Sports Back to Some Gains: PBH, SHO

  • Jun 01, 2020 AEST
  • Team Kalkine
Sports Back to Some Gains: PBH, SHO

Summary

  • COVID-19 has disrupted sporting events and leagues across the globe, impacting sports wagering business.
  • Industry players have floated new products to keep customers interacted.
  • Sporting events are gradually returning to normalcy, and domestic sports leagues have either returned or set to return soon.

As lockdowns and public health measures were imposed across the world, sporting events were delayed and halted. This directly impacted the wagering and other businesses that are dependent on sports.

As many countries are now easing lockdowns, sporting leagues and events are set to return to normalcy, while some sporting events have been restarted in few countries.

Related: Gaming Players under Radar, Playing season knocking off with the new normal

PointsBet Holdings Limited (ASX:PBH)

PointsBet Holdings recently announced that domestic sports leagues, National Rugby League and the Australian Football League have declared the dates of restarting the season. NRL started games on 28 May 2020, while AFL is scheduled to restart on 11 June 2020.

This would mean clients of the Company would now be able to bet on racing as well as major sports. PBH also reported an agreement with Fox Sports related to an exclusive betting partner for the 2020 season.

Management believes that partnerships with broadcasting channels would enhance client acquisition and increase consumer volumes. Despite COVID-19 led disruptions in AFL, NRL and other key sporting leagues, the Australian business achieved record net win months in February and March.

The Australian business recorded net win of $18.2 million between 1 April and 25 May, and in the US, the business achieved net win of $0.3 million in the same period, as major sporting events remained closed.

On an unaudited basis, the Company recorded net win of $67.2 million for the financial year to date period ended 25 May. This result has been attributed to strong performance of the Australian business, driven by an increase in online gambling, strong racing turnover growth and improvement in product offerings.

It was noted that situation in the United States remains uncertain pertaining to the start of major sports leagues. PBH said that basketball league and baseball league are looking to initiate games in July, while PGA Tour is set to commence on 11 June 2020.

In the US, the Company has introduced additional wagering venues that are unimpacted by COVID-19, as major sporting leagues remain halted, allowing the business to engage its customers.

In April, the Company released its quarterly update for the period ended 31 March 2020. Australian business recorded net win quarter at $15.5 million, up by 89.8% over the pcp. Although major sporting events were closed in the US, the business recorded net win performance of $3.3 million.

In Australia, net win margin improved to 8.7% from 7.9%, while net win margin in the US increased to 3.6% from 3% in the previous quarter. PBH stated that Australian business achieved its first positive EBITDA quarter, driven by net margin increase and expense management.

The Company recorded 63.1% growth in active clients over the pcp, increasing from 65,031 clients to 106,046 clients. As major sporting events were halted due to COVID-19, client acquisition and business were impacted.

At the end of the period, the Company was carrying corporate cash of $149.4 million, with no borrowings. It was highlighted that the business has always followed a disciplined approach to cash management and would continue this approach due to COVID-19.

Since it was clear that sports would be paused, PBH lowered its variable expenses. Cost of sales move in line with betting turnover, thus cost is expected to proportionately fall in the US. Most of the marketing spending is variable in nature. For the US business, marketing expenses have been reduced for Q4.

On 29 May 2020, PBH last traded at $5.8, up by 7.807% from the previous close.

SportsHero Limited (ASX:SHO)

SHO is developing an interactive sports prediction platform for user experience that offers monetary and other prizes as well. Its digital platforms are developed for football, and the platforms allow to host videos, enabling users to access match highlights and news.

Earlier this month, SportsHero announced a sporting content deal with a unique digital media company that covers most popular football leagues across the world. SHO has agreed on a two-year deal with Dugout, which was formed by 10 of the largest football clubs, globally.

SportsHero would provide its audience with Dugout content, including daily football articles in English as well Bahasa for the top tier football leagues in England, Spain, Italy as well as the Champions League.

SHO’s product would be advertised across the Dugout platform, meaning visibility of the Company’s product to the Dugout audience in addition to content. The deal enables the business to have most popular football content in the world.

It was noted that Dugout has approx. 40 million video views per month in Indonesia with an average customer spending around 4 minutes on a video, and the platform has around 68% return rate from the customers. Dugout enables audience to know football clubs, thus growing their digital fan base.

SportsHero also reported that its advertisement on Dugout’s Indonesian platform would have guaranteed 75k views per month. The deal would add value to SportsHero platform with videos and news of the most popular football clubs in the world.

In its quarterly update for March quarter, the Company highlighted implementation of cost control measures designed to have annual cost savings. These measures included standing down of contracted team members, Chairman and Directors’ suspending remuneration for the period starting from 1 March to 30 June 2020, CEO and senior staff taking a 50% pay cut and more.

During the quarter, the Company partnered with Linius Technologies Limited (ASX:LNU) to customise the content. It has enabled the platform to see videos that are relevant to the audience, depending on their preferences.

The Company also executed binding agreements with Cross Bet Holdings to establish an equally owned joint venture. The JV has applied for a sports bookmaker licence to the Northern Territory Racing Commission, which would enable the business to launch a pay-to-play sports prediction platform.

On 29 May 2020, SHO last traded at $0.025, up by 13.636% from the previous close.

As policymakers are re-opening the economy, sports leagues around the world are gearing up for restart, which would provide further clarity on the business of these companies.

(Note: All currencies in Australian Dollar unless or otherwise stated)

 


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