Lucrative Aus-based partnership for perennial loss-maker BetMakers: Global expansion likely

Wagering data and technology group Betmakers (ASX: BET) has confirmed reports of joining a consortium to launch a new online wagering brand in Australia and New Zealand. 

The company's stock rallied 20% as the trading halt was lifted around 2 pm AEST.

The new wagering venture is a consortium made up of Tekkorp Capital, a Las Vegas-based gambling investment firm, News Corp (ASX: NWS) and TGW, a trust whose investors include Australian betting-industry executive Matthew Tripp. 

Under the agreement, BetMakers will provide technology and services to power the new wagering platform.

“This deal will allow the Company to demonstrate that we are a viable pathway for large scale operators that want to enter markets quickly and efficiently, allowing them to focus their resources into marketing strategies,” commented chief executive, Todd Buckingham. 

“While this deal is focused on the Australian market, we feel this model will play an important part of our international expansion.”

Key financial terms

• Platform establishment fee of $2m

• Launch development fee of $500,000 per month between signing and go-live date (estimated to be within 6 months)

• Development & service fee of a minimum $7.5m per annum

• Annual fee based on a revenue sharing arrangement starting at 25% of net gaming revenue

  • Reduces by 1% per annum

  • Maximum cap of $20m per annum, the cap will grow to $43m over the 10-year period

In summary, BetMakers estimates that the total maximum revenue possible over 10 years after the go-live date to be circa $313m plus the initial platform and launch development fees.

Food for thought

Low risk for Betmakers

Sports betting, especially in Australia, is an extremely crowded and competitive space.

PointsBet (ASX: PBH) has been in operation since 2017 and made its ASX debut in 2019. The bookmaker, which operates in both Australia and the US, has never turned a profit and raised an additional $825m across three separate capital raisings to fund its growth aspirations.

Fortunately for Betmakers, as the technology partner, the company isn't exposed to any customer and competitor facing risks.

Under the terms of the agreement, the wagering venture may be terminated (among other things) if the 'go live date' does not occur within 18 months of signing the agreement, or if the venture decides to pack up shop.

Earnings boost

Assuming everything goes to plan, BetMakers could be earning roughly $27m in year one of the agreement (less initial establishment and development fees).

That's a sizeable earnings boost considering the company delivered $43.5m revenue in the first-half of FY22.

Betmakers 12-month price chart