Month: March 2016

The latest news in the world of mergers and acquisitions is that the UK gambling giant William Hill is reported to have teamed up with NYX Gaming Group in order for them to buy OpenBet. The rumored price put on the betting technology developer is $300 million. This comes right after the UK betting operator has announced its withdrawals from the process to remain the Football Association’s “official betting partner”. The FA tripled the cost of the deal to an estimated £2 million a year.

OpenBet has over 15 years of experience in the field of developing gaming platforms with customers including PMU in France, Danske Spil in Denmark and BCLC in Canada. Currently, the company is owned by Vitruvian Partners. They were bought out back in 2011 for £208 million. There have been reports of Morgan Stanley being appointed to handle the potential sale, though those have not been confirmed by officials from either of the parties involved.

NYX Interactive is Stockholm based. The company was established in 2006 and today offers a number of operating systems for casinos and other online games. The group develops, operates, and manages a rather huge portfolio of online games, including casino, bingo, poker, sports betting, and lottery. In late 2011 they became part of the NYX Gaming Group with their acquisition of one of the leading online games developers – NextGen Gaming (based in Sydney, Australia).

Another titan in the field – Playtech – is expected to enter the game as it is already one of the main players in the industry. This is likely the reason for William Hill to be giving NYX a shoulder – bookies are not fans of the idea of Playtech dominating the market more than it already does. Something that will certainly be more the case if they were to win OpenBet over.

The potential joint venture of William Hill and NYX comes after a recent row of mergers on the British gambling market – Coral & Ladbrokes, Betfair and Paddy Power – it seems to be the going trend. William Hills even made an offer of £744m to buy out competitor 888 Holdings but the offer was rejected by the shareholders. We all know the benefits of mergers and acquisitions, so none of this comes as a surprise.

We have hunted down some expert’s opinions on the topic to shed some light on the overall feeling about the possible acquisition. David Jennings (analyst at Davy Research, Ireland’s leading provider of wealth management, asset management, capital markets and financial advisory services) believes that from investor’s viewpoint, the market cannot be convinced by the strategic benefits of the merger – the numbers still have to be right, guaranteeing steady returns. Something that is not the case as we speak.

Wawrick Bartlett from Global Betting and Gaming Consultants is more concerned with the fate of existing OpenBet members. “The current customers of the OpenBet sports book will have concerns that if ownership fell into a competitor’s hands, they may lose some integrity over customers’ data.”. He is also supporting the point that from financier’s standpoint there are things to be cleared before the deal can potentially go ahead. Anyone with a background in the gambling industry would know though, that things here are not always done for profit. Limiting the reach of Playtech might prove a good enough reason for the bookmaker to proceed with the acquisition regardless of fiscal benefits (or the lack of such).

If you know anything about finance it will be no news to you that gambling is a massive market worldwide. The UK is no exception with one of the fastest-growing segments being online gambling, which generated £1.45 billion for bookmakers in the five months between November 2014 and March 2015.

The big news there is that a new player is about to enter the scene – the well established Australia’s largest bookmaker Tabcorp, part of Tabcorp Holdings is about to team up with The Sun newspaper in an attempt to concur the british online gambling market.

The Sun online bingo is already a favourite destination for many players, with half the betting popularion on the island being regular readers of the tabloid and so loyal to it in their choise of gaming provider as well. The newly born Sun Bets is scheduled to be officially launched in half an year, with the Australian operator covering the software platform and products offered and the British operator – promoting the new site in its existing network.

Now let’s look at some numbers. Tabcorp declared a proffit of USD 240m last year, of which they will put in USD 20m to kickstart the new UK venture. As we mentioned above the UK market seems to be one of the most competitive in the field worldwide, with gambling revenues hitting GBP 3 biillion yearly and over 400 licensed operators.

From an investors point of view, this seems like a pretty safe move for Tabcorp as they won’t have to spend much energy (and so – funds) on establishing a completely new brand. The over 10 million weekly readers of the popular newspaper on the other hand will benefit from the improved betting platform and the tabloid will of course gain a lot from an extra revenue stream.

