts broadly unchanged following the H119 results and include a summary income statement below. As before, our forecasts assume no Swiss revenues from July 2019 and no further major regulatory changes from this point.
Exhibit 2: BAH income statement
€m |
2014 |
2015 |
2016 |
2017 |
2018e |
2019e |
2020e |
2021e |
Sports |
55.7 |
61.2 |
66.2 |
64.6 |
60.5 |
52.7 |
54.0 |
55.1 |
E-gaming |
51.4 |
60.4 |
72.5 |
80.8 |
82.8 |
84.2 |
86.3 |
88.1 |
Gross gaming revenue (GGR) |
107.0 |
121.6 |
138.7 |
145.4 |
143.4 |
136.9 |
140.3 |
143.1 |
Cost of sales (VAT and fees) |
(12.3) |
(21.3) |
(25.8) |
(27.6) |
(28.2) |
(25.8) |
(26.7) |
(27.2) |
Net gaming revenue (NGR) |
94.7 |
100.3 |
112.9 |
117.8 |
115.1 |
111.1 |
113.6 |
115.9 |
% of GGR |
88.5% |
82.5% |
81.4% |
81.0% |
80.3% |
81.2% |
81.0% |
81.0% |
Personnel costs |
(14.4) |
(15.5) |
(17.3) |
(18.1) |
(18.7) |
(19.8) |
(19.9) |
(20.0) |
% GGR |
-13.5% |
-12.8% |
-12.5% |
-12.4% |
-13.1% |
-14.5% |
-14.2% |
-14.0% |
Marketing |
(41.1) |
(36.5) |
(44.0) |
(42.0) |
(38.3) |
(37.1) |
(37.9) |
(38.6) |
% of GGR |
-38.4% |
-30.0% |
-31.7% |
-28.9% |
-26.7% |
-27.1% |
-27.0% |
-27.0% |
Other |
(12.5) |
(16.7) |
(18.6) |
(21.3) |
(21.9) |
(22.1) |
(23.4) |
(23.5) |
% of GGR |
-11.6% |
-13.7% |
-13.4% |
-14.7% |
-15.2% |
-16.1% |
-16.7% |
-16.4% |
total operating costs (ex DA/SBP) |
(67.9) |
(68.7) |
(79.9) |
(81.4) |
(78.9) |
(79.0) |
(81.2) |
(82.2) |
EBITDA |
26.8 |
31.6 |
33.0 |
36.4 |
36.2 |
32.1 |
32.4 |
33.7 |
EBITDA margin (%) |
25.0% |
26.0% |
23.8% |
25.0% |
25.3% |
23.5% |
23.1% |
23.6% |
Normalised operating income |
25.9 |
30.7 |
31.9 |
35.1 |
34.9 |
30.2 |
30.4 |
31.7 |
Operating income |
25.8 |
30.8 |
31.9 |
34.1 |
34.9 |
30.2 |
30.4 |
31.7 |
Net finance costs |
1.7 |
2.2 |
2.2 |
1.5 |
0.0 |
0.1 |
0.1 |
0.1 |
Normalised PBT |
27.5 |
32.9 |
34.1 |
36.6 |
35.0 |
30.3 |
30.5 |
31.8 |
PBT |
27.5 |
32.9 |
34.1 |
35.7 |
35.0 |
30.3 |
30.5 |
31.8 |
Tax |
(1.8) |
(2.3) |
(3.1) |
(2.8) |
(2.4) |
(2.5) |
(2.4) |
(2.5) |
Normalised net income |
25.7 |
30.6 |
31.0 |
33.8 |
32.6 |
27.9 |
28.1 |
29.3 |
Profit after tax |
25.6 |
30.7 |
31.0 |
32.8 |
32.6 |
27.8 |
28.1 |
29.3 |
Reported EPS (€) |
3.65 |
4.37 |
4.42 |
4.68 |
4.65 |
3.97 |
4.00 |
4.17 |
Adjusted EPS (€) |
3.66 |
4.36 |
4.42 |
4.81 |
4.65 |
3.97 |
4.00 |
4.17 |
Dividend per share (€) |
0.60 |
2.25 |
7.50 |
7.50 |
6.50 |
5.00 |
5.00 |
5.00 |
Source: BAH, Edison Investment Research
Exhibit 3: Financial summary
€m |
2014 |
2015 |
2016 |
2017 |
2018 |
2019e |
2020e |
2021e |
|||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|||
INCOME STATEMENT |
|||||||||||
Revenue (GGR) |
|
|
107.0 |
121.6 |
138.7 |
145.4 |
143.4 |
136.9 |
140.3 |
143.1 |
|
Cost of Sales |
(12.3) |
(21.3) |
(25.8) |
(27.6) |
(28.2) |
(25.8) |
(26.7) |
(27.2) |
|||
Net Gaming Revenue |
94.7 |
100.3 |
112.9 |
117.8 |
115.1 |
111.1 |
113.6 |
115.9 |
|||
EBITDA |
|
|
