bet-at-home — Navigating challenges in 2022

bet-at-home (XETRA: ACXX)

Currency in EUR

Last close As at 03/02/2023

EUR7.99

0.08 (1.01%)

Market capitalisation

EUR56m

Research: Consumer

bet-at-home — Navigating challenges in 2022

bet-at-home’s (BAH’s) interim results were consistent with the view in our May 2022 outlook note that 2022 would be a challenging year, as the group continues to navigate the regulatory landscape in its key markets. Full year guidance was lowered in June given legal and regulatory changes in Germany and Switzerland, and BAH exited the UK market in July following a licence review. Management continues to look forward to a potential new licence in the Netherlands, which would provide a new growth opportunity. Given the significant fall in BAH’s share price in the year to date, the group’s June 2022 net cash position (excluding client money) of €28.3m would represent 92% of its current market capitalisation.

Russell Pointon

Written by

Russell Pointon

Director, Consumer

Consumer

bet-at-home

Navigating challenges in 2022

Travel and leisure

Spotlight - Update

15 November 2022

Price

€4.40

Market cap

€31m

Share price graph

Share details

Code

ACXX

Listing

XETR

Shares in issue

7.0m

Net cash (€m) at 30 June 2022
(excluding client money)

28.3

Business description

Founded in 1999, bet-at-home is an online sports betting and gaming company with 170 (end June 2022) employees. It is licensed in Malta and headquartered in Düsseldorf, Germany. Since 2009, bet-at-home has been part of BetClic Everest, a privately owned gaming company, which currently holds 53.9% of bet-at-home’s shares.

Bull

bet-at-home has a strong record of growing its registered customer base as it expanded geographically and developed new products across sports betting and casino.

Online gaming is a growing market.

A potential new licence in the Netherlands in Q422 could lead to a more favourable outlook.

Bear

Regulatory risk is high in the majority of its markets, albeit regulated market exposure should increase over time.

bet-at-home operates in competitive markets that require high marketing spend.

The company has been subject to punitive taxes and customer litigation.

Analysts

Russell Pointon

+44 (0)20 3077 5700

Milo Bussell

+44 (0)20 3077 5700

bet-at-home is a research client of Edison Investment Research Limited

bet-at-home’s (BAH’s) interim results were consistent with the view in our May 2022 outlook note that 2022 would be a challenging year, as the group continues to navigate the regulatory landscape in its key markets. Full year guidance was lowered in June given legal and regulatory changes in Germany and Switzerland, and BAH exited the UK market in July following a licence review. Management continues to look forward to a potential new licence in the Netherlands, which would provide a new growth opportunity. Given the significant fall in BAH’s share price in the year to date, the group’s June 2022 net cash position (excluding client money) of €28.3m would represent 92% of its current market capitalisation.

Consensus estimates

Year
end

Revenue*
(€m)

EBITDA
(€m)

EPS
(€)

DPS
(€)

EV/sales
(x)

P/E
(x)

Yield
(%)

12/20

54.6**

13.2**

1.28

2.50

0.05

3.4

56.8

12/21

59.3

14.0

1.52

0.00

0.05

2.9

N/A

12/22e

51.6

1.8

0.03

0.00

0.05

146.7

N/A

12/23e

51.0

2.6

0.16

0.00

0.05

27.5

N/A

Source: Refinitiv. Note: *Gross gaming revenue. **Restated figures.

H122: Results affected by restrictions

Against a restated comparator that excludes the discontinued Austrian business, BAH’s H122 gross gaming revenue (GGR) fell 18.8% y-o-y to €26.7m due to a significant fall in Sports revenue and restrictions in Germany. Management notes no significant change in customer behaviour despite the wider macroeconomic backdrop and anticipates stronger volumes in Q422 due to the FIFA World Cup. EBITDA was down 83% y-o-y, from €6.1m to €1.1m, a margin of 4%, driven by operational gearing and significantly increased legal costs.

