Bet On It: Macau gaming concession renewals officially finalized

Inspired Entertainment enters contract with Paddy Power, November app downloads spike, and other notable stories in the sports betting and iGaming space.

Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.

SECTOR NEWS: Churchill Downs (CHDN) announced the appointment of Andrea Carter to the company’s board of directors. Carter is currently serving as Senior EVP and CHRO for Global Payments (GPN). in Atlanta. Carter was appointed as a Class II Director and her term will expire with the other Class II Directors at the 2025 annual meeting of shareholders of the company. Her appointment increases the CDI board of directors to nine members.

Gan Limited (GAN) announced on Friday an exclusive national partnership for Gan Sports and Super RGS for WSI doing business as WynnBET (WYNN). Following an analysis, WynnBET chose to integrate the GAN Sports technology to power its online sportsbook operations across future U.S. jurisdictions, including the retail launch of the WynnBET Sportsbook at Encore Boston Harbor in Massachusetts in early 2023. Additionally, Gan will build upon its existing relationship with WynnBET by providing support through GAN’s content aggregation delivery system Super RGS that will be deployed in all future iGaming States in which WynnBET elects to operate online.

The Sands China (SCHYY, LVS) group signed its finalized 10-year gaming concession contract Friday at a signing ceremony, after having been awarded a provisional concession by the Macao SAR government on November 26. Also, Wynn Resorts announced that Wynn Resorts Macau S.A. has entered into a 10-year agreement with the Macau government for the renewal of its gaming concession, covering Wynn Macau and Wynn Palace Cotai. The company said, "Through our extensive and positive discussions with the Macau government, we are confident that the market holds significant future opportunity." Melco Resorts & Entertainment announced that the Macau government has awarded a ten-year concession to operate games of fortune and chance in casinos in Macau to Melco Resorts, a subsidiary of the company. The term of the concession commences on January 1, 2023 and ends on December 31, 2032.

Inspired Entertainment (INSE) announced a new exclusive long-term contract with Paddy Power, a UK-based bookmaker that owns and operates over 350 betting shops in the UK and is a central brand within Flutter Entertainment (PDYPY). As part of this agreement, Inspired will exclusively provide Paddy Power with fully integrated managed services for its entire UK estate of approximately 1,400 terminals, including installation, remote and field technology support, as well as content and platform deployment. 

Bragg Gaming (BRAG) announced that it has launched its new content and technology with BetMGM (MGM) in Michigan, furthering the company’s North American expansion. The company’s new content and technology is now live with six iGaming operators across three North American markets. New proprietary content such as Egyptian Magic from Bragg’s Atomic Slot Lab studio as well as new exclusive titles from the company’s partner studios is now available to BetMGM’s customers in the Great Lakes state, following the launch of Bragg’s new Remote Games Server technology with the operator.

GOOD TEAMS WIN, GREAT TEAMS COVER: Week 14 contained mixed results for sportsbooks, with just one of the five largest underdogs winning outright, although four of the five covered the spread, Canaccord analyst Michael Graham noted. All three prime time games going under the projected total was positive for operators, although Week 14 was one of the best weeks of the season for over bettors, with seven of thirteen games going over and dropping the winning percentage for unders to 56%. Maryland provided results from its first month of online sports betting activity, with $186M of wagers placed during the nine-day period following the launch on November 23, including $64M of promotions. FanDuel led in Maryland with 48% of the monthly online handle, followed by DraftKings (DKNG) with 37%, BetMGM with 8% and Barstool (PENN) and three other operators with 3% respectively. New York had $32M of gross gaming revenue, or GGR, generated from $376M of wagers placed during NFL Week 13. Graham said that the industry-wide hold rate was 8.5% with sportsbooks benefiting from heavy public betting on the US team in the World Cup, which was knocked out by the Netherlands in the Round of 16.

TRUIST SUMMIT TAKEAWAYS: Last week, Truist hosted its annual Securities Gaming, Lodging, Leisure & Restaurants Summit in Boston. In general, gaming’s momentum has continued into Q4 with no notable signs of cracks amidst an uncertain macro environment, though companies are ready to adjust if that changes., according to Truist analyst Barry Jonas. The analyst told investors that interactive operators are hyper-focused on profitability, REITs remain active and he sees tailwinds across gaming tech.