26.8 |
31.6 |
33.0 |
36.4 |
36.2 |
32.1 |
32.4 |
33.7 |
|
Normalised operating profit |
|
|
25.9 |
30.7 |
31.9 |
35.1 |
34.9 |
30.2 |
30.4 |
31.7 |
|
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Exceptionals |
(0.1) |
0.1 |
0.0 |
(0.9) |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Share-based payments |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Reported operating profit |
25.8 |
30.8 |
31.9 |
34.1 |
34.9 |
30.2 |
30.4 |
31.7 |
|||
Net Interest |
1.7 |
2.2 |
2.2 |
1.5 |
0.0 |
0.1 |
0.1 |
0.1 |
|||
Profit Before Tax (norm) |
|
|
27.5 |
32.9 |
34.1 |
36.6 |
35.0 |
30.3 |
30.5 |
31.8 |
|
Profit Before Tax (reported) |
|
|
27.5 |
32.9 |
34.1 |
35.7 |
35.0 |
30.3 |
30.5 |
31.8 |
|
Reported tax |
(1.8) |
(2.3) |
(3.1) |
(2.8) |
(2.4) |
(2.5) |
(2.4) |
(2.5) |
|||
Profit After Tax (norm) |
25.7 |
30.6 |
31.0 |
33.8 |
32.6 |
27.8 |
28.1 |
29.3 |
|||
Profit After Tax (reported) |
25.6 |
30.7 |
31.0 |
32.8 |
32.6 |
27.8 |
28.1 |
29.3 |
|||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Discontinued operations |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Net income (normalised) |
25.7 |
30.6 |
31.0 |
33.8 |
32.6 |
27.8 |
28.1 |
29.3 |
|||
Net income (reported) |
25.6 |
30.7 |
31.0 |
32.8 |
32.6 |
27.8 |
28.1 |
29.3 |
|||
Basic average number of shares outstanding (m) |
7.0 |
7.0 |
7.0 |
7.0 |
7.0 |
7.0 |
7.0 |
7.0 |
|||
EPS - basic normalised (€) |
|
|
3.66 |
4.36 |
4.42 |
4.81 |
4.65 |
3.97 |
4.00 |
4.17 |
|
EPS - diluted normalised (€) |
|
|
3.66 |
4.36 |
4.42 |
4.81 |
4.65 |
3.97 |
4.00 |
4.17 |
|
EPS - basic reported (€) |
|
|
3.65 |
4.37 |
4.42 |
4.68 |
4.65 |
3.97 |
4.00 |
4.17 |
|
Dividend (€) |
0.60 |
2.25 |
7.50 |
7.50 |
6.50 |
5.00 |
5.00 |
5.00 |
|||
Revenue growth (%) |
25.0 |
13.6 |
14.0 |
4.8 |
(-1.4) |
(-4.5) |
2.5 |
2.0 |
|||
Gross Margin (%) |
88.5 |
82.5 |
81.4 |
81.0 |
80.3 |
81.2 |
81.0 |
81.0 |
|||
EBITDA Margin (%) |
25.0 |
26.0 |
23.8 |
25.0 |
25.3 |
23.5 |
23.1 |
23.6 |
|||
Normalised Operating Margin |
24.2 |
25.2 |
23.0 |
24.1 |
24.4 |
22.1 |
21.7 |
22.2 |
|||
BALANCE SHEET |
|||||||||||
Fixed Assets |
|
|
4.5 |
4.8 |
4.9 |
4.0 |
3.4 |
7.3 |
6.3 |
5.3 |
|
Intangible Assets |
2.4 |
2.2 |
2.0 |
2.0 |
2.0 |
2.1 |
2.3 |
2.5 |
|||
Tangible Assets |
2.1 |
2.6 |
2.9 |
2.0 |
1.4 |
5.2 |
4.0 |
2.8 |
|||
Investments & other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Current Assets |
|
|
89.9 |
123.3 |
140.5 |
120.6 |
99.9 |
85.3 |
80.3 |
76.5 |
|
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Debtors |
57.9 |
70.7 |
47.9 |
16.9 |
20.1 |
25.1 |
30.1 |
35.1 |
|||
Cash & cash equivalents |
21.8 |
40.7 |
82.3 |
94.4 |
70.6 |
49.7 |
39.7 |
30.9 |
|||
Customer cash |
9.7 |
9.4 |
9.5 |
7.5 |
7.7 |
9.0 |
9.0 |
9.0 |
|||
Other |
0.5 |
2.5 |
0.7 |
1.8 |
1.5 |
1.5 |
1.5 |
1.5 |
|||
Current Liabilities |
|
|
(27.0) |
(32.7) |
(35.7) |
(35.3) |
(34.0) |
(41.0) |
(42.0) |
(43.0) |
|
Creditors |
