Bet On It: Macau bounces back to pre-pandemic levels

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: Bragg Gaming (BRAG) announced the appointment of Robbie Bressler as interim CFO, effective July 1. Bressler brings a wealth of experience to the role, previously holding senior finance positions, including SVP Finance, at Bally’s Corporation, Gamesys Group plc, and The Intertain Group Ltd. He is currently serving as CFO of ForumPay Ltd., a crypto payment processing company. He began his career at Ernst & Young, where he spent over a decade in their financial services assurance group.

Macau’s gaming bureau reported May gross revenue from games of fortune in the region was up 29.7% year-over-year to 20.188B patacas.

PARLAY PAYDAY: The online sports betting, or OSB, industry is experiencing growth, with a 20% increase in the first quarter of 2024 and a remarkable 51% surge throughout 2023, according to BoFA. This growth can be attributed to several factors:

• New State Legalization: As more states legalize sports betting, the market expands.
• State Maturation and Productivity: Existing states are becoming more efficient in their operations.
• Higher Hold Rates: Improved win rates contribute significantly to OSB growth.

Looking ahead, the focus on hold rates becomes increasingly important for investors, BofA said. The firm told investors that, even without handle growth, changes in bet mix alone could drive substantial industry expansion—potentially exceeding 20% for the overall market and 25-40% for operators other than FanDuel (FLUT) and DraftKings (DKNG). Multi-stage bets, known as parlays, have significantly impacted online sports betting. Parlays boast an average hold rate of 19%, compared to just 5% for single bets. Over the past four years, the parlay mix has grown from 18% to 28% of the handle and from 41% to 60% of revenue. This growth is fueled by product enhancements and technological advancements, especially in same-game parlays. Operators can influence the parlay mix through effective merchandising, broader market offerings, improved technology, and promotional efforts. Additionally, they can enhance the parlay hold by increasing the number of bets (legs) within a parlay—leveraging technology and innovative features like cash-outs. Despite progress, there remains substantial room for improvement in the parlay market relative to the leading player, FanDuel. 

TAX HIKE SIGNED INTO LAW: Illinois sportsbook operators are set to face higher tax obligations following Governor JB Pritzker’s approval of the 2025 state budget, Pat Evans of Legal Sports Report wrote. The budget, totaling $53.1B, incorporates various measures aimed at boosting state revenue. Notably, the sports betting tax hike is projected to generate an extra $200 million annually. “This budget builds on years of economic momentum that is revitalizing communities up and down the state of Illinois,” Pritzker said. “We are on a trajectory of sustainable long-term growth.”

ADDITIONAL ANALYST COMMENTARY: Barclays lowered the firm’s price target on Las Vegas Sands (LVS) to $57 from $59 and maintained an Overweight rating on the shares. The firm lowered estimates to reflect renovation disruption and Q2 seasonality.

Susquehanna decreased its price target on DraftKings to $49 from $56 and reiterated a Positive rating on the shares. The firm raised its estimates on stronger industry fundamentals but lowered its target to reflect now lower multiples associated with the fear of state tax contagion and its impact on the outlook for each states’ profitability curves.

BofA analysts added Nvidia (NVDA), DraftKings (DKNG) and Kirby (KEX) to the firm’s “US 1 List,” which is intended to represent a collection of the best investment ideas that are drawn from the universe of Buy-rated, U.S.-listed stocks covered by BofA Global Research fundamental equity research analysts. 

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 (FLUT), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).