Racing Data And AI Adoption Will Drive Long Term Wagering Platform Demand

Catalysts

About Betmakers Technology Group

Betmakers Technology Group is a global B2B wagering technology and data provider focused on powering horse racing and sports betting operators with scalable platforms and content.

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

• Further global rollout of the Apollo and GTX platforms, combined with proven market-leading cost per bet, should scale higher variable fee revenue on largely fixed infrastructure. This is intended to lift both top line growth and EBITDA margins over the medium term.
• Growing international wagering activity and the push by operators to expand racing menus across thousands of sportsbooks increases demand for Betmakers' interconnected racing ecosystem. This supports sustained double digit revenue growth and improves gross margin leverage.
• Deepening use of AI in pricing, risk management, and automation is expected to lower unit operating and cloud costs while enhancing trading performance for clients. This is intended to reinforce gross margin expansion beyond the current 68 percent level and support higher net margins.
• Rising importance of data, content, and engagement tools in competitive betting markets positions RACELAB and other API-based products to capture a greater share of wallet from existing customers. This is expected to accelerate high-margin recurring revenue and earnings growth.
• Industry consolidation and the formation of larger national or pooled tote and fixed odds structures are likely to favor scalable, regulation-ready B2B providers. This may enable Betmakers to win larger, longer-term contracts that underpin recurring revenue visibility and EBITDA growth.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Betmakers Technology Group's revenue will grow by 9.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -31.0% today to 5.9% in 3 years time.
• Analysts expect earnings to reach A$6.5 million (and earnings per share of A$0.01) by about December 2028, up from A$-26.4 million 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 61.8x on those 2028 earnings, up from -7.2x today. This future PE is greater than the current PE for the AU Hospitality industry at 32.4x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.85%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The strategy depends on sustained double digit growth from Apollo, GTX and other platforms. If global wagering growth slows or operators reduce above the line marketing and generosity budgets during downturns, Betmakers' variable fee revenues could underperform expectations and weigh on revenue and earnings growth.
• Management is targeting gross margins above 70% and EBITDA margins above 25%. Further cloud savings and efficiency gains may prove harder to capture at scale, which would limit operating leverage and constrain improvements in net margins and EBITDA.
• The business model is exposed to regulatory and structural shifts in global wagering markets. For example, delays to fixed odds adoption in the United States or changes to tote structures could slow customer turnover growth and reduce the upside from variable fees, impacting revenue and long term earnings.
• Although the revenue base is diversified, Betmakers remains heavily concentrated in horse racing and in a B2B wagering ecosystem. Any long term decline in racing engagement relative to other forms of entertainment or sports betting could cap addressable market growth and put pressure on revenue and profitability.
• The turnaround has relied on cost cutting, platform consolidation and balance sheet repair. If future growth requires more investment in people, AI, product and global expansion than currently anticipated, operating costs could rise faster than revenue and dilute EBITDA margins and net income.

Valuation

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

• The analysts have a consensus price target of A$0.24 for Betmakers Technology Group 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$110.2 million, earnings will come to A$6.5 million, and it would be trading on a PE ratio of 61.8x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of A$0.17, the analyst price target of A$0.24 is 29.2% 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.