Guidance lowered following regulatory challenges

Management lowered FY22 guidance in June given the exit from the Swiss market and product restrictions in Germany, and left the guidance unchanged with the H122 results. The mid-point of revenue guidance is €47.5m, versus €55m previously, a downgrade of 14% and a year-on-year decline of c 20% from the restated FY21. The EBITDA range is a loss of €4.5–2.0m, versus the range of a loss of €2.0m to a profit of €2.0m previously, which includes a €1.7m loss from discontinued Austrian operations. This implies ongoing pressure on profitability in H2.

Valuation: Cash underpins market value

Commentary around valuation is complicated by the fact that current consensus estimates do not accurately reflect the lowered guidance. On CY22e and CY23e EV/sales multiples of 0.05x, BAH remains at a deep discount to peers of 97% for both years. BAH’s share price has fallen 68% YTD and its end-June net cash (excluding client money) of €28.3m would account for 92% of the current market value. The next catalyst for BAH could be the Q322 results on 21 November.

H122 results

BAH’s interim results exclude the results of its activities in Austria following the closure of its online casinos in 2021, which were treated as discontinued.

Exhibit 1: Financial highlights

 

H122 (€m)

H121 (€m)

Change y-o-y

GGR (gross gaming revenue)

26.7

32.8

-19%

NGR (net gaming revenue)

20.8

26.8

-22%

EBITDA

1.1

6.1

-83%

Margin

4%

19%

14.6pp

PBT

(0.2)

4.8

N/A

Net cash (ex client money)

28.3

35.7

-21%

Source: bet-at-home

In the period, GGR fell by c 19% to €26.7m (H121: €32.8m), driven mainly by the c 25% fall in Sports revenue to €24.3m (H121: €32.3m) as Gaming GGR rose from a depressed H121 to €2.4m (H121: €0.6m). Personnel and marketing costs fell by 22% and 37%, respectively, providing some offset to the revenue decline. However, other operating expenses, including professional expenses and additional transaction costs, grew almost threefold to €6.3m, which resulted in total operating costs falling by only 4%.

As such, EBITDA fell by 83% to €1.1m (H121: €6.1m), a margin of only 4% (H121: 19%), and BAH swung to a loss before tax in the period of €0.2m (H121: PBT of €4.8m).

Management’s focus in H122 was on the selection of a partner to provide its sports and gaming platform, replacing its in-house platform. This will enable BAH to focus on marketing and customer relationship management in future, growing brand awareness. In July 2022 BAH selected EveryMatrix and as a result management expects to reduce the number of employees to c 110 by FY22-end from 170 at 30 June 2022.

Despite further changes to regulations, notably in its core German market, management believes the underlying performance was stable in the period. BAH has not seen any significant change in customer behaviour despite the more challenging macroeconomic backdrop.

As is typical in the years of major football tournaments, the upcoming FIFA World Cup in November and December 2022 should drive higher betting volumes. We note that in Q318 (the 2018 FIFA World Cup), BAH’s Sports GGR grew by c 17% y-o-y. BAH will also increase advertising expenditure in the lead up to the tournament accordingly and we note that in Q218, ahead of the competition, marketing expenditure increased by c 45% y-o-y. The World Cup is typically a good opportunity to attract new players.

Regulatory developments and guidance

BAH faced further regulatory and legal headwinds in H122. The section below updates the more detailed comments on BAH’s markets in our May Outlook note.

Germany

In May 2022, authorities in the German region of Hesse published a licensable betting programme, which significantly reduced BAH’s live betting offering. As at 1 July 2022 the €1,000 per month deposit limit imposed in the State Treaty on Gaming 2021, that previously had only been implemented in the online casino sector, was enforced across all products. BAH has actioned these changes accordingly. The existing betting programme will be extended to the end of CY22 and BAH has applied for an extension of its sports betting licence. Following this change, management anticipates a stable regulatory environment in Germany, but further restrictions in the region cannot be discounted. Management has welcomed the granting of the first licences for virtual slot machines (in June 2022). The gradual development of legal certainty in Germany should provide greater clarity for operators and as such should be a positive for BAH.

Austria

The winding up proceedings of the Austrian subsidiary, bet-at-home Entertainment Ltd, were approved on 13 May 2022, with retrospective effect from the initial application date of 23 December 2021, following the negative ruling by the Austrian Supreme Court in October 2021.

