Global Shift To Regulated Digital Wagering Will Strengthen Racing Data And Trading Platforms

Catalysts

About RAS Technology Holdings

RAS Technology Holdings provides data, trading technology and digital media solutions to racing and wagering operators across global markets.

What are the underlying business or industry changes driving this perspective?

• Ongoing global shift toward regulated digital wagering, coupled with RAS’s expanding presence in the U.K., Asia and other emerging jurisdictions, is expected to support multi year double digit revenue growth as more operators seek specialist racing content and trading solutions. This can lift top line performance and operating leverage.
• Scaling of the Managed Trading Service, derivatives and in play products, supported by a 24 by 7 global trading team, positions RAS to capture usage based fees from higher operator turnover and differentiated markets. This can increase gross profit and improve net margins as fixed platform costs are amortized over a larger client base.
• Deepening industry relationships with regulators and racing authorities in markets such as the U.K., Mauritius and Hong Kong is shifting RAS further into mission critical infrastructure. This can lengthen contract durations, reduce churn and underpin recurring ARR growth and earnings visibility.
• Continued investment in contemporary tech stacks and AI driven automation across data, content and trading workflows should help keep unit costs low as volumes grow. This can support margin expansion and stronger EBITDA and net profit over time once the current capex like spend moderates.
• Integration and uplift of the Hong Kong acquisition, including new digital assets, simulcast products and pricing initiatives, offers a pathway to monetize one of the highest turnover racing markets globally. This can potentially accelerate B2C revenue growth and contribute meaningfully to group earnings and cash generation.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming RAS Technology Holdings's revenue will grow by 22.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.5% today to 15.6% in 3 years time.
• Analysts expect earnings to reach A$6.1 million (and earnings per share of A$0.13) by about December 2028, up from A$526.0 thousand today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 16.9x on those 2028 earnings, down from 85.4x today. This future PE is lower than the current PE for the AU Professional Services industry at 19.1x.
• Analysts expect the number of shares outstanding to grow by 0.07% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.84%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company is relying on continued rapid expansion in the U.K., Hong Kong and broader Asia at a time when racing and wagering markets are facing higher taxes, regulatory pressure and potential tightening of rules around digital betting, which could slow operator turnover and reduce revenue growth.
• Management plans to continue investing heavily in technology, AI automation and global trading capability beyond FY '25. If these investments do not translate into sufficient new contracts or usage based fees, operating leverage may not materialize and net margins could stagnate or decline.
• A growing dependence on large strategic partners and Tier 1 clients, including the Hong Kong Jockey Club and major U.K. operators, increases customer concentration risk. Any contract change similar to the Picklebet restructure could materially reduce ARR and earnings.
• The strategy includes ongoing acquisitions in data and wagering technology. If integration is slower than expected or synergies fail to appear, the associated cash outflows and earnouts could weaken the balance sheet and constrain future earnings growth.
• Variable fee managed trading services and embedded products such as BetBridge are exposed to broader wagering turnover cycles and competitive offerings. If macro or industry conditions reduce betting volumes or pricing power, this would pressure revenue scalability and compress EBITDA margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of A$1.82 for RAS Technology Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be A$39.4 million, earnings will come to A$6.1 million, and it would be trading on a PE ratio of 16.9x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of A$0.94, the analyst price target of A$1.82 is 48.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.