BlueBet Holdings: Jumps well out of the barriers

About the author:

Kurt Gelsomino
Author name:
By Kurt Gelsomino
Job title:
Analyst
Date posted:
02 August 2021, 8:30 AM
Sectors Covered:
Building Materials, Industrials, Gaming

  • BlueBet Holdings (ASX:BBT) delivered a pleasing 4Q21 update, with strong growth experienced in key operational metrics and Net Win Margins maintained at healthy levels.
  • While FY21 turnover and active customers were pre-released with its listing trading update, net revenue of A$32.0m came in 2% above prospectus.
  • BBT has materially re-rated since IPO. We retain our Add rating and look to the company’s FY21 result for the next update on its Australian business momentum.

Delivers a strong 4Q21 result

BlueBet Holdings (ASX:BBT) delivered 4Q21 turnover of A$96.5m, +39.8% on the pcp and +15.6% on 3Q21. Gross Win of A$12.7m increased 29.8% on 4Q20 and 22.1% on 3Q21 and Net Win was A$10.1m, up 20.9% on the pcp and 18.8% on 3Q21.

Importantly, the Net Win Margin remained strong at 10.4% and highlighted BBT’s disciplined approach to managing its investment in Promotions (2.7% of turnover). As  a  comparison,  PointsBet’s Australian business  generated 4Q21  Net  Win Margins of 8.7% (4.7% of turnover spent on Promotions).

As released in its listing trading update, active customers at 30 June 2021 were 32,472 (+45.7% yoy and 27.1% on 1H21) and 16% above prospectus forecasts, with a strong 4Q21 experienced (5,648 net adds over 4Q21 vs. 3Q21; +20% qoq).

FY21 finishes slightly ahead of prospectus

FY21 turnover of A$344.7m (+83.2%  yoy)  was  pre-released  and 2.6%  above prospectus (A$336.0m). This resulted in Net Win of A$35.6m (+92.4% yoy), which was in line with MorgansF (A$35.4m) and 3.2% ahead of prospectus (A$34.5m). The Net Win Margin of 10.3% (+50bp yoy) was in line with expectations and net revenue of A$32.0m(+90% yoy; 2% beat to prospectus) was in line with Morgans.

BBT’s balance sheet remains in a strong position, with net cash of A$56.1m at year end supported by the company’s recent IPO andA$8.3m of operating cashflow generated in FY21 (4Q21 operating cashflow was A$1.8m).

In line with expectations, BBT’s Cost per First Time Depositor (CPD) rose to A$225 in FY21, up from A$170 in CY20. We expect CPD will continue to rise in FY22 as BBT expands its brand marketing. FY21 Average Annual Customer Value (ACV) remained strong at A$1,095, rising 32% on the pcp but down 2% on CY20. The implied ACV/CPD  multiple  of  4.9x  remained healthy,  with 3.0-4.0x  considered attractive across the industry; however, it was down from an elevated CY20 result of 6.6x (CY19 4.2x).

BBT has made a positive start to FY22, with management noting it was on track to deliver a record monthly Net Win in July driven by the industry’s ongoing migration to  the  online  channel.  We expect customer  engagement has  been  further supported by the recent lockdown restrictions.

BBT will partially deploy the A$10m of IPO proceeds allocated to accelerating its Australian marketing investment to support its CY21 prospectus forecast, with a new marketing campaign and refreshed website and mobile apps to be launched for the upcoming Spring racing carnival and AFL/NRL final series.

BBT’s US market entry remains on track to take first bets in the 1Q CY22 following its recent Iowa Skin agreement with Dubuque Racing Association. A decision on its Virginia license application is expected in coming months; the Virginia Lottery is expected to make up to a further 5 licenses available (there were 18 applicants). There are currently 10 sports betting license holders in Virginia.

Forecast changes

We have made minor upgrades to our Australian business net revenue forecasts over FY22-24. In CY21, we forecast net revenue of A$37.1m (+43.2% on CY20) and sit 2.5% above BBT’s CY21 prospectus forecast of A$36.2m.

In FY22, we forecast net revenue of A$44.0m (+37.6% yoy).

Investment view: maintain Add rating

BBT’s update was in line with our expectations and highlighted the company’s strong operational momentum, with the Australian business still to benefit from its upcoming new marketing campaign and refreshed website and mobile apps.

We recognise BBT has materially re-rated since IPO (+96%) and near-term revenue multiples are elevated (FY22F 9.6x), with the share price likely to remain driven by investor sentiment in the short-term. We remain attracted to BBT’s opportunity to increase its Australian market share (currently just ~1.2%) and significant, long-term growth potential from its US market entry. We maintain an ADD rating and look to BBT’s FY21 result for the next update on its operational momentum. 

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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