EMPIRE STATE DATA: New York reported November results for online sportsbooks with over $1.5B in wagers once again, Benchmark analyst Mike Hickey told investors. This edged out October’s handle by about $10M, a 1% increase from last quarter. GGR also had a modest increase of 2% month-over-month to $148.2M. Handle and revenue numbers were slightly disappointing, Hickey noted, as most assumed that adding in a World Cup to a "prime" betting month like November would boost numbers to near highs of January. November’s results bring New York’s year-to-date handle for 2022 over $14.5B and GGR year-to-date over $1.2B. Wagers per day also saw a slight increase sequentially of 4%, reporting about $51.8M per day for the month.

NOVEMBER DOWNLOADS RISE: Morgan Stanley analyst Stephen Grambling said that November app download growth remains "strong," well ahead of handle growth. Based on Sensor Tower data, U.S. sports betting app downloads grew 102% in November, likely supported by state launches in Kansas and Maryland. Total app downloads for November were 2.1M ,up 11% vs. October. total app downloads through December 10 are up 78% year-over-year. In December, Grambling forecasts sports betting handle to grow 35% year-over-year. He also highlighted in a note to investors that that app downloads are a "good proxy" to track market share trends over time, but does have some volatility so one monthly data point can be misleading. 

ADDITIONAL ANALYST COMMENTARY: BofA analyst Shaun Kelley downgraded Penn Entertainment to Neutral from Buy with a price target of $40, down from $45. Kelley downgraded Caesars (CZR) to Neutral from Buy as well with a price target of $55, down from $60. He thinks growth momentum is levelling out after casino gaming stocks, and especially regional operators, were the largest "over-earners" in his coverage versus pre-COVID. Unlike other areas in consumer discretionary, estimates have not yet come down for the group, Kelley noted. 

Roth Capital analyst Edward Engel downgraded DraftKings to Neutral from Buy with a $15 price target. The analyst cites concerns that Fanatics’ Q1 OSB launch can disrupt the profitability narrative. Engel also notes that DraftKings’ positive free cash flow target for 2025 implies EBITDA of $150M-plus, but this excludes $300M-$400M-plus of stock-based comp.

JMP Securities analyst Jordan Bender downgraded Boyd Gaming (BYD) to Market Perform from Outperform without a price target. The company’s assets have underperformed industry growth post-pandemic, and a lack of catalysts heading into 2023 make the shares fairly valued, Bender told investors in a research note. Boyd has the foundation in place for growth in future years, including an online platform and a solid balance sheet, but there is limited upside to estimates in the medium-term, said the analyst. He finds other gaming names better positioned in the current environment.

Jason Bazinet’s analysis suggests DraftKings remains on track relative to its long-term targets. However, the market appears to be more skeptical about the the company’s long-term prospects, Bazinet tells investors in a research note. If legalization trends continue at the 2018-2021 cadence, the company should reach its long-term targets by 2033, says the analyst. He believes the market is not giving DraftKings credit for its progress and is a buyer of the stock at current levels. Bazinet views the company’s risk/reward as compelling and keeps a Buy rating on the shares with a $24 price target.

Barclays analyst Brandt Montour raised the firm’s price target on Wynn Resorts to $97 from $75 and reiterated an Equal Weight rating on the shares. Additionally, Montour raised the firm’s price target on Las Vegas Sands to $57 from $43 and maintained an Overweight rating on the shares. Lastly, Montour raised Barclays’ price target on Bally’s to $23 from $21 and kept an Equal Weight rating on the shares. Heading into 2023, the macro backdrop for the U.S. gaming, lodging and leisure sector has worsened since Barclays’ initiation six months ago, Montour tells investors in a research note. However, the analyst still expects to see a strong preference among consumers for experiences, "driving a continued a shift of wallet toward travel." However, less pent-up demand, less savings for consumers and less confidence with the economic backdrop will collectively lead to more price sensitivity, contends Montour. He therefore shifts his positioning to incorporate some level of trade-down across most of the sub-sectors. Montour especially likes segment exposure with a high perceived value proposition, like cruise lines.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI) and Wynn Resorts (WYNN).

Keywords: gaming concession, Macau, UK, content, technology, sportsbooks, operators, cover, under, over, momentum, New York, downloads, handle