Netherlands

As we wrote in our outlook note in May 2022, BAH has applied for a new sports betting and gaming licence in the Netherlands and expects it to be awarded by the end of FY22. Management expects a decision to be made in Q422.

Poland

At the time of the publication of our Outlook note, management intended to apply for a new licence in Poland. However, management now states it does not currently plan to return to the Polish market, following a detailed market analysis, preferring to focus on its German-speaking core markets.

Switzerland

In June 2022, BAH lost the legal case it brought before the Swiss Federal Supreme Court; the case dated back to 2019 and concerned the legality of IP blocking of BAH’s offer. Although the group had exited the market in 2019, this has resulted in management closing access to its websites from Switzerland.

UK

In line with its strategy to focus on German-speaking markets, BAH announced its decision to exit the UK market in July 2022, driven by increasing compliance requirements in the market, which made the business no longer economically viable following the suspension of its operating licence by the UK Gambling Commission. The licence was surrendered on 12 July 2022.

Guidance

Given the negative impact of these legal and regulatory events, on 27 June BAH lowered both its GGR and EBITDA guidance for FY22. The revised guidance was reiterated with the H122 interim results on 22 August. Management expects GGR of between €45m and €50m (previously €50–60m) and an EBITDA loss within a range of €4.5–2.0m (previously between a loss of €2.0m and a profit of €2.0m).

We expect the Q322 results to be announced on 21 November 2022.

Valuation

BAH has seen a 70% decline in its share price over the last six months, notably since management reduced its FY22 guidance in late June following the loss of the Swiss legal dispute and the regulatory developments in Germany, and since the exit from the UK market.

BAH’s end-June net cash excluding client money of €28.3m would represent 92% of the current market value. We assume there will have been some cash outflow during Q322 and we also note that BAH has current liabilities relating to the discontinued operations in Austria amounting to €7.8m. Nevertheless, it appears that cash currently underpins a substantial proportion of the market capitalisation.

Exhibit 2 shows the peer comparison group. BAH currently trades on very low EV/sales multiples of 0.05x in both CY22e and CY23e, reflecting a 97% discount in both years to our peer group. We believe the current CY22e adjusted EBITDA and adjusted EPS consensus for bet-at-home (as shown on page 1) does not reflect management’s most recent guidance and we assume this may also be the case for CY23e. As such, we draw attention to the fact that the current forward CY22e and CY23e multiples for bet-at-home are potentially misrepresentative. Based on the consensus forecasts published by Refinitiv, the group currently trades on EV/EBITDA multiples of 1.5x in CY22e and 1.0x in CY23e and forward P/E multiples of 146.5x in CY22e and 27.5x in CY23e. This is despite management guiding to an EBITDA loss for CY22 (which suggests some analyst forecasts have yet to be updated).

BAH suspended dividend payments in FY21, having paid a dividend consistently since FY11 prior to that.

Exhibit 2: Peer valuation

Company

Share price (local ccy)

Currency

Market cap (€m)

EV/sales CY22 (x)

EV/sales CY23 (x)

EV/EBITDA CY22 (x)

EV/EBITDA CY23 (x)

P/E CY22 (x)

P/E CY23 (x)

Betsson

81.2

SEK

1,840

1.15

1.04

5.2

4.9

9.4

9.0

Entain

1,350.0

GBp

9,112

2.36

2.19

10.8

9.6

23.8

17.0

Flutter Entertainment

11,430.0

GBp

23,048

3.15

2.68

22.2

15.2

48.7

27.8

Kindred Group

104.2

SEK

2,206

1.74

1.45

13.5

8.4

26.2

13.0

BlueBet Holdings

0.4

AUD

52

0.49

0.10

N/A

N/A

N/A

N/A

Average

1.78

1.49

12.95

9.54

27.00

16.72

bet-at-home

4.4

EUR

31

0.05

0.05

1.5

1.0

146.5

27.5

Premium/(discount) to average

(97)%

(97)%

(89)%

(89)%

443%

64%

Source: Refinitiv. Note: Prices at 15 November 2022.


General disclaimer and copyright

This report has been commissioned by bet-at-home and prepared and issued by Edison, in consideration of a fee payable by bet-at-home. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by bet-at-home and prepared and issued by Edison, in consideration of a fee payable by bet-at-home. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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