Some investor brokers however hold doubts. Analysts from Goodboy Stockbrokers have voiced concerns that USD 20m is by far not enough for a sufficient marketing campaign acoss various channels (tv, terrestrial and online). Another weak link can be the fact that in Australia casino style games are banned online, so even with it’s largest bookmaker status, Tabcorp has close to zero expirience in those, and they are a huge part of the UK online gambling market.

An issue can also become the unwillingness of Tabcorp to provide live sport betting online in it’s home market – the logic being that since the introduction of that service in the UK, racing gambling suffered as players shifted to betting online on other popular sports. Both The Sun and Tabcorp are assuring investors that the group is working on developing new range of high class projects and services and is ready to meet the highly critical and competitive new market. Predictions are that the new venture should be profitable within 5 years, so let’s wait and see.

If you have been following the news this year, you must be in the know already that Macau’s casinos have been in trouble for some time now. Following the Chinese government crackdown on corruption and the subsequent flee of high-rollers from the horizon, the revenue plunged 49% last year, hitting an all-time low overall for 2015. Below we will look at how two of the biggest players are dealing with the situation.

Sands China took a gamble last September, when the now 82 years old owner, business magnate Sheldon Adelson appointed a new director of his company. Wilfred Wong, a Beijing insider, is the first in this position of Chinese origin. The markets almost immediately responded positively to the news, with shares of the company rising as much as 2.7 percent to HK $26.30 after the announcement, following four straight days of declines prior to it. Mr. Wong has experience of 15 years in China’s top lawmaking body – the National People’s Congress. Now under the new management, the company is preparing to open a $2.7 billion Parisian Macao resort by September 2016. After the not so promising January (although that is on average a weak month for the country, spent in preparation for the Lunar New Year), Mr. Wong qualified the performance for February as “satisfying”, saying the numbers are getting better and the picture – more optimistic altogether, as the tourists flow from mainland China is growing and starting to compensate for the lost VIP gamblers.

Another industry titan from the area – Galaxy Entertainment Group Ltd, reported their last year’s results as well this week. Their fourth-quarter earnings fell 7% compared to the year before. Not an optimum result as well but still – far less than the decline analysts were predicting a few months ago. Here as well, the main reason for their improved records is the shift of focus from high-rollers to smaller stakes players and non-gambling resorts. This year they are planning on developing a resort on land site in Hengqin (an island in the south of of Zhuhai, Guangdong province, just 200 meters from Macau). Galaxy shares have risen 6.5 percent so far this year, making it the only one among all Macau casino stocks that is on the rise and the best performer in the Hang Seng Index – a sure indication that whatever their strategy is, it is working.

One of the chairmans of the company, Chinese billionaire Dr. Lui Che Woo, shared on Teledifusão (a popular Macau local radio station) he is confident the group will see stable growth as a result of its expansion in inland resorts. Finance experts seem to be sharing his view – Aaron Fischer, analyst from CLSA Ltd (Asia’s leading and longest running independent brokerage) comments “Profit improvement for Galaxy can be sustained in 2016 because it has among the best non-gaming products in Macau, especially its hotel and retail offerings,”.

It will be curious to see whether other casino resorts will follow and how will this be affecting the results of the first quarter of 2016.

With the end of 2015, this month many Macau bookmakers have reported their financial results for the year behind. With Chinese authorities’ crackdown on corruption (starting back in late 2014) and the subsequent flee of VIP players, the businesses in the area have suffered losses across the board. This month however seems more promising with results picking up for major players in the industry. This is partly due to the Chinese New Year, celebrated between the 7th and the 13th February. As usually, a lucrative period for all companies relying on customers of Chinese descent. Another major factor in the improvement of the numbers in the gambling industry is their change of focus from high-rollers to smaller stake players and the expansion into not gambling related activities – mostly holiday resorts in the area.

The 82 years old billionaire behind Las Vegas Sands – Sheldon Adelson – has been also seriously hit. His is the biggest casino in Macau and the current situation there is the main reason for the nearly 20% net income drop compared to last year (surpassing by far the predicted by Bloomberg experts decline of 8.5%). The destination historically a safe haven for gambling has turn into somewhat of a nightmare over the past two years.

Let’s focus on the positive though. Despite the losses being on a roll for a 20th straight month this January, Bloomberg’s expert Tim Craighead reported a raise in revenues for February and painted a more optimistic picture for 2016.