(1.3) |
(1.0) |
(0.5) |
(1.8) |
(3.3) |
(4.3) |
(5.3) |
(6.3) |
|||
Short term provisions/ tax liabilities |
(14.1) |
(19.9) |
(21.4) |
(22.6) |
(19.2) |
(25.2) |
(25.2) |
(25.2) |
|||
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Other |
(11.5) |
(11.8) |
(13.9) |
(10.9) |
(11.5) |
(11.5) |
(11.5) |
(11.5) |
|||
Long Term Liabilities |
|
|
(0.1) |
(0.0) |
(0.1) |
(0.0) |
(0.0) |
(3.5) |
(3.5) |
(3.5) |
|
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Other long term liabilities |
(0.1) |
(0.0) |
(0.1) |
(0.0) |
(0.0) |
(3.5) |
(3.5) |
(3.5) |
|||
Net Assets |
|
|
67.5 |
95.3 |
109.6 |
89.3 |
69.3 |
48.1 |
41.1 |
35.3 |
|
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Shareholders' equity |
|
|
67.5 |
95.3 |
109.6 |
89.3 |
69.3 |
48.1 |
41.1 |
35.3 |
|
CASH FLOW |
|||||||||||
Op Cash Flow before WC and tax |
26.8 |
31.6 |
33.0 |
36.4 |
36.2 |
32.1 |
32.4 |
33.7 |
|||
Working capital |
(4.4) |
(3.6) |
(0.1) |
(2.4) |
(6.5) |
(4.0) |
(4.0) |
(4.0) |
|||
Exceptional & other |
5.8 |
5.9 |
0.4 |
(0.4) |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Tax |
(1.8) |
(2.3) |
(3.1) |
(2.8) |
(5.0) |
(2.5) |
(2.4) |
(2.5) |
|||
Net operating cash flow |
|
|
26.4 |
31.7 |
30.2 |
30.8 |
24.8 |
25.7 |
26.0 |
27.2 |
|
Capex |
0.0 |
0.0 |
0.0 |
0.0 |
(0.7) |
(1.0) |
(1.0) |
(1.0) |
|||
Acquisitions/disposals |
(2.4) |
(1.1) |
(1.3) |
(0.5) |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Net interest |
2.2 |
2.2 |
0.3 |
1.5 |
0.0 |
0.1 |
0.1 |
0.1 |
|||
Equity financing |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Dividends |
(2.8) |
(4.2) |
(15.8) |
(52.6) |
(52.6) |
(45.6) |
(35.1) |
(35.1) |
|||
Other |
(15.0) |
(9.6) |
28.2 |
33.0 |
4.7 |
0.0 |
0.0 |
0.0 |
|||
Net Cash Flow |
8.4 |
19.0 |
41.6 |
12.1 |
(23.8) |
(20.9) |
(10.0) |
(8.8) |
|||
Opening net debt/(cash) |
|
|
(13.4) |
(21.8) |
(40.7) |
(82.3) |
(94.4) |
(70.6) |
(49.8) |
(39.7) |
|
FX |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Other non-cash movements |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Closing net debt/(cash) |
|
|
(21.8) |
(40.7) |
(82.3) |
(94.4) |
(70.6) |
(49.8) |
(39.7) |
(30.9) |
|
Source: bet-at-home, Edison Investment Research
|
|
Research: Investment Companies
Deutsche Beteiligungs (DBAG) is proceeding to deploy the capital commitments of DBAG Fund VII (€1,010m including top-up fund), with 71% of the main fund and 59% of the top-up fund already allocated. The fund should complete its investment phase soon and subsequently DBAG should launch its successor. This would considerably drive fees, as they are based on committed capital. Meanwhile, DBAG’s portfolio is influenced by weaker economic and trading conditions in some sectors (eg automotive). In this context, it is encouraging that DBAG continues diversifying its portfolio into other sectors, including TMT, which contributed positively to its NAV in 9M19.