These are the gaming stocks punters are betting on
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One reason given for the recent rise of the Australian amateur investor is that COVID-19 caused gambling venues to close, and thus drove the hordes to speculate on stocks.
Australians bet more than $242bn in 2017-18, with about three quarters of that being spent inside casinos and on the pokies, according to the 35th edition of Australian Gambling Statistics.
The remainder went on the ponies and on sports betting.
“The closure of casinos and other gambling venues due to the pandemic is another factor associated with the increase in trading volumes in stocks, as people trading from home sought a substitute for gambling,” said Angel Zhong, a senior lecturer in finance in the School of Economics, Finance and Marketing at RMIT.
But if Australia’s punters did divert from pokies to playing the markets, they haven’t invested in what they know.
Casinos are plumbing five year lows while game makers and online lotteries and betting companies are yet to recover from the double whammy of the market crash in March and the loss of custom.
All are down bar Pointsbet (ASX:PBH) and Betmakers (ASX:BET), that is, which are both benefiting from the continuation and return of sporting competitions.
| Ticker | Company | Price | % Return YTD | Market Cap |
|---|---|---|---|---|
| ALL | Aristocrat Leisure | $28.36 | -17% | $18B |
| TAH | Tabcorp Holdings | $3.67 | -20% | $7.5B |
| CWN | Crown Resorts | $9.79 | -19% | $6.4B |
| SGR | The Star Entertainment Group | $3.15 | -32% | $2.8B |
| SKC | SkyCity Entertainment | $2.28 | -37% | $1.8B |
| PBH | PointsBet Holdings | $6.80 | 39% | $916.8M |
| JIN | Jumbo Interactive | $12.70 | -15% | $760.6M |
| RDC | Redcape Hotel Group | $0.83 | -26% | $463.8M |
| BET | Betmakers | $0.45 | 221% | $256.3M |
| AGI | Ainsworth Game Technology | $0.40 | -47% | $134.7M |
| RCT | Reef Casino Trust | $2.07 | -17% | $101.6M |
| DNA | Donaco International | $0.03 | -61% | $37.1M |
| SVH | Silver Heritage Group (suspended) | $0.01 | 0% | $12.6M |
| AQS | Aquis Entertainment | $0.014 | -54% | $500,000 |
Betmakers, a company that provides backend technology for horse racing bookies, had no debt and $31.6m in cash at the end of the 2020 financial year following a $35m capital raising in June, and said it had a strong finish to the financial year.
The company said in March it wasn’t impacted by COVID-19, losing no customers nor any contracts, and predicted its $10m annual revenue guidance would be impacted only if Australian horse racing stopped — an action even the Victorian government has refrained from taking.
Pointsbet, which calls itself Australia’s fastest growing online bookie, flagged in July what investors should look for in the full year results, saying it took $82m in cash receipts during the 12 month period and $135m in cash at the end of the year.
The return of the NRL and AFL leagues bolstered the company’s bottom line, as the vast majority of punters it services are in Australia, although it saw “a strong trend of clients transferring to racing” while both were shut down.
Pointsbet has been trying to grow a US arm since March last year but the almost complete shutdown in sports in the June quarter saw that business go backwards. It has, however, managed to help various sports convince US regulators that Americans should be allowed to bet on them, including darts, eNASCAR iRacing — an esport — and Belarusian Ice Hockey.
Betmakers is due to report its full year results on Wednesday and Pointsbet on Monday week.
Grim … but not terrible
The outlook for still-closed casino operators has been bleak since March.
Morgans analysts said at the start of the rolling global lockdowns they will face “significant earnings risk due to venue closures which will expose fixed operating cost bases”.
Star Entertainment Group (ASX:SGR) proved in its annual result last week it could make money with localised reopenings despite reduced capacity, while Crown (ASX:CWN) with its flagship Melbourne casino closed since March, also benefited from regional reopenings and a revenue rebound meant it saw no need to write down any of its Australian casinos.
Lotteries and betting company Tabcorp (ASX:TAH) was forced into a $600m capital raise last week and the launch of a three year cost cutting program.
The company has been under pressure from online bookies such as Pointsbet and hurt by pub and club closures. The lotteries division was the only bright spark in the annual result which saw a slide from a $361m profit last year to a $870m loss, after the company had to write down the value of its wagering and gaming assets.
Fantasy sports
One possible area of future growth for gambling in Australia is fantasy sports betting.
Unlisted TopBetta and MoneyBall, as well as Pointsbet, offer fantasy sports betting and Australian regulators appear to be happy to regulate it as if punters are betting on regular sports, according to Gilbert and Tobin lawyers Andrew Hii and Bryce Craig.
Fantasy sports involve picking a “fantasy team” of players selected from various teams in a sporting competition, whose combined activities in their real-life games determine the performance of a fantasy team.
There is an argument that because the outcome of a fantasy game relies on the combined result of players’ performances in real life, that it’s more of a casino-like gamble rather than a sports bet.