His explanations to the more assuring results are similar to ours – the decision to broaden activities towards non-gamblers that many online and offline operators have been toying with lately. The expansion into new markets and customer types has proved to be working. This is evident looking at the operators that seem to be doing better – they are the ones either having new venues, such as Galaxy, or with a focus on web based activities.
With higher interest to online gambling, the number of players on the virtual scene is growing more than ever, making it harder and harder for an average player to find their way around. You can refer to the safecasinos.org.uk overview of trustworthy online casinos or similar destinations, doing the hard work of checking the credibility of a given operator. The detailed information provided (such as this review of a very popular player in the field, to give you an idea safecasinos.org.uk/mrgreen is essential when trying to work your way through the jungle of generous offers and promises of easy wins. As you would know (especially if you come from financial background), if it looks too good to be true, it probably isn’t. But let’s not digress and sum things up.

Even with the drastic losses, Macau remains the world’s largest gambling hub, beating even the Las Vegas Strip (revenues for 2015 despite all troubles still represent 5 times Vegas’ results). What China based operators seem to be learning the hard way is, ironically, becoming more like Vegas – featuring more non-gambling facilities to lure tourists in from around the globe. The $4.1 billion Wynn Palace will now offer air-conditioned cable car rides. The Parisian (a venue of Sands China scheduled to open later on this year) will entertain visitors with a half-size Eiffel Tower. The shift from high end VIPs to more regular players seems to be the way to go, even though Billy Ng, an analyst from Bank of America Merrill Lynch, rightly pointed out that the new customers will make the market more volatile to seasons – as you can imagine high rollers weren’t exactly bothered with pre-planned holidays and weekends.

Hope this article has been of interest, we will continue to monitor the latest developments and bring you hot news from the world of finance, gambling and all around. Stay tuned.

Last year didn’t exactly end well for Genting Singapore, a known destination for high rollers, famous not only for its casino but for the resorts with the same name that it operates. Especially if you were to compare the $7,8 in the red from December 2015, to the $89.2 net profit they ended with in the year before. To call it quite a drop doesn’t quite cover it.

The overall revenue decline for the company was 14% year-on-year, totalling at $547.4 million, for gaming alone the plunge was a whooping 19%, the equivalent of $374 million. The adjusted earnings before interest, taxes, depreciation, and amortisation (a key indicator for operating performance used in the industry) was down 5% or in cash – $181.3 million.

An official statement shed some light on the reasons for the steady decline: “Gaming revenue was impacted by a lower VIP gaming market as we continue to tighten our credit policies.”. The company had also reported a net loss of $16.9 million in the second quarter ended June last year. For the entire financial year of 2015, Genting Singapore’s net profit dropped 85% to $75.2 million.

Over the past 20 years the Singapore based PLC has been a favourite destination for gamblers across continents, covering venues in America, Malaysia, Australia, the Philipines and since the acquisition of Stanley Leasure back in 2005 – the United Kingdom as well.

The operator announced they are working on lowering operating costs and improving efficiency to recoup some of the losses. Despite lower number of tourists across the country though, the Genting Group reported over 7 million visitors to their hotels, outperforming all competition. So it seems like it’s just the gambling side of the business that is suffering. Let’s have a look on why that is.

The explanation for the drastic drop seems to be the lack of interest on the VIP gaming market. Singapore is one of many destinations suffering from China’s major crackdown on corruption, that is reaching even high level officials. Xi Jinping’s campaign against fraud has proved to be a disaster for Macau already, the only place in China where gambling is legal. High profile Asian gamblers are fleeing or keeping low profile, with other countries benefiting from their presence. South Korea, Vietnam and a number of countries in Europe where gambling is regulated and legalised have been reported to be the new top destination for the orphaned Chinese top end players. According to Reuters, one of Macau’s top casino junket operators, a Vietnamese investment group and Hong Kong jewellery chain Chow Tai Fook will be teaming up in the development of a $4 billion casino resort in Vietnam. The lower tax rates in Australia seem to be also tempting. Let’s wait and see how will this unfold. Meanwhile, stay tuned for more financial news from our team.