Bet On It: South Carolina advances legalized sports betting efforts

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: Penn Entertainment (PENN) announced the launch of its stand-alone Hollywood Casino app in Pennsylvania. Built on Penn’s proprietary technology platform, Hollywood Casino offers more than 700 iCasino games, a variety of daily promotions, and jackpots. Available on Android, iOS and desktop, customers in the Keystone State can access Hollywood Casino through either the ESPN Bet app or through the new Hollywood Casino app using their same ESPN Bet login credentials, allowing for a seamless experience across Penn’s online betting and casino platforms. Penn plans to launch Hollywood Casino in additional jurisdictions in 2025, subject to regulatory approvals.

Gaming and Leisure Properties (GLPI) has completed the previously announced $395M acquisition of the land and real estate assets of Bally’s Kansas City Casino and Bally’s Shreveport Casino & Hotel from Bally’s Corporation (BALY). The two properties have been put into a new Bally’s master lease that is cross-defaulted with the company’s existing Bally’s master lease, with initial annual cash rent of $32.2M representing an 8.2% initial cash capitalization rate. Total rent coverage on the Kansas City and Shreveport assets is expected to be 2.2x in the first year of ownership.

Entain (GMVHF) acknowledged that the Australian Transaction Reports and Analysis Centre, or AUSTRAC, has commenced civil penalty proceedings in the Federal Court of Australia against Entain Group, the group’s subsidiary in Australia. Entain is considering the Originating Application and Concise Statement filed and served by AUSTRAC. The proceedings against Entain Australia relate to alleged contraventions of the Australian Anti-Money Laundering and Counter-Terrorism Financing Act 2006, identified as part of AUSTRAC’s enforcement investigation of Entain Australia. “The act requires those it regulates to identify, mitigate and manage risks of money laundering and terrorist financing. As the group has previously disclosed, this investigation was announced by AUSTRAC in September 2022. Entain has co-operated with AUSTRAC throughout its investigation, and in December 2022 commenced a program of further enhancements to Entain Australia’s anti-money laundering and counter-terrorist financing systems and processes. This dedicated program, as communicated to AUSTRAC, is due to be completed in June 2025. The company noted the previous penalties in AUSTRAC proceedings in the gaming sector and, whilst the outcome of the civil penalty proceeding against Entain Australia is uncertain, it may result in a penalty being levied which could be potentially material. The level of any penalty is ultimately a matter for the Federal Court of Australia, which proceedings may take some time,” the company stated.

NFL WEEK 15: During the week of December 9-15, Macquarie estimated the total sports betting market hold at 5%, with an NFL hold of 2% and a 9% hold for other sports. This would mark the third consecutive week of below-average hold levels. For Q4, the firm now projects the market hold to settle around 8.6%, below the normalized average of 9%. In New York, trailing one-month handle growth has slowed to high-single digits as tougher year-over-year volume comparisons emerge and some operators adopt a more conservative promotional strategy in the highly taxed state. Most of New York’s handle growth comes from BetMGM (MGM), Fanatics, and ESPN Bet, while DraftKings (DKNG)/ Flutter Entertainment (FLUT) remain flat year-over-year and Caesars (CZR)/ Rush Street Interactive (RSI) are down. Illinois’ October data showed another sequential increase in market parlays/same-game parlays, which rose to 31% of handle. FanDuel led with 40%, followed by Fanatics at 32%. Macquarie continues to favor the online gaming sector for two reasons: it is the only major gaming vertical not reliant on the economy to sustain double-digit growth and it has consistently exceeded market expectations over the past two years. The firm told investors that DraftKings and Flutter offer the best exposure to the online market. Both benefit from a U.S. market poised for sustained double-digit growth through 2030, with consistent performance across states, according to Macquarie. The firm sees DraftKings offering upside potential from hold expansion, while Flutter delivers global scale and diversification benefits. With its current and pending portfolio of leading brands, Macquarie sees a path for Flutter to reach a $600 share price within four years. At current valuations, the firm believes the market is underestimating the potential value of future iGaming legislation, creating strong upside potential.

In Week 15 of the NFL season, 13 favorites won outright, 12 covered the spread, and 7 games went over the total. These results likely created unfavorable outcomes for sportsbooks, according to BofA. Prop bets also leaned slightly unfavorable, with three of the five most popular prop bets at BetMGM hitting, as well as three of the five most popular anytime touchdown bets. Outside of NFL betting, Travis Hunter won the Heisman Trophy, which represented BetMGM’s largest liability for the award. On the app front, FanDuel led in downloads with a 22% market share, followed by DraftKings at 17%. In the App Store’s sports category rankings, PrizePicks secured the number one spot, with FanDuel and ESPN Media in the top five. DraftKings, Underdog, and Hard Rock ranked numbers six-10, while Dabble, Fliff, Fanatics, Bet365, ESPN Bet, and BetMGM placed 11-20. DraftKings Pick 6 ranked in the 20s, and Caesars appeared in the 30s. In terms of active user share, ESPN Bet led with 19%, followed by DraftKings at 18% and FanDuel at 17%.

SOUTH CAROLINA: South Carolina lawmakers are advancing efforts to expand legal gambling by prefiling two bills for consideration: House Bill 3625 and House Bill 3353, Michael Molter of LegalSportsBetting.com reported. House Bill 3625, known as the “South Carolina Sports Wagering Act,” focuses exclusively on legalizing sports betting within the state. The bill proposes the establishment of a Sports Wagering Commission to regulate the industry, enabling South Carolinians to legally bet on professional and collegiate sports if passed. House Bill 3353 takes a more comprehensive approach, proposing a constitutional amendment to legalize not only sports betting but also pari-mutuel horse race betting and casino gaming, including electronic and table games. Revenues from these activities would be allocated to infrastructure projects such as highway and bridge repairs, adopting a funding model similar to Mississippi’s sports betting system. The legislative session beginning January 14 will be critical for both bills. H.3625 has been referred to the House Ways and Means Committee, while H.3353 has been assigned to the House Judiciary Committee. Despite the progress, both bills face challenges, particularly South Carolina’s historically strong opposition to gambling. 

ADDITIONAL ANALYST COMMENTARY: In a research note to investors, Deutsche Bank presented updated gaming sector models along with revised price targets. While the firm adjusted estimates for several operators, the changes in price targets are primarily driven by transitioning its valuation base year from 2025 to 2026. Deutsche raised its price target on the following stocks:

• Wynn Resorts (WYNN) to $128 from $118 and reiterated a Buy rating
• Sportradar (SRAD) to $19 from $18 and maintained a Buy rating
• MGM Resorts to $49 from $48 and kept a Buy rating
• Light & Wonder (LNW) to $89 from $78 and reaffirmed a Hold rating
• Las Vegas Sands (LVS) to $66 from $60 and backed a Buy rating
• Golden Entertainment (GDEN) to $38 from $36 and reassessed a Buy rating
• Gaming and Leisure Properties to $58 from $54 and held a Buy rating
• DraftKings to $36 from $33 and reiterated a Hold rating
• Caesars to $58 from $56 and maintained a Buy rating
• Boyd Gaming (BYD) to $79 from $72 and kept a Hold rating
• Accel Entertainment (ACEL) to $15 from $14 and backed a Buy

Argus upgraded Boyd Gaming to Buy from Hold with a $90 price target.

Morgan Stanley downgraded Melco Resorts (MLCO) to Equal Weight from Overweight with a price target of $7.50, down from $9.60. Macau Gaming gross gaming revenue and EBITDA could grow by mid-single digits in 2025, contends the firm, which notes its estimates are below sell-side consensus as it is more conservative on margins. Among the group, the firm updated valuation methodologies, cut its estimates and price targets, and shuffled its stock preferences, leading to the Melco downgrade.

Barclays initiated coverage of Gaming and Leisure Properties with an Equal Weight rating and $55 price target as part of a broader research note on REITs. The company doesn’t necessarily own the “highest quality” assets vs. industry peers, but investors have recognized that Gaming and Leisure possesses its own advantages, in the form of greater transparency around rent coverage for the vast majority of its leases and strategic relationships with Bally’s, Cordish, and, more recently, the Ione Band of Miwok Indians, the analyst tells investors in a research note. The company’s cost of capital also still allows it to grow within its regional gaming niche, the firm adds.

Wells Fargo initiated coverage of Golden Entertainment with an Overweight rating and $38 price target. Calling it “a simple story,” the firm points out Golden Entertainment has a strong balance sheet and proactive management team exploring optionality, with fundamentals expecting to stabilize in 2025, while the stock’s valuation seems reasonable at current levels